ASIC says that after several years of preparation, it is now set to take action against predatory lending.

Plans to tackle the punitive rates charged by short-term lenders have been brewing since the David Murray-chaired Financial System Inquiry in 2014, but the corporate watchdog has only just been granted the legislative teeth to do so.

ASIC's new product intervention powers will first be turned on lenders charging repayment rates of up to 1,000 per cent via layers of upfront, ongoing, default and administrative fees.

“ASIC is ready and willing to use the new powers that it has been given,” ASIC commissioner Sean Hughes said.

“The product intervention power provides ASIC with the power and responsibility to address significant detriment caused by financial products, regardless of whether they are lawfully provided.”

The first targets include online payday lender Cigno Pty Ltd and its associate Gold-Silver Standard Finance Pty Ltd, and more recent versions of the same business model operated by MYFI Australia Pty Ltd and BHF Solutions Pty Ltd.

Cigno has been particularly controversial for consumer advocates, as it actively pursues lending in rural, remote and Indigenous communities.

ASIC has not pursued the sector after having lost Federal Court civil cases in 2014 against earlier incantations of Cigno and Gold-Silver Standard Finance.

Short-term lenders can still be exempt from credit licensing, conduct and responsible lending obligations under the National Consumer Credit Protection Act (NCCPA), as long as the fees charged for a loan do not exceed 5 per cent of the loan amount and 24 per cent per annum.

The new provisions give ASIC the power to stamp out onerous loans via product intervention orders.

“ASIC will take action where it identifies products that can or do cause significant consumer detriment,” Mr Hughes said.

“In this case, many financially vulnerable consumers incurred extremely high costs they could ill afford, often leading to payment default that only added to their financial burden,” he said.

The regulator can now call for criminal and civil penalties for breaching the orders, including up to five years' imprisonment and fines of up to $1.26 million per offence.