General Commercial and Eden Capital fined $50k each

General Commercial, formerly known as Urban Commercial Group, and Eden Capital (Australia), formerly known as Southside Lending, have been ordered to each pay $50,000 for failing to take reasonable steps to cooperate with the Australian Financial Complaints Authority (AFCA).

Failure to co-operate with AFCA is a civil penalty offence and can carry significant penalties.

The two companies were the subject of civil proceedings brought by the Australia Securities & Investments Commission (ASIC) last year.

The case centred on allegations that the companies and their directors 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, this included threatening to sue complainants unless they withdrew their AFCA complaint.

The judgement for the case was handed down on Tuesday (24 January).

Both companies were found to have repeatedly refused to provide documents and information to AFCA when requested and harmed AFCA staff by subjecting them to inappropriate and unprofessional behaviour. Further, General Commercial was found to have:

• Failed to pay an AFCA determination of $11,492.71
• Commenced legal proceedings against an AFCA staff member after that staff member requested documents related to a complaint
• Threatened AFCA complainants with legal proceedings unless they withdrew their complaint
• Along with Eden Capital, commenced legal proceedings, via its parent company, Miravo Pty Ltd, against AFCA complainants in the Queensland Civil and Administrative Tribunal.

The court determined that the conduct of General Commercial and Eden Capital amounted to a breach of their obligation under their Australian credit licences to act efficiently, honestly, and fairly and the obligation of licensees to cooperate with AFCA.

Justice Downes ordered the two companies to pay $50,000 each.

General Commercial and Eden Capital have both now been restrained from engaging in credit activity for 12 months, however, Eden Capital will be allowed to collect payments on existing loans.

General Commercial director Dale Brendan Heremaia and his son, Eden Capital director Benjamin Eden Heremaia were also both ordered to pay $30,000 and $20,000, respectively.

The two directors have been restrained from carrying on any business engaging in credit activity or being involved in the carrying on by another person of any business engaging in credit activity for a period of 12 months.

In handing down the penalty, Justice Downes said that while there was no dishonesty, the conduct “continued over a lengthy period, it was not inadvertent and it undermined the effective operation of AFCA’s processes and the resolution of the complaints by the consumers”.

However, the judge noted that the two respondents demonstrated remorse in relation to their actions and had accepted that their actions may have been “better considered” and that a different course should have been undertaken by them.

It has been indicated that they intend to exit the market once their obligations under the proposed orders are met. (Indeed, General Commercial has already had its credit licence cancelled due to it no longer being a member company of the AFCA scheme.)

The defendants agreed to the penalty amounts and agreed to pay ASIC’s costs.

Speaking of the judgement, ASIC commissioner Danielle Press said: “Despite being members of AFCA, actions were taken to break the law by threatening to sue complainants, as well as taking legal proceedings against complainants and against an AFCA staff member personally. 

“General Commercial also failed to pay over $11,000 to complainants under an AFCA determination.

“As directors, Dale and Benjamin Heremaia had a responsibility to make sure their companies complied with AFCA’s processes, but instead, they went out of their way to avoid doing so.”

The Australian Financial Complaints Authority (AFCA) also welcomed the ruling, which it said “reaffirms the legal requirement for financial firms to co-operate with AFCA to achieve the effective and efficient resolution of complaints”.

It highlighted that Justice Downes had found that cooperation by AFCA members with AFCA was “important to the effective running of the AFCA Scheme” and that the conduct “undermined the effective operation of AFCA’s processes and the resolution of the complaints by the consumers”. 

AFCA’s chief ombudsman David Locke commented: “AFCA welcomes the court’s ruling and its recognition of the need for financial firms to cooperate with AFCA.

“The vast majority of the members of our external dispute resolution scheme do work in partnership with us, and this is to the benefit of firms as well as consumers,” Mr Locke said. 

“AFCA recognises that a financial dispute can be stressful, but we require all parties to engage with our staff and each other in a co-operative and respectful manner at all times.”

[Related: ASIC sues credit companies over AFCA clashes]