Payday lender Money3 refunds $100,000

Action by ASIC has seen Australia's second-largest listed payday lender, Money3, end a two payments 'fixed fee' loan arrangement and to refund more than A$100,000 to consumers.

In addition, Money3 has changed the product and its marketing and all previous two-part fixed fee contracts will allow repayments at even monthly intervals across the 16 month term of the contract.

ASIC was concerned that consumers may have been misled into believing the terms of the loan enabled flexible repayments when the contract in fact disclosed that a large fee could be charged if the consumer asked for a variation of the repayment schedule.

Previously, the first repayment - generally due a week after the loan was taken out - was for a nominal amount, and the much larger second repayment was due 15 months later. This second payment usually accounted for more than 90 per cent of the total amount repaid.

By way of illustration, ASIC cited examples of fees where the second repayment was as high as 170 per cent of the customer's Centrelink benefit for that pay period.

ASIC said in a media release that the refunds "will ensure current consumers have not repaid any monies above the principal amount lent and a cost recovery fee".

The agency was concerned that the product was likely to be unsuitable for most of the financially vulnerable customers who obtained it, and in breach of the national responsible lending obligations.