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12-267MR Perth lender enters into enforceable undertaking and pays credit infringement notice penalties
ASIC accepted the EU from Mr Rendell following concerns there may have been underlying weaknesses in Key Credit's compliance processes.
Key Credit has also paid a penalty of $5,500 after ASIC issued five infringement notices under the National Consumer Credit Protection Regulations 2010 (Cth) (the Regulations).
ASIC acknowledges the cooperative approach taken by Mr Rendell in relation to this matter.
ASIC has accepted an EU from Mr Rendell, trading as Key Credit. ASIC’s investigation raised concerns that:
- there may have been underlying weaknesses in Key Credit's compliance processes regarding implementation of legislative changes, and
- borrowers may have been misled in relation to Key Credit's ability to repossess essential household property listed as security for their loans.
Under the EU, Key Credit has agreed:
- to contact each affected borrower informing them that the mortgages over their essential household property are void and not enforceable, and
- that if borrowers default in their loan repayments, Key Credit will not and cannot take possession of that essential household property.
Key Credit will also engage an independent compliance consultant to review and report to ASIC on Key Credit's compliance with the credit legislation.
ASIC alleged that Key Credit engaged in conduct contrary to provisions in the National Consumer Credit Protection Act 2009 (National Credit Act - incorporating the National Credit Code) on five separate occasions.
The infringement notices were issued following an investigation by ASIC into credit contracts entered into by Key Credit with consumers which created mortgages over essential household goods.
Key Credit paid five penalties of $1,100 each in compliance with the infringement notices.
‘The Key Credit infringement notices are the first paid under the credit legislation,’ ASIC Commissioner, Peter Kell said.
The prohibition on mortgages over essential household goods or 'blackmail security' was introduced into the National Credit Act to provide additional protection for vulnerable consumers.
‘To ensure that consumers are protected, financial services businesses that do not adhere to the law will be dealt with,’ Mr Kell said.
As provided by the Regulations, compliance with the notices is not an admission of guilt and Key Credit is not taken to have been convicted of the offence specified in the notices.
Key Credit specialises in small amount credit contracts.
The National Credit Code includes a prohibition against credit providers securing loans by way of a mortgage over essential household property. Essential household items are items considered reasonably necessary for the domestic running of the household, having regard to current social standards. This includes but is not limited to one television set, one refrigerator, one freezer etc.