ASIC has made an interim stop order preventing City Finance Lending Pty Ltd (City Finance Lending) from issuing its small amount credit contract (SACC) product to retail clients because of deficiencies in its target market determination (TMD).
City Finance Lending’s SACC product allows consumers to borrow up to $2,000 for personal purposes ‘to meet an unexpected expense or to make a discretionary expense and who meets [City Finance’s] eligibility criteria.’
ASIC is concerned that the TMD for City Finance Lending’s SACC may be deficient in several key areas.
First, the TMD may fail to appropriately define the target market for the SACC product in that it may not adequately:
- define what an ‘acceptable’ source of income is
- specify which potential customers require credit for an unacceptable purpose, and
- specify which potential customers are excluded from the target market for the SACC product on the basis that they do not have financial capacity to repay the principal, repayment and fees.
Second, the TMD may be inconsistent with the likely objectives, financial situation and needs of a retail client, as statements made in the TMD as to minimum amounts borrowed are inconsistent with statements made on City Finance Lending’s website.
Finally, City Finance Lending’s TMD may not contain appropriate distribution conditions to ensure the product is directed towards the target market. In particular, the distribution conditions may not:
- contain details as to how SACCs can only be issued to customers within the target market
- specify what information will be obtained from potential customers or third parties to establish whether they are in the target market
- specify how such information will be obtained from potential customers or other parties
- specify how such information will be used by City Finance Lending to decide whether or not the customers is within the target market, and
- explain what controls are in place within City Finance Lending’s origination and approval system to ensure that the product is likely to reach customers within the target market.
ASIC made the interim order to protect consumers from obtaining and using SACCs that potentially may not be suitable for their financial objectives, situation, or needs. The order is valid for 21 days unless revoked earlier.
Background
City Finance Lending is a credit provider of small and medium amount credit contracts, with an Australian Credit Licence number 469854.
On 13 March 2025, ASIC published REP 805. This report highlights ASIC’s ongoing concerns and work in the small credit industry.
Recent action taken by ASIC in the small credit sector includes:
- current civil penalty proceedings against Ausfinancial Pty Ltd, trading as Swoosh Finance, for alleged breaches of its responsible lending obligations and alleged contraventions of certain design and distribution obligations (24-285MR)
- securing of $16 million in penalties against Ferratum Australia Pty Ltd (in liquidation) for a number of contraventions of the National Credit Act including entering contracts which imposed prohibited fees (24-141MR), and
- Federal Court action against Sunshine Loans Pty Ltd for charging an amendment or rescheduling fee not permitted by the National Credit Code (25-046MR).
The Design and Distribution obligations (DDO) regime commenced on 5 October 2021 and requires issuers and distributors of financial products to adopt a consumer-centric focus in designing, marketing and distributing financial products, and to distribute those products in a more targeted manner. A target market determination is a mandatory public document that sets out the class of consumers a financial product is likely to be appropriate for (target market) and matters relevant to the product’s distribution and review.
An issuer and distributors of a financial product must take reasonable steps that will, or are reasonably likely to, result in distribution conduct relating to retail clients being consistent with the target market determination for the product.