Cairns car yard lender fined $1.2 million as ASIC puts spotlight on vulnerable consumers

The Australian Securities and Investment Commission is one of several regulators to flag the protection of vulnerable communities as a top priority, after the Federal Court fined a Cairns-based lender and broker, and the companies’ sole director, $1.2 million over consumer credit law breaches that affected indigenous consumers in a remote community.

In September 2016 the Federal Court founder lender Channic Pty Ltd and broker Cash Brokers Pty Ltd breached responsible lending provisions in the National Credit Act, and that Channic had engaged in unconscionable conduct and entered into unjust transactions with consumers.

The misconduct related to the companies’ operations from a used car yard in Cairns, where Cash Brokers provided loans to consumers from Channic at an interest rate of 48%, with a brokerage fee of either $550 or $900. Channic was found to have not assessed whether the loans were actually suitable for the consumers entering into the agreements.

Last Friday, the court fined the two companies and their sole director, Colin William Hulbert, $776,000 and also ordered the payment of costs to the value of $420,000. Hulbert is personally liable for $220,000 in fines.

At the end of March, affected consumers were awarded $47,699 in compensation by the Federal Court.

The case initially came to ASIC’s attention through the Indigenous Consumer Assistance Network (ICAN), which reported to ASIC the companies were unfairly dealing with indigenous consumers in the remote Queensland community of Yarrabah.

When commenting on the penalty decision last week, ASIC said pursuing companies that fail to protect vulnerable consumer groups is a top priority, and listed four other cases it has prosecuted after receiving intelligence from ICAN.

“The penalty awarded by the Federal Court is not just condemnation of this misconduct, but is a warning to other lenders who might consider pursuing profits at the expense of their obligations to consumers,” ASIC deputy chairman Peter Kell said in a statement on the penalties.

Protecting vulnerable consumers about more than following letter of the law

ASIC is not the only regulatory body to make the protection of vulnerable consumers and workers a top priority, but businesses should understand that doing the right thing by clients is about more than following frameworks like the Australian Consumer Law to the letter, says LegalVision general counsel Ursula Hogben.

“There is no official legal definition of a ‘vulnerable consumer’, but the kinds of things [regulators] would consider is the education level of the group, the financial situation of that group, and the difference in power between supplier and seller and the consumer,” Hogben says.

When dealing with consumers who may not be aware of their rights under the law, making sure they understand their rights and responsibilities as well as your company’s is about going the extra step to make sure things are as clear as possible.

The ACCC outlines this sentiment in its guide to businesses on vulnerable groups, saying if it is apparent to a business that a consumer might not be able to make an informed decision about a product, then that business must “take extra care in their dealings” to make sure the customer understands what they are signing up for.

“There are two parts to it — one is making sure that the business actually follows the consumer law, the other is what can you do to go above and beyond. For example, providing information statements [about their rights around products] is a positive step,” says Hogben.

When regulators like ASIC or the Australian Competition and Consumer Commission (ACCC) contact a business to establish whether it has upheld its obligations to inform consumers of their rights, Hogben says it’s important to be able to demonstrate that you have the company policies and procedures in place to make sure your customers are informed.

“There’s one problem if you don’t follow consumer law, but also with vulnerable consumers, it’s about laying out what the rights actually are,” she says.

“For example, the ACCC would also look at whether a situation was a one-off, and what the company policy was.”

Companies should be able to readily answer the following three questions when questions come up about protecting vulnerable customers, Hogben says: “When the issue was raised, what they did about it, and did the company take active steps to make things better or not?”

SmartCompany was unable to contact Channic Pty Ltd, Cash Brokers Pty Ltd or Colin William Hulbert prior to publication.

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