ASIC sues Ultimate Credit Management over alleged ACL breaches

The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Ultimate Credit Management Pty Ltd (Ultimate Credit Management), a debt collection company that buys consumer credit contracts from credit providers and tries to recover those debts from the borrowers.

The regulator has alleged that, between 10 May 2019 and 11 December 2019, Ultimate Credit Management breached the National Consumer Credit Protection (NCCP) legislation by beginning proceedings against 24 borrowers (who owed between $400 and $2,851) in NSW when these borrowers lived in other states.

The NCCP requires credit providers to commence debt recovery proceedings in the state or territory in which the borrower lives.

ASIC has flagged that commencing proceedings outside of a borrower’s home state makes it “much more difficult for borrowers to defend themselves”, especially should they wish to appear in person (as they might not be able to afford or have the capacity to challenge a proceeding in another jurisdiction).

Moreover, it alleges that following complaints from borrowers to the Financial Ombudsman Service (which later became the Australian Financial Complaints Authority [AFCA]), the complaints body had advised Ultimate Credit Management in May 2018 that beginning proceedings against borrowers outside of the borrower’s home state was a breach of the obligations imposed on credit licensees.

Despite assurances that it would change its policy, the regulator alleges that Ultimate Credit Management continued to initiate such proceedings, which resulted in further complaints and investigations by AFCA.

The debt recovery proceedings in question resulted in Ultimate Credit Management obtaining 21 default judgements in the amount of $176,379.84 and garnishee orders totalling $11,53.10.

As such, the financial services regulator said it was concerned that these alleged failures resulted in “significant consumer harm” and that Ultimate Credit Management’s conduct breached its obligation as a credit licensee to do all things necessary to ensure that it engaged in credit activities “efficiently, honestly and fairly”.

ASIC is seeking declarations and pecuniary penalties against Ultimate Credit Management.

The date for the first case management hearing is yet to be scheduled by the Court.

Debt collection activities have been a key area of focus for ASIC recently, particularly “poor debt collection practices”.

In March, ASIC commenced proceedings against Membo Finance Pty Ltd – and its sole credit representative Richmond Group Financial Services Pty Ltd – for conduct that includes allegedly commencing court proceedings in NSW when debtors lived in other states or territories.

ASIC revealed earlier this year that it will continue to focus on this area over the next four years, including by collecting data to understand the controls in place when debt is sold, how these work and who is affected, as well as engaging with lenders and industry associations.

[Related: ASIC pivots away from enforcement clampdown]