The Federal Court has found that credit repair business Malouf Group Enterprises Pty Ltd (Malouf Group) and its director Jordan Francis Malouf breached the Australian Consumer Law during the period 1 January 2014 to 31 December 2015 by making false and misleading representations and by engaging in unconscionable conduct.  

The Court ordered Malouf Group to pay a pecuniary penalty of $400,000, and Mr Malouf $100,000.  In determining the penalties, the Court took into account an Enforceable Undertaking in which the respondents will refund a total of $1.1 million to consumers who did not have any negative listings on their credit files when they entered into contracts with Malouf Group during the 2014-2015 period. Further, the penalties imposed were towards, or at, the upper end of the limit of the financial resources available to the respondents.

Malouf Group operated its credit repair business predominantly on-line and by telephone sales and claimed to “clean up” a consumer's credit history by removing negative listings. However, ASIC alleged that the Malouf Group sales tactics misrepresented the services that Malouf Group actually provided because Malouf Group had not ascertained if the consumer had negative listings or if any negative listings were able to be removed. 

The Court found that Malouf Group engaged in misleading or deceptive conduct in inducing consumers to enter in to contracts with it. That conduct involved:

• the making of false representations on websites operated by Malouf Group as to its standing as a credit repair company;
• the display of false testimonials on the Malouf Group websites;
• the making of false representations as to Malouf Group's ability to clean up a consumer's credit history; and
• the making of false representations in Malouf' Group's sales scripts about the work Malouf Group had done for the consumer prior to the payment of the Malouf Group fee.

The Court found that examples of the tactics used by Malouf Group to induce consumers to enter into contracts were both "disturbing and unconscionable", describing the conduct as "cynical and calculated". It found that Mr Jordan Malouf, the sole director of Malouf Group, was knowingly involved in the contraventions of the Australian Consumer Law. The Court noted that Mr Malouf had:

• devised and implemented the business model of Malouf Group;
• approved the content of the websites and advertising;
• approved the content of the sales scripts; and
• was involved in the training and supervision of sales staff to ensure that they followed the sales scripts.

ASIC Deputy Chair Peter Kell said "Consumers who seek out credit repair services should understand that there can be no guarantees that their credit history can be 'cleaned'.  Further, consumers may request corrections to be made to their own credit file for free.”

The respondents have also been ordered to pay $100,000 towards ASIC's costs.

Download the enforceable undertaking

Background

ASIC had commenced this proceeding under a delegation of power from the Australian Competition and Consumer Commission ("ACCC").

On 30 June 2017, ASIC commenced civil proceedings in the Federal Court of Australia in Brisbane against the credit repair business, Malouf Group Enterprises Pty Ltd and its director Jordan Francis Malouf (refer: 17-226MR).  ASIC has a standing delegation of certain of the ACCC's powers and functions for the purposes of investigation and commencement and conduct of any proceedings in relation to matters involving credit repair and debt collection.

Malouf Group has traded under various business names including: Credit Clean Australia, Credit Wash, Credit Fix Australia, and Clean Your Credit.

ASIC's MoneySmart website has guidance and information on what you need to be aware of when dealing with credit repair companies.