Lightspeed Finance and director fined for failure to give effect to an AFCA determination

The case involves an "unaffordable loan" to complete home renovations

Lightspeed Finance and director fined for failure to give effect to an AFCA determination


By Mina Martin

A credit assistance provider and its director have been ordered to pay a total of $220,000 for failing to give effect to an Australian Financial Complaints Authority (AFCA) determination.

The Federal Court found Lightspeed Finance failed to give effect to an AFCA determination and as company director, Mark James Fitzpatrick was knowingly involved in this breach of the National Credit Act.

“When an external dispute resolution decision is made, ASIC expects the determination will be carried out,” said Sarah Court, ASIC deputy chair. “Complying with AFCA determinations is a critical part of a licensee’s obligations and ensures that consumers have access to a dispute resolution system that works.”

On Dec. 4, 2008, AFCA made a determination against Lightspeed after a consumer complained about an unaffordable loan. AFCA determined that Lightspeed should pay a loan debt (including interest) owed by the client to a lender, prior to the client repaying Lightspeed the initial loan amount.

The loan was arranged by Lightspeed for the consumer to complete home renovations. Despite knowing the loan was not for business purposes, Lightspeed accepted a business purpose declaration from the consumer, telling the consumer they could obtain refinance at the end of the loan term. AFCA found complying with obligations under the National Credit Act would have shown that the loan was unaffordable.

On July 12, 2019, a second determination was made in favour of the same consumer, reducing the consumer’s liability even further. Both determinations were accepted by the consumer and were binding on Lightspeed under the AFCA rules.
The $220,000 fine includes $20,000 in penalties, $150,000 in compensation, and $50,000 for ASIC’s costs.

In making the orders, Justice Derrington observed that Lightspeed and Fitzpatrick failed to meet the obligations of Lightspeed’s credit licence by refusing to comply with AFCA’s determinations, a central part of Lightspeed’s agreement to be bound by AFCA’s external dispute resolution scheme, ASIC reported.

Since March 13, 2019, greater penalties apply for failures to cooperate with AFCA, which include a maximum penalty of $10.5 million for a company and $1.05 million for an individual.

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