ASIC has commenced proceedings against Oak Capital (Oak Capital Mortgage Fund Ltd and Oak Capital Wholesale Fund Pty Ltd) for allegedly engaging in unconscionable conduct to avoid the National Credit Code.
ASIC alleges that from 7 March 2019 to 4 October 2023, Oak Capital made up to 47 loans totalling over $37 million under a model designed to avoid the application of the Code and the National Consumer Credit Protection Act 2009.
ASIC Deputy Chair Sarah Court said, ‘As a result of loans being treated as unregulated, we allege Oak Capital deprived its clients of important consumer protections, including responsible lending obligations, the right to make a hardship application and protection from being charged excessive fees and interest.
‘These protections are critical in the current financial climate where borrowers are more likely to be at risk of serious financial hardship. ASIC will continue to take action where we consider business practices are designed to avoid consumer credit protections.’
In documents filed in the Federal Court, ASIC alleges that Oak Capital provided loans to companies - rather than the individuals requiring the loan - to avoid the operation of the Code and the Credit Act, in circumstances where Oak Capital knew, or ought to have known, that the loan was for a domestic, personal or household purpose (such as a home loan) and would otherwise be captured by the Code.
ASIC alleges that Oak Capital’s lending model required a company to be the named borrower for loans in circumstances where the company did not benefit from, or have any genuine interest in, the loan and there was no reason for Oak Capital to consider that the company borrower would repay the loan. In most cases, the individuals seeking the loan provided their own homes as security.
Oak Capital made loans to companies with no or minimal assets or current trading activities. Some companies had even been established for the purpose of obtaining the loan only days prior to the loan settlement.
Given their distressed financial circumstances, several individuals defaulted on their loans and Oak Capital repossessed their homes. In its proceeding, ASIC relies on 47 loans as illustrative examples of the Oak Capital avoidance model.
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BACKGROUND
The non-bank lenders engaging in the conduct within the Oak Capital corporate group are Oak Capital Mortgage Fund Ltd and Oak Capital Wholesale Fund Pty Ltd.
Neither entity has ever held an Australian Credit Licence. Both entities hold Australian Financial Services Licences in connection with contributory mortgage investment funds they operate which allow investors to select individual investments from a range of approved mortgage products.
The National Credit Code applies to loans to individuals where the loan is wholly or predominantly for a personal, domestic, or household purpose.
ASIC’s Moneysmart website features information that supports Australians in making decisions about their money. Consumers who take out regulated loans have access to certain protections under law, including access to free, independent external dispute resolution services through AFCA. Consumers can find more information about loans, including how to decide which loans are right for them, on Moneysmart.