Fintech Nimble has to refund $1.5 million because it let algorithms decide who was good for a payday loan

Grant Ellis/Getty Images

Online lender Nimble used algorithms to determine whether to make payday loans but there was a hole in that hands-off assessment.

Now the fintech has to make combined refunds of more $1.5 million to 7,000 customers following an investigation by the corporate watchdog, ASIC (Australian Securities and Investments Commission).

Significant deficiencies were found in Nimble’s compliance with the responsible lending laws.

ASIC found Nimble didn’t properly assess the financial circumstances of many consumers before providing them with loans. Nimble relied on algorithms which did not properly take consumers’ financial information into account.

Nimble, founded in 2005, failed to recognise where consumers had obtained repeat loans from payday lenders within a short period of time. Even where repeat loans were identified, Nimble did not take sufficient or appropriate steps as required by law before making a loan.

“This is a significant outcome for financially vulnerable consumers,” says ASIC deputy chair Peter Kell.

“This outcome is a further example of ASIC’s strong focus on the payday lending sector. This remains a high priority area for ASIC, and we expect the industry to continue to lift its game.”

As well as repaying $1.5 million through a consumer remediation program overseen by Deloitte Touche Tohmatsu, Nimble has to make a $50,000 contribution to Financial Counselling Australia and hire an independent compliance consultant to review business operations.

Nimble CEO Sami Malia says the company worked with ASIC to quickly fix the issues through system enhancements.

“Nimble has identified and promptly resolved these issues,” Malia said.

They affected around 1.2% of loans written during the period from July 2013 to July 2015.

“These application assessment issues were entirely unintended and were resolved in collaboration with ASIC,” Malia said. “There has been no adverse findings against Nimble.”

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.