ASIC has commenced civil penalty proceedings in the Federal Court of Australia against Mr Lindsay Gordon Kobelt, the owner and operator of Nobby's General Mintabie Store (Nobby’s).

The proceedings relate to Mr Kobelt’s conduct as a provider of ‘book up’. Book up is a type of credit that allows a customer to buy goods now and pay for them later and is commonly used in Indigenous communities.

Nobby’s is located in Mintabie in the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) in remote South Australia, and sells a range of goods to the public including groceries, fuel and second hand motor vehicles. The majority of Nobby’s customers are Indigenous residents of the APY Lands.

ASIC is taking action against Mr Kobelt for alleged breaches of the ASIC Act relating to unconscionable conduct and of the National Consumer Credit Protection Act 2009 (National Credit Act), which requires providers of credit to be licensed.

ASIC’s investigations indicate that Nobby's book up customers are required to provide Mr Kobelt with their debit cards and PINs, as well as details about their income, when they purchase goods. ASIC alleges that Mr Kobelt then uses the customer’s card to withdraw all or nearly all of the customer’s money from their bank account on or around the day they are paid. ASIC says this forces customers to ask Mr Kobelt for more credit and creates a relationship of dependency between the customer and Mr Kobelt. ASIC has taken action against Mr Kobelt because it says that this amounts to unconscionable conduct.

ASIC also alleges that Nobby’s has charged customers more for buying second hand vehicles on book up, which essentially amounts to payment of a fee. Under the provisions of the National Credit Act, payment of a fee in association with the provision of a credit service requires the provider to be licensed. Mr Kobelt does not hold an Australian credit licence nor is he otherwise authorised to provide credit services.

ASIC Commissioner, Mr Peter Kell said, ‘Book up can be a beneficial service for consumers, providing access to a source of credit and helping to manage money between payments. This is particularly the case where those consumers do not have ready access to alternative banking services in remote or regional areas. However, ASIC wants to ensure that users of the service are not exploited and that providers of book up do so legally.

‘In bringing this action before the courts, we hope to make clear the circumstances under which book up can be offered and the legal provisions by which traders must abide.’

ASIC is seeking declarations from the court that Mr Kobelt breached sections 12CB of the ASIC Act and 29(1) of the National Credit Act.

ASIC is also seeking orders that Mr Kobelt:

• pay a fine (civil penalty) in the amount the court sees fit;

• return customers' debit cards to the police for collection by customers and take steps to tell customers how to get their cards returned, including by displaying notices about the decision and how cards can be re-claimed throughout the APY Lands;

• be prevented from obtaining any customer's debit card and PIN as a condition of providing credit, and from providing credit without being licensed;

• be prevented from taking any steps to recover outstanding debts from his customers under contracts pursuant to which credit was provided in association with the sale of second hand motor vehicles and, subsequently, other goods;

• disclose to each customer their outstanding debt in respect of contracts pursuant to which only other goods were supplied, and be prevented from recovering the debt other than by way of periodic payment, the period and quantum of those instalments to be determined by the court.

ASIC is also asking the court to order that Mr Kobelt be banned from providing credit or any other financial service for a period of time to be determined by the court.

The first directions hearing is scheduled for Friday 30 May 2014.

Editor's note 1:

The matter will next be heard in court on 13 November 2014 for directions.

Editor's note 2:

On 13 November 2014 the matter was adjourned to 16 December 2014 for further directions.

Editor's note 3:

On 16 December 2014 the matter was adjourned for further directions to 9 April 2015.

Editor's note 4:

On 9 April 2015 the matter was adjourned to 20 May 2015 for further directions.

Editor's note 5:

On 20 May 2015, the matter was adjourned to trial, commencing 9 June 2015.

Editor's note 6:

The trial started on 9 June 2015 and ran until 2 July 2015. The court has reserved its decision.

Editor's note 7:

On 9 November 2016, the Federal Court handed down its decision (refer: 16-383MR) and subsequently, made a decision on penalties (refer: 17-115MR). Mr Kobelt appealed against the judgment of the Federal Court given on 13 December 2016. The appeal was heard on 14 to 15 August 2017, with the Full Federal Court delivering its decision on 15 February 2018 to partially uphold Mr Kobelt's appeal (refer: 18-047MR).

Editor's note 8:

On 20 March 2018, ASIC applied to the High Court of Australia for special leave to appeal from the orders made by the Full Court on 20 February 2018. On 17 August 2018, the High Court of Australia granted special leave to ASIC to appeal from the orders made by the Full Court on 20 February 2018. A date for the hearing of the appeal is yet to be set.