In a lawsuit filed in the Federal Court on Monday, ASIC alleges Ferratum Australia Pty Ltd repeatedly breached consumer credit protection laws by overcharging customers who entered into small amount credit contracts.

ASIC deputy chair Sarah Court described the alleged contraventions as “concerning”, given the laws were designed to protect consumers who need to access Ferratrum’s “fast loans on the go”.

“ASIC is concerned that the alleged conduct harmed consumers with low incomes and low bank account balances,” Court said.

“These types of practices are especially harmful during the COVID-19 pandemic.”

Ferratum is a subsidiary of Multitude SE, a public limited liability company headquartered in Finland, and opened its digital doors to Australian consumers in May 2011. It offers loans ranging from $500 to $1900 for periods of up to 12 months.

ASIC claims that, between March 2019 and August this year, Ferratum charged prohibited fees, such as direct debit fees; entered into contracts with borrowers that imposed prohibited fees; incorrectly calculated amounts borrowers had to pay when they repaid their contracts early; and failed to act efficiently, honestly and fairly by ensuring it had accurate and reliable calculation, recording and monitoring systems in place to pay out contracts early.

The microloans provider promises consumers they can pay out their loan “at any time”, but ASIC alleges Ferratum overcharged at least 40 consumers between March 2019 and July 2020.

“Only 33% of early payout amounts in the sample reviewed by ASIC were correctly calculated by Ferratum,” the enforcement action alleges.

ASIC further alleges that Ferratum issued upwards of 10,000 standard form contracts between March 2019 and September 2019 that contained unlawful “DDR alteration fees”, direct deposit fees, returned mail fees, Visa or Mastercard fees and returned payment fees.

The regulator’s investigation allegedly reveals Ferratum raked in more than $9,700 in unlawful fees during that time, followed by a further $5,161 in the following months.

The calculation issues were brought to Ferratum’s attention in late 2016 but, ASIC alleges, Ferratum did not take the necessary steps to build a better system.

“There was a direct financial impact on those consumers who were overcharged the early payout amounts and were charged the unlawful credit fees and charges. Not all those consumers have necessarily been identified by ASIC,” the action says.

“There was an indirect financial impact on consumers who were exposed to the potential of a misleading demand or automatic deduction by Ferratum to pay the unlawful fees and charges under [small amount credit contracts] to Ferratum.”

Ferratum was ordered to pay an infringement notice penalty of $10,200 to ASIC in October, 2013 for false and misleading advertising. The regulator found Ferratum advertised a “free $100 loan” on its website at www.cashinahurry.com.au, in TV advertisements and on ATM machines between May 2013 and July 2013, despite the loan attracting transaction fees.

The regulator is seeking declarations, pecuniary penalties and costs in its latest action.

ASIC is represented by Georgina Thomas, instructed by ASIC.

The case is Australian Securities & Investments Commission v Ferratum Australia Pty Limited.

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