Debt relief company slapped with court order, injunction

The Australian Securities and Investments Commission (ASIC) has obtained interim court orders and injunctions from the Federal Court of Australia against debt relief company Debts Knockout Pty Ltd as well as its owner, operator and others who worked in the company (the defendants).

ASIC has alleged that Debts Knockout and the defendants provided unlicensed financial services through the business Debt Wipeout.

The defendants include Debt Wipeout business operator David Murphy, owner of the business name Anastasios Mavroulis, as well as Kewa Ruwhiu and Mathew Ruwhiu.

ASIC has also alleged that Debts Knockout provided financial services in its own right.

Debt Wipeout advertises on billboards, shop-a-dockets, websites, social media and in person, claiming that it can “extinguish” a consumer’s loan or debt for an upfront payment of 15 to 25 per cent of the outstanding balance.

The company has made representations that upon receiving this upfront payment, the creditor would receive funds to settle the consumer’s debt.

However, consumers’ debts have not been extinguished despite them having made these upfront payments.

According to the corporate regulator, the alleged contraventions of the Corporations Act 2001 and ASIC Act 2001 include:

• Carrying on a financial services business without holding an Australian Financial Services Licence;
• Engaging in misleading or deceptive conduct while carrying on a financial services business;
• Making false or misleading representations while carrying on a financial services business;
• Engaging in unconscionable conduct while carrying on a financial services business; and
• Engaging in conduct that was liable to mislead the public as to the nature while carrying on a financial services business.

On 6 October 2020, Justice Farrell found, on evidence filed by ASIC, that there was a prima facie case that the defendants and Debts Knockout had engaged in contraventions of the Corporations Act and ASIC Act.

The court also found that there was a need to protect aggrieved persons and made asset preservation orders against Mr Murphy.

The court made additional orders requiring the disclosure of information to ASIC against each of the defendants and Debts Knockout.

On 9 October 2020, the court made further injunctions restraining the defendants and Debts Knockout from carrying on or promoting Debt Wipeout.

Further, it ordered the defendants and Debts Knockout to take down the websites debtwipeout.org, debtsknockout.com and associated social media promotions.

“These orders were made pending a final hearing into the conduct of the defendants and Debts Knockout in which ASIC is seeking pecuniary penalties and orders requiring Mr Murphy to refund to any person who has paid an amount in order to have a loan or debt extinguished the amount of that payment, or enough to redress the loss or damage suffered by a person in relation to the alleged contraventions,” ASIC said.

The court has adjourned the matter for a case management hearing on 26 October 2020.

The court orders have come after ASIC implemented a set of coronavirus pandemic-related enforcement priorities that will guide its response to misconduct, including opportunistic conduct seeking to exploit the current environment, such as predatory lending practices, scams, unlicensed conduct, and misleading and deceptive advertising.

The enforcement priorities are in response to the COVID-19 pandemic’s impact on the financial system and the potential for harm that it has created.

Commenting on ASIC’s actions, deputy chair Daniel Crennan QC said: “We will continue to address the impact of the COVID-19 pandemic, which includes taking action to protect consumers in financial stress due to potentially unscrupulous conduct.”

[Related: NAB stops dealing with unlicensed debt management providers]