Commission alleges irresponsible lending by Pretty Penny

12 August 2019
Release No. 17

Commission alleges irresponsible lending by Pretty Penny
The Commerce Commission has commenced High Court proceedings against Quadsaa Pty Ltd (trading as Pretty Penny and PPL) alleging that it has breached the lender responsibility principles contained in the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

The Commission’s proceedings relate to Pretty Penny’s conduct between September 2016 and June 2017. In that period Pretty Penny offered loans of between $50 and $550 for terms of between 1 and 92 days with an annual interest rate of 365%, or 1% per day with interest compounding daily.

The Commission alleges that Pretty Penny failed to exercise the care, diligence and skill of a responsible lender, as required by the lender responsibility principles, in that it:
• failed to make inquiries so as to be satisfied of the borrowers’ requirements and objectives
• failed to make inquiries so as to be satisfied of the borrowers’ ability to repay without substantial hardship
• failed to exercise care, diligence and skill in text, email, radio and internet advertising
• failed to ensure loan agreements were not oppressive, including interest rates
• failed to ensure it did not induce borrowers to enter into agreements by oppressive means.
The Commission seeks declarations that Pretty Penny’s conduct breached the CCCFA, injunctions preventing Pretty Penny from lending without taking specified steps to ensure it meets its legal obligations, and compensation for affected borrowers.

The Commission has received 76 complaints or enquiries about Pretty Penny since March 2017.

As the matter is before the Court the Commission will make no further comment at this time.

Background
Lender Responsibility Principles
Lenders entering into consumer credit contracts after 6 June 2015 are required to comply with the lender responsibility principles, as set out in the CCCFA.

These include that lenders must make reasonable inquiries, before entering the agreement, to be satisfied it is likely the borrower will make repayments without suffering substantial hardship.

Responsible Lending Code
The Code provides guidance as to how lenders can comply with the principles. It includes the type of enquiries a lender should make into a borrower’s income and expenses, and it specifies that more extensive enquiries should be made if the borrower is vulnerable.

The Code is not legally binding, but if lenders comply with it that will be treated as evidence they complied with the principles.

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