ASIC has launched court proceedings against two business lending specialists, Green County Pty Ltd and Max Funding Pty Ltd, alleging they issued personal loans without being licensed and without undertaking proper inquiries.
ASIC has alleged Green County and Max Funding did not make reasonable inquiries about the purpose of loans, which led to Green County providing personal loans to certain borrowers, even though neither entity was licensed to provide these personal loans or act as an intermediary.
This resulted in customers not having the benefits of protections under the National Credit Act and Code, ASIC has claimed, and being charged more for loans than they lawfully should have been.
“The Credit Act provides important safeguards for consumers who apply for personal loans to protect consumers from unfair lending practices,” ASIC Deputy Chair Sarah Court said.
“If you are prohibited from providing a certain type of loan because you are not licensed, it is ASIC’s expectation that there are processes in place to help ensure those loans are not provided.”
ASIC said that the two businesses were operating a credit lending model where they were relying on an exemption from the need to hold an Australian Credit Licence, because Green County was requiring prospective borrowers to sign a business purpose declaration.
“However, business purpose declarations are ineffective including where a credit provider would have known, if they had made reasonable inquiries about the credit purpose, that the credit was in fact to be applied for personal use,” ASIC said.
As part of the court action, ASIC will allege Green County contravened the consumer protection provisions in the National Credit Code by exceeding the 48% annual cost rate cap for certain credit contracts and failing to specify the annual percentage rates for certain credit contracts.
It also failed to specify the total interest payable for certain credit contracts, ASIC said.
ASIC will also allege Ivy Tang Gy Ng breached her duty of care and diligence as a director or officer of these companies and ought to have taken reasonable measures to avoid the companies breaching the Credit Act and the Code.
“ASIC’s allegations of providing personal loans without the proper licence and breaching directors’ duties are serious. Directors and officers have a fundamental responsibility to take reasonable steps to ensure that their organisations have systems in place to comply with the law,’ she said.
ASIC said it would be seeking declarations, pecuniary penalties, injunctions, disqualification orders and other orders from the Court, though a court date is yet to be determined.