In Make It Mine Finance Pty Ltd, in the matter of Make It Mine Finance Pty Ltd (No 2) [2015] FCA 1255 Justice Beach of the Federal Court ordered that Make It Mine Finance Pty Ltd (MIM) pay pecuniary penalties totalling $1,250,000 for Credit Act and Credit Code breaches as follows:
(a) $500,000 for disclosure breaches;
(b) $500,000 for responsible lending breaches;
(c) $250,000 for licensing breaches.
MIM was also ordered to pay ASIC’s costs. Separately MIM accepted a compliance review licence condition on its credit licence.
Justice Beach has previously determined MIM’s liability for:
(a) Four contraventions of the Code in respect of each of 24,377 credit contracts, being disclosure breaches connected with the key requirements in s 17 of the Code.
(b) A contravention of item 4(1) of Pt 2 of Sch 2 to the Transitional Act in relation to 1,830 credit contracts where MIM was unlicensed whilst entering into credit contracts between 1 July 2010 and 31 December 2010.
(c) A contravention of item 6(1) of Pt 2 of Sch 2 to the Transitional Act in relation to 1,784 credit contracts where MIM was unlicensed whilst entering into credit contracts between 1 January 2011 and 20 April 2011.
(d) Four contraventions of the responsible lending obligations under the National Credit Act in respect of 20,763 credit contracts.
Justice Beach assessed the maximum penalties as follows:
(a) $2m for disclosure breaches;
(b) $$2.2m for responsible lending breaches (rejecting the Cash Store approach submitted by ASIC);
(c) $1.1m for licensing breaches.
In discussing the relevant factors in determining the penalty Justice Beach observed:
“In the present case, prior to October 2012 Mr Lang paid lip service to MIM’s statutory obligations. He kept lawyers’ involvement to a minimum. And when MIM’s lawyers gave prudent and correct advice, he either ignored it or implemented a variation thereof that conformed to his own convenient apparent misconceptions. Moreover, when MIM’s contravening conduct had been exposed, he pursued the theme, which continued before me, that somehow MIM’s lawyers should take some measure of the blame. Moreover, he sought to rely upon his relative youth and inexperience to explain the contraventions; at one stage he even referred to being “mentored” in relation to some of the conduct that I have found to be contravening. His excuses carry little weight. They had a veneer of respectability and were asserted with an air of earnestness when giving his oral evidence, but they lacked substance. His pride was to his prejudice. Nevertheless, it would appear that adequate procedures have now been put in place by MIM to remedy any systemic deficiencies.”…
“There is no evidence of specific loss by any particular debtor. Nevertheless, I infer that:
(a) MIM’s conduct deprived consumers of statutory protections to which they were entitled; the exclusive clientele of MIM were recipients of Centrelink payments, paying directly through Centrepay, and were therefore vulnerable and disadvantaged; and
(b) the use of Centrepay may have had the effect of diverting consumers from lower cost options, such as lay-by.”…” the penalty that I intend to impose for the Code contraventions together with the other contraventions will be in an amount that MIM has the capacity to pay and will not in any way significantly affect its prudential standing.”…
“I have fixed the same penalty in total for the responsible lending breaches as I have for the disclosure breaches as I consider them to warrant, in the special circumstances of this case, similar treatment, even though the responsible lending breaches attract a higher overall maximum penalty. Although on the one hand the responsible lending breaches might be considered to be more fundamental, on the other hand the disclosure breaches were the subject of detailed legal advice that was in substance ignored. On balance I have decided to fix equal penalties for both classes.”….
“The corporate culture of MIM at the time of the breaches appears to have been motivated by commercial expediency and entrepreneurialism, without proper regard for its compliance obligations.”
