ASIC sues credit companies over AFCA clashes

General Commercial, formerly known as Urban Commercial Group and Eden Capital (Australia), formerly known as Southside Lending, have been sued for allegedly failing to take reasonable steps to cooperate with the Australian Financial Complaints Authority (AFCA).

ASIC has also sought civil penalties against General Commercial and Eden Capital owners and operators Dale Brendan Heremaia and Benjamin Eden Heremaia, for their role in the contraventions.

The regulator has claimed that General Commercial and Eden Capital repeatedly engaged in disruptive, aggressive and uncooperative behaviour towards AFCA and complainants, with the intent of disrupting the body’s complaints handling and investigation processes.

According to ASIC, the misconduct included:

• Failure to pay an AFCA determination to complainants in the amount of $11,492.71.
• Threatening AFCA complainants with legal proceedings unless they withdrew their AFCA complaint.
• Commencing proceedings against complainants because they lodged a complaint with AFCA.
• Making complaints about the conduct of AFCA staff members.
• Threatening to withdraw from the AFCA scheme or to not renew their AFCA membership.
• Threatening to bring proceedings against AFCA staff members who were investigating complaints.
• Commencing proceedings against an AFCA staff member (seeking $25,000 in damages).
• Repeated failures to identify, locate and provide to AFCA documents and information requested for the purposes of resolving the complaints.

Australian credit licensees have to be a member of AFCA, an external dispute scheme whose determinations are binding on members. Under its rules, licensees cannot begin legal proceedings against a complainant, while AFCA is considering their complaint.

Reforms that resulted from the banking royal commission meant a failure to co-operate with AFCA is a civil penalty offence.

ASIC has alleged that General Commercial and Eden Capital’s conduct amounted to a breach of their obligations as credit licensees to act efficiently, honestly and fairly.

General Commercial had held a credit licence from 28 June 2018 until 11 March 2021, when ASIC cancelled its license on the public interest, that it was no longer a member company of the AFCA scheme.

Eden Capital on the other hand had held a credit licence since 3 September 2015.

“Compliance with AFCA determinations is a critical part of a licensee’s obligations. It ensures that consumers have access to independent resolutions that can be handled in a timely manner,” ASIC deputy chair Sarah Court said.

ASIC has sought declarations of contraventions of the National Consumer Credit Protection Act 2009 (NCCP Act), pecuniary penalties and other orders to be made by the Federal Court.

In April, ASIC took action against Lightspeed Finance and director James Fitzpatrick for breaches of the Credit Act s47 (1) (m) (licensee obligation to cooperate with AFCA).

[Related: ASIC sues AMP companies over fees-for-no-service]