In Australian Securities and Investments Commission v Channic Pty Ltd (No 5) [2017] FCA 363 the Federal Court fined lender, Channic Pty Ltd (Channic) $278,000, broker Cash Brokers Pty Ltd (CBPL) $278,000 and the sole director of both companies, Mr Hulbert, $220,000,a total of $776,000 for breaching consumer credit laws relating to responsible lending. The Court also ordered they pay ASIC’s legal costs of $420,000.

Previously in Australian Securities and Investments Commission v Channic Pty Ltd (No 4) [2016] FCA 1174 Justice Greenwood found that CBPL contravened the credit assistance responsible lending provisions of the National Consumer Credit Protection Act. He also found that Channic contravened the credit licensee responsible lending provisions of that Act. Mr Hulbert was a person who has been knowingly concerned in each of those contraventions. He also found that Channic engaged in unconscionable conduct in breach of s 12CB of the ASIC Act. Each of the relevant credit contracts was found to be unjust at the time it was entered into, in terms of section 76 of the National Credit Code.

With respect to Mr Hulbert’s penalty Justice Greenwood stated: “He engaged in the conduct “without regard” to its unlawfulness. He was objectively, recklessly indifferent, to whether his conduct and that of Channic and CBPL put the consumers in a position of being parties to contracts that were unsuitable for them. I also accept that Mr Hulbert’s prior conduct demonstrates a history of failure to comply with the legislative requirements applicable to credit providers.”

Mr Hulbert was the sole director of both Channic and CBPL. They both operated from Supercheap, a used car dealership in Cairns which was also owned by Mr Hulbert. ASIC brought civil penalty proceedings after recreiving reports that Channic and Cash Brokers were dealing unjustly with vulnerable Indigenous consumers from the remote community of Yarrabah.

The case involved 8 loans for the purchase of vehicles.

All the vehicles were purchased by the consumers from an entity called ANG Hulbert & Associates Pty Ltd (“ANG”) trading as either “SuperCheap Auto” or “SuperCheap Car Sales”

The usual operation of those three businesses involved used cars being offered for sale or sold to members of the public by Supercheap. The sale of the cars would usually be financed by loans. Supercheap would be the seller and would convey title to the vehicle to the consumer. Channic would provide loans to customers to buy the vehicles. ASIC contended that CBPL would “purport” to broker a loan from Channic to assist a customer to purchase the vehicle.

Supercheap took out written advertisements by which it said that finance was offered to buyers: with a 20 minute onsite approval; to persons in receipt of Centrelink income; to persons with bad credit histories; and to exbankrupts. Supercheap advertised its business by means of a large sign outside its business premises visible to passersby

Alrhough the matter was decided on its facts Justice Greenwood explained the methodology for applying the statutory provisions:

“Plainly enough, the statutory regime requires the relevant inquiries and verification to be undertaken in order to enable the credit provider to make an informed assessment about the suitability of the proposed particular credit contract for the particular consumer in the context of the financial situation of that individual and the requirements and objectives of the consumer in entering into the particular contract. These statutory matters are not matters of form or mere process but represent normative matters of substance. The legislation is beneficial in the sense that it seeks to ensure that a consumer does not enter into an “unsuitable” credit contract (within the statutory notion of that concept) by casting a statutory obligation on a credit provider not to enter into such a contract coupled with a regime for inquiries and verification about the relevant statutory matters and an assessment protocol. These normative matters are not simply a “tick the box” compliance exercise. …

I am satisfied that Channic did not make reasonable inquiries to determine each consumer’s requirements and objectives in relation to the credit contract because the only relevant inquiries concern someone at Channic looking at the CBPL referred documents and “filling out” the Schedule 1 Loan Inquiry Checklist as a process or clerical matter and then “telling” the consumer on the credit day the elements of the loan contract rather than interrogating the consumer about the consumer’s requirements and objectives for that particular contract. “