In Australian Securities and Investment Commission v A&M Group Pty Ltd trading as Debt Negotiators [2022] FCA 1534 the Federal Court ordered A&M Group Pty Ltd, which trades as Debt Negotiators, to pay to the Commonwealth a civil penalty of $650,000, together with $80,000 towards ASIC’s costs, after finding that it breached section 12DJ of the ASIC Act which prohibits undue harassment or coercion in connection with financial services by its conduct against debtors who had missed payments under their Part IX debt agreements.

Justice Bromwich also found that A&M had engaged in conduct in relation to financial services that was misleading or deceptive, or likely to mislead or deceive which was prohibited under section 12DA of the ASIC Act.

Debt Negotiators’ business involves administering registered debt agreements entered into between debtors and their creditors under Part IX of the Bankruptcy Act 1966 (Cth), especially and typically consumer debtors with multiple creditors and few assets.

ASIC’s proceeding against Debt Negotiators focussed on its conduct towards six debtors during the period 30 January to 19 February 2020.

It sent text messages, emails and made telephone calls to six separate debtors where it made statements that were untrue such as they could be charged with fraud and sentenced to imprisonment for failing to make payments under their debt agreement or selling their assets.

A&M harassment included:

• threatening to contact uninvolved family members, friends, work colleagues or landlords; and/or
• contacting or attempting to contact uninvolved family members, friends and work colleagues; and/or
• pressuring debtors to seek the assistance of family and friends to make payments due under their debt agreements; and/or
• communicating with debtors in a demeaning, condescending and/or offensive manner.

After the contravening conduct was detected A&M made changes tailored to address the contravening conduct.

In explaining the amount of the penalty Justice Bromwich observed:

In the final analysis, the admissions of contravention and the remedial program introduced by Debt Negotiators have been highly influential in determining the level of penalty required for both specific and general deterrence. The penalties would have been considerably higher if either of those steps had not been taken and much higher again if both had not been taken. In short, that ultimate response, well before any trial had been listed, constitutes the right kind of sorry and thus reduced risk of repeat contraventions. But it does not remove the continued need for a substantial, albeit much reduced, penalty. The objective of the exercise is to eliminate this sort of behaviour from the registered debt agreement administration industry.

Justice Bromwich said this was not a case in which the defendant made a very significant profit directly from the contravening conduct; the judge commented that the actual profit derived is not a useful measure of the seriousness or otherwise of the contraventions.

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.