ASIC has taken legal action against a Cairns-based lender and broker who offered high-interest credit contracts to consumers in one of Australia’s most disadvantaged local areas.

Proceedings have been filed in the Federal Court of Australia in Brisbane against Channic Pty Ltd (Channic), Cash Brokers Pty Ltd (Cash Brokers) and the sole director of both companies, Mr Colin William Hulbert.

ASIC alleges that Channic and Cash Brokers breached the responsible lending laws that apply to lenders and brokers licensed under the National Consumer Credit Protection Act 2009 (National Credit Act).

ASIC alleges breaches of responsible lending obligations and instances of unconscionable conduct occurred in relation to a series of loans given to consumers for the purchase of motor vehicles from a Cairns-based motor dealer.

Cash Brokers assisted consumers obtain loans from Channic at 48% interest per annum to enable them to purchase vehicles from Ang Hulbert & Associates Pty Ltd, trading as SuperCheap Car Sales (SuperCheap). Mr Hulbert is also the sole director of SuperCheap.

ASIC alleges SuperCheap’s advertising targeted consumers on low incomes or in receipt of Centrelink benefits and those with bad credit histories. Advertising included a flyer noting, ‘Centrelink Income OK, Single Parents OK, Bad Credit OK, Ex Bankrupts OK, Defaults OK.’

ASIC’s claim identifies 10 consumers, who it alleges were given loans that were unaffordable and not suited to their requirements. ASIC has sought civil penalty orders against Cash Brokers, Channic and Mr Hulbert, as well as compensation for the 10 consumers.

‘The responsible lending obligations are some of the most important features of the National Credit Act and are designed to protect consumers from being given loans that they can’t afford’, ASIC Deputy Chairman Peter Kell said.

The proceedings are listed for a directions hearing in the Federal Court in Brisbane on 8 October 2013.

Background

ASIC alleges in the proceedings that:

• Cash Brokers breached its responsible lending obligations under the National Credit Act by assisting the consumers to obtain an unsuitable loan from Channic, while Channic breached its obligations by giving the unsuitable loans

• Mr Hulbert, as director of the two companies, was involved in their contraventions of the responsible lending obligations

• the loan transactions were unjust, and

• Channic engaged in unconscionable conduct.

The court may impose a penalty of up to $1.1 million against corporations and up to $220,000 against an individual for each contravention of the responsible lending obligations.

All of the consumers are Indigenous Australians and most live in the relatively isolated community of Yarrabah near Cairns. Motor vehicles are vital in such areas which do not have easy access to essential services such as hospitals and supermarkets. In 2011 the Census identified Yarrabah as the most disadvantaged Local Government Area in Australia.

ASIC became the national regulator of consumer credit in July 2010, with the commencement of the National Credit Act. The National Credit Act requires persons to hold a credit licence to engage in credit activities such as the provision of loans. It also imposes certain obligations on licence holders to improve consumer protection and deter predatory lending practices, such as general conduct obligations, responsible lending obligations and the requirement to have internal and external dispute resolution procedures.

In February this year, ASIC cancelled the credit licence of Zaam Rentals Pty Ltd (Zaam Rentals), a Victoria-based household goods rental company which targeted poorer areas in Mildura and surrounding areas in NSW, including Indigenous communities (refer: 13-021MR).

The responsible lending provisions are a key element of the national credit laws and ASIC will continue to be very active in monitoring compliance and investigating reports of breaches of the requirements.

Editor's note 1:

The matter is set for a two week trial starting 1 December 2014 with a trial review set for 4 November 2014.

Editor's note 2:

The trial commenced before Justice Greenwood in Cairns on 1 December and continued until 12 December 2014 and has been adjourned for further hearing for 4 days commencing on 9 February 2015.

Editor's note 3:

The hearing of the matter concluded on 11 February 2015  The matter has been listed for submissions on 9 April 2015.

Editor's note 4:

Final oral submissions were heard in the Federal Court , Brisbane on 9 and 10 April 2015.  Justice Greenwood reserved his judgment.