In Carter and Anor v Fast Access Finance (Beaudesert) Pty Ltd and Anor [2011] QCAT 525 the Queensland Civil and Administrative Tribunal decided that contracts for the sale of purchase of diamonds were in fact a loan contract regulated by the Consumer Credit Code (as it then was) and as the charge for credit was well in excess of the permitted rate of 48% pa the loan should be reopened.
The lender was ordered to repay to the borrower the whole of interest [or credit charge or profit] received by it.
Rachael Carter and Michael Sinclair had fallen behind substantially with their rental. On 5 November 2009, they attended the offices of Fast Access Finance (Beaudesert) Pty Ltd in order to obtain a loan of $1,000 to pay the rent. They had 2 children and were unemployed.
They signed documentation to buy diamonds for $2000 by instalments by weekly repayments of $98.00 over a period of 5 months on the security of their 1993 Holden Commodore worth $2000 and at the same time to sell the same diamonds immediately for $1000.They were not shown any diamonds and there was no discussion about diamonds. They left with $1000.
The lender argued the arrangement was not a regulated loan even though the applicants signed a loan application form and the privacy consent referred to borrowing.
The [applicants submitted the] rate of interest was calculated at about 318% pa.
The Adjudicator concluded:
The respondents‘ submissions … would have one believe that the genuine nature of the transaction between the parties was one of the sale and purchase of diamonds…. that Mr Sinclair and Ms Carter attended their office for the purpose of purchasing diamonds and immediately reselling those diamonds as an essential part of that transaction so that as the net result they could lose $1,000. They would never see the diamonds which they contracted to purchase and nor would they get any benefit for example by Ms Carter being able to wear the diamonds…
I find that the characterisation of the transaction in that manner is so highly unlikely, improbable and implausible as to be a complete fiction. It is ridiculous that a person would wish to enter a business premises in order to buy a product no matter what it be, to sell it immediately and make a loss…
This transaction breaches the Code in many respects, pursuant to section 70 it is reopened and I find the respondents are not entitled to any interest, credit charge or profit. As they have not produced any evidence or statement of account then I accept the evidence of the applicant that they have paid $2,500 to repay the loan of $1,000 and I order that the respondents pay to the applicants the sum of $1,500 within 14 days.
AUTHOR’S NOTE 21 November 2011: The words in square brackets have been added as the solicitor for the respondent has pointed out that there was no specific finding as to interest.
