Case against company that mis-sold insurance gains momentum

Case against company that mis-sold insurance gains momentum

Case against company that mis-sold insurance gains momentum

Update: ASIC has until 4 October to file and serve a statement of claim against payday lending company The Cash Store, which it has accused of mis-selling insurance and breaching a number of credit laws.

As reported in Insurance Business earlier this month, ASIC has launched legal proceedings against The Cash Store. It alleges that it unfairly sold insurance to loans when customers were unlikely to ever make a claim; and breached consumer credit laws including providing unaffordable loans to a large number of their customers who were on low incomes or in receipt of Centrelink benefits.

The Federal Court of Australia last week made orders by consent that ASIC file and serve file its statement of claim by 4 October; file and serve any defence by 15 November; and any reply by 29 November. The proceeding should be listed for further directions on 6 December.

The regulator is seeking financial penalties after The Cash Store breached a number of laws including the responsible lending obligations, and engaging in "unconscionable conduct".

The maximum penalty for breaching the relevant credit laws is $340,000 for each contravention and the maximum penalty for a breach of the unconscionable conduct provision of the Australian Securities and Investment Commission Act 2001 is $1.7m for each contravention. ASIC alleges that TCS and AFA have committed multiple breaches of the credit laws.