There is minimal case law in relation to the national consumer credit regime under the National Consumer Credit Protection Act 2009 (Cth) and related legislation. However, the Administrative Appeals Tribunal ("AAT") decisions of Sullivan and ASIC and Rent to Own (Aust) Pty Ltd and ASIC shed some light on:
- the concept of a 'fit and proper' person;
- assessing the likelihood of future contraventions of the credit laws;
- the importance of accurately completing ASIC forms; and
- when it is appropriate to grant licences subject to conditions.
Sullivan and ASIC  AATA 592
- The facts
Sullivan and ASIC  AATA 592 concerned a credit licensee, Same Day Money Pty Ltd ("Same Day Money") and its key person and 'controlling mind', Lawrence Sullivan. Mr Sullivan lodged false statements in the Annual Compliance Certificate ("ACC)" in relation to convictions of Same Day Money and himself for breaches of state credit legislation. Same Day Money also purported to authorise a credit representative that was not a member of an approved external dispute resolution ("EDR") scheme, which was a breach of the credit laws. ASIC decided to ban Mr Sullivan and cancel Same Day Money's ACL. The AAT affirmed ASIC's decision to cancel the ACL, and increased Mr Sullivan's banning period from 4 to 5 years.
- The discussion
The AAT found the discretion to ban Mr Sullivan was enlivened by Mr Sullivan's contraventions of credit laws by failing to disclose the criminal proceedings against the company and Mr Sullivan in the ACC. The AAT also found that Mr Sullivan was not a "fit and proper person". Not only did Mr Sullivan have criminal convictions, he also did not have appropriate knowledge and skills to engage in credit activities. Mr Sullivan had only basic book-keeping skills and did not have systems in place to detect errors. The AAT stated that he did not exhibit diligence in the way he completed paperwork. The AAT was also concerned by Mr Sullivan's lack of contrition for his wrongdoing.
The AAT was satisfied that Same Day Money had contravened its obligations under the credit laws. The company had convictions under state credit legislation, had purported to authorise a credit representative without EDR scheme membership and had offered credit that exceeded the statutory cap. Given its own convictions and the record of Mr Sullivan, the AAT also determined the company was not a fit and proper person to hold a credit licence. Licence suspension in place of cancellation was not considered appropriate while Mr Sullivan remain involved with the business. The AAT therefore decided Same Day Money's licence should be cancelled.
Rent to Own (Aust) Pty Ltd and ASIC  AATA 689
- The facts
This case concerned a credit provider, Rent to Own (Aust) Pty Ltd ("Rent to Own"), which was applying for an ACL under the new credit licensing regime. Mr Tapping was a director and the "controlling mind" of Rent to Own, and another similar business called Cash on Tap Pty Ltd ("Cash on Tap"). Mr Tapping had previously made undertakings admitting that both businesses had contravened state credit legislation. Cash on Tap was also prosecuted for offences in Queensland. Mr Tapping did not disclose these matters to ASIC in Rent to Own's credit licence application. ASIC decided to refuse Rent to Own's ACL application. The AAT decided that a licence should be granted but limited to performing and enforcing existing contracts.
- The discussion
The AAT determined that it had reason to believe that Rent to Own would breach credit legislation in the future. The AAT stated that previous contraventions of the legislation suggested a pattern of conduct, and it did not see this pattern coming to an end. This was despite some evidence of expenditure on legal costs directed to achieving compliance.
The AAT was concerned by Mr Tapping's lack of recognition of wrongdoing and his failure to introduce a strict system to ensure that wrongdoing would not reoccur. The AAT was unimpressed by Mr Tapping's attitude that the regulators were responsible, at least in part, for informing him of his obligations. The AAT was also concerned by the false statements made in the application form.
The AAT discussed when it would be appropriate to grant a licence application despite having reason to believe the applicant would breach credit legislation. The AAT stated granting a licence subject to additional conditions involved the exercise of discretion, and this involved consideration of community standards. The AAT assessed current community standards as "putting a high value on the skill and integrity of persons involved with credit transactions." AAT considered that the community expectation is heightened when the credit provider is dealing with borrowers who are not "well off" and less likely to understand the costs and lawfulness of credit transactions.
Do's and Don'ts for credit licensees
So what lessons can be learned from these two decisions?
- obtain professional advice if you do not fully understand your obligations;
- have appropriate systems and processes in place to ensure you will comply with your obligations;
- complete appropriate background checks to ensure that your responsible managers:
- have the knowledge, skills and experience to engage in credit activities;
- display attributes of good character including diligence, honesty, integrity and sound judgement; and
- are not disqualified by law from performing their role in your credit business;
- ensure that you answer questions in ASIC forms honestly and truthfully;
- check whether potential credit representatives are members of an EDR scheme prior to appointment; and
- understand community expectations about the skill and integrity of persons involved with credit transactions.
- hide or manipulate information that you are required to provide to ASIC or other regulators;
- expect ASIC or other regulators to inform you of your obligations – it is your responsibility to understand your obligations; and
- expect to be granted, or allowed to keep, a credit licence if you have breached credit legislation in the past. Licences may still be granted, subject to conditions, but this involves an exercise of discretion by the relevant decision-maker.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.