The Federal Court last week fined Fast Access Finance Pty Ltd, Fast Access Finance (Beenleigh) Pty Ltd and Fast Access Finance (Burleigh Heads) Pty Ltd (the FAF Companies) for breaching consumer credit laws by engaging in credit activities without holding an Australian credit licence.
The FAF companies operated under a business model where consumers seeking small value loans (of amounts generally ranging from $500 to $2,000) were required to sign documents, which purported to be for the purchase and sale of diamonds in order to obtain a loan.
ASIC alleged in its claim that the purchase and sale of diamonds was a pretence, because there were no diamonds involved in the transaction and consumers had no intention of buying or selling diamonds. Instead, the diamond purchase and sale contracts were designed to camouflage what were in fact loan transactions to which the National Consumer Credit Protection Act 2009 (National Credit Act) applied.
The Court concluded that the arrangements for the sale of diamonds “comprised a pretence or sham, brought into existence as a mere piece of machinery, to conceal the true nature of the transaction, which was the provision of credit”.
In handing down the penalty, the Federal Court stated: “Although the excessive interest paid by each customer may not have been large in absolute terms and by some standards, it was no doubt substantial for the customer in question.
“Such customers have little chance of recovering anything from any of the respondents. The most heinous aspect of the case is the deliberate and pre-meditated exploitation of these vulnerable people.”
Deputy chairman Peter Kell commented: “ASIC will continue to crack down on lenders who use avoidance models in an attempt to deprive consumers of these important protections.”
ASIC first commenced proceedings against the FAF companies in 2013, where it alleged that they engaged in unlicensed credit activities, and sought a civil penalties order against them in addition to compensation for five consumers.
[Related: Flex commissions to be banned by ASIC]
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