Controversial payday lender Cash Converters is struggling to make ends meet after announcing another big operating loss.

The company, which specialises in making short-term loans to cash-strapped borrowers, posted a net loss of $11.1 million in the year to the end of June.

Cash Converters is currently under investigation by the Australian Securities and Investments Commission (ASIC) over allegations that it failed to comply with responsible lending standards.

Under consumer credit laws, payday providers are required to assess the ability of loan applicants to repay loans before taking on borrowers.

The company has disclosed that it has put aside $13 million to cover “compliance issues” arising from the ASIC action.

Cash Converters is also facing a class action from disgruntled borrowers in Queensland, who claim they were charged unfair brokerage fees on cash advances made between 2010 and 2013.

In 2015 the company settled a class action brought by 38,000 NSW customers who secured $20 million in compensation after alleging they were slugged unfair establishment fees.

Struggling to remain profitable, Cash Converters markets some of the most expensive credit products in the Australian loans market.

One of Cash Converters’ flagship products is its cash advance loan.

One of its flagship products – the cash advance loan – includes an establishment fee priced at 20 per cent of the loan value.

The company also receives a 4 per cent monthly fee until the loan is repaid.

The fee structure means that borrowers incur exorbitant costs on loans up to $2000, which are the equivalent of annual interest rates above 40 per cent.

According to recent stock market filings, Cash Converters is banking on the launch of new credit products to return to profitability.

In November the company will begin offering loans up to $5000 to Australian borrowers in an effort to rebuild its lending operations.

The company’s latest balance sheet shows that the value of personal loans on its books shrunk by more than $30 million to $101 million in 2016.

Rising litigation and heightened regulatory activity on the payday lending sector have undermined the viability of the business, which has not made a profit since 2014.

In 2015, Cash Converters reported a $21 million net loss.

In 2015 Cash Converters reported a $21 million net loss. Photo: Facebook/Cash Converters

Share price slumps

Investors in the company have taken big hits in the past three years amid mounting concern that the business models of payday lenders have become more problematic.

Since peaking at $1.41 in April 2013, the share price has tumbled to just 47 cents.

Apart from launching new credit products, Cash Converters is also investing heavily in online subsidiaries to boost growth.

It is also rebranding its car finance arm Carboodle that was the subject of an ASIC investigation last year.

ASIC has stepped up its crackdown on payday lenders this year after it identified wide-ranging problems in the sector two years ago.

Earlier this year, Nimble Australia Pty Ltd agreed to compensate 7000 borrowers $1.5 million when the regulator found it had not complied with responsible lending standards.