ASIC takes action to enforce AFCA Determinations

On 16 April 2021, ASIC announced a decision to commence proceedings in the Federal Court of Australia against Lightspeed Finance Pty Ltd (Lightspeed) and its director, Mark Fitzpatrick (Fitzpatrick).

The background to the matter is that in early 2017, Lightspeed facilitated a $90,000.00 loan for two (joint) borrowers. Declarations made by the borrowers to Lightspeed indicated the loans were for “predominantly business purposes”; however, Lightspeed in 2017 had identified that the purpose of the loan was for financing completion of works to the borrowers’ property.

The borrowers, both being in receipt of unemployment benefits, subsequently defaulted on the loan. Following default, the lender obtained an order for possession of the property, which was sold for $200,000.00, none of the proceeds of which were paid to the borrowers – in effect, an unsuitable $90,000.00 loan caused the loss of a $200,000.00 property.

AFCA, in 2018 and 2019, made decisions:

1. 1. Firstly, on 4 December 2018:
      1. for Lightspeed to pay the lender the entire loan debt; and
      2. on satisfaction of that payment, the borrowers were to repay Lightspeed the sum of $65,082.20 (a copy of the decision was unable to be located; the writer’s presumption is this order was designed to avoid any particular windfall gain being delivered to the borrowers); and
   2. Secondly, on 12 July 2019:
      1. Repeating the first order of December 2018; andReducing the payment required under the second order to $43,485.45 (the decision was unable to be located and the reason for the reduction in liability is unknown).

The proceedings, filed in the Queensland registry, Court reference: QUD114/2021 (Proceedings) seek (Originating Application QUD114/2021, page 2):

1. Declarations that Lightspeed breached regulation 11A(2)(c) of the National Consumer Credit Protection Regulations 2010 (Cth) (NCCP Regulations) to give “effect to any determination made by AFCA in relation to the complaint” and that Fitzpatrick was involved in and contravened the NCCP Regulations;
2. Orders that both Lightspeed and Fitzpatrick pay compensation to the borrowers equivalent to the value of the property: $220,000.00; and
   Orders that both Lightspeed and Fitzpatrick pay a civil penalty for breach of section 47(m) of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act), comprised of the failure to give effect to the AFCA determination.

The maximum pecuniary penalty which may be levied for breach of section 47(m) of the NCCP Act is 5,000 penalty units. Each penalty unit is presently set at $222.00, (Notice of Indexation of the Penalty Unit Amount, 14 May 2020.) however, between 2017 and 2020 was $210.00, (Notice of Indexation of the Penalty Unit Amount, 14 May 2020.) and so the maximum penalty which may be levied against Mr Fitzpatrcik is $1,050,000.00, and against Lightspeed is ten times that amount, or $10,500,000.00 (Section 167B, NCCP Act).

At the time of filing of the proceedings, Lightspeed and Fitzpatrick had failed to repay the lender the loan debt.

The issue of the Proceedings demonstrates an increased willingness by ASIC to actively pursue litigation against credit providers who engage in consistent or prolonged breaches of the NCCP Act and attendant NCCP Regulations, and reflects (perhaps) a changing approach in light of the findings of the Financial Services Royal Commission and criticism that ASIC was subject to for taking more light-handed approaches in the past.

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.