Ferratum Australia Hit with A$16 Mln Penalty over Consumer Credit Violations

Australian subsidiary of Finnish fintech Multitude SE fined A$16 million for multiple breaches of consumer credit laws, highlighting regulatory risks for foreign operators.

Key Insights

  • Ferratum Australia Pty Ltd has been ordered by the Federal Court to pay A$16 million in penalties for multiple breaches of Australian consumer credit laws between 2019 and 2021.
  • The company was found guilty of charging prohibited fees, incorrectly calculating early repayment amounts, and failing to maintain proper systems for accurate charging.

SYDNEY (MarketsXplora) – Australian payday lender Ferratum Australia Pty Ltd has been hit with a A$16 million ($10.6 million) penalty by the Federal Court for multiple breaches of consumer credit laws, the country’s financial regulator said on Friday.

The now-liquidated company, a subsidiary of Finnish multinational Multitude SE, was found to have violated the National Consumer Protection Act and the National Credit Code between March 2019 and August 2021.

Justice Kennett, presiding over the case, highlighted that Ferratum’s non-compliance appeared to stem from its parent company’s disregard for Australian regulatory requirements.

“It is appropriate that the orders made should seek to deter Multitude SE against taking a similar approach to doing business in Australia in future in the event that it seeks to re-enter the market,” Kennett said in his ruling.

The Australian Securities and Investments Commission (ASIC) initiated proceedings against Ferratum in November 2021, with the company defending the allegations until its voluntary liquidation in April 2023.

The court found Ferratum guilty of several infractions, including:

  • Charging prohibited fees such as direct debit fees for certain credit card transactions and fees for altering direct debit arrangements.
  • Entering into contracts with borrowers that imposed these prohibited fees.
  • Incorrectly calculating early repayment amounts in two-thirds of identified contracts, with one customer overcharged by more than 30% of their total loan amount.
  • Failing to maintain systems necessary to ensure accurate charging for early payouts on small amount credit contracts.

“This case sends a clear message to overseas companies operating in Australia’s financial services sector,” an ASIC spokesperson told MarketsXplora. “Compliance with local regulations is not optional, regardless of where the parent company is based.”

Under Australian consumer credit protection laws, providers of small amount credit contracts are restricted in the fees they can charge, limited to establishment fees, monthly fees, default fees, and government charges.

The case highlights the increasing scrutiny of payday lenders and small credit providers in Australia, as regulators aim to protect vulnerable consumers from predatory lending practices.

Consumers who believe they may have been affected by Ferratum’s conduct are advised to contact the Australian Financial Complaints Authority (AFCA).

The penalty comes amid a broader crackdown on non-compliant financial services providers in Australia, with regulators showing increased willingness to pursue significant fines and legal action against offenders.

Samson Ononeme

Meet Samson Ononeme, a dynamic writer, editor, and CEO of marketsxplora.com. With a passion for words and a sharp business acumen, Samson captivates readers with captivating storytelling and delivers insightful market analysis. He is a trailblazer in the finance industry, empowering individuals with knowledge and shaping the narrative of money. Get ready to be inspired by his literary prowess and entrepreneurial leadership.

Leave a Reply