In Australian Securities and Investments Commission v Fast Access Finance Pty Ltd [2015] FCA 1055 the Federal Court decided that lenders, Fast Access Finance Pty Ltd, Fast Access Finance (Beenleigh) Pty Ltd and Fast Access Finance (Burleigh Heads) Pty Ltd breached consumer credit laws by engaging in credit activities without holding an Australian credit licence. Justice Dowsett discussed the basis for appropriate Credit Act compensation orders for customers.

UPDATE 13 March 2017: the lenders were fined $730,000 (more).

Consumers who were seeking small value loans (of amounts generally ranging from $500 to $2,000) entered into contracts for the purchase and sale of diamonds in order to obtain a loan. The effect of these contracts was to charge interest in excess of the 48% interest rate cap that should have applied to small amount loans.

Compensation orders
Justice Dowsett rejected ASIC’s submission that he should order that the relevant FAF entity refund to each customer, the difference between the amount actually paid to the customer and the amount paid to the FAF entity by the customer. He said that where a customer has fully repaid the debt, such an order would mean that in effect, he or she received an interest-free loan. He said:

“To allow a customer an interest free loan goes beyond the three objectives identified in s 180(1). It should be kept in mind that punishment is to be inflicted by the imposition of pecuniary penalties. Although s 180(1)(c) might suggest a punitive intention, (deprivation of any profit), it requires only that the Court prevent the credit provider from profiting from the customer. Like subss 180(1)(d) and (e), subs 180(1)(c) is concerned with compensation….

Each customer has had the benefit of the advance or advances. He or she should pay the price for it, to the extent that the law allows. In this case, any orders pursuant to s 180 should ensure that no customer has paid, or will pay more to the relevant FAF entity than the sum of the amount paid to that customer … plus interest at the maximum rate permitted by law. The evidence suggests that these transactions would have been unprofitable if an interest rate of 48% per annum were charged. That proposition might be a reasonable guide to the appropriate interest rate. However it may be that not all of the customers could have borrowed at that rate. There is no evidence indicating the rates at which other borrowers were lending, nor as to their lending policies. Nonetheless, I am willing to infer that it is more probable than not that each customer could have borrowed elsewhere at the maximum lawful interest rate.

Where the amount payable by a customer pursuant to the relevant transaction has been paid in full, there will be an order for compensation in the amount derived by:
•calculating the total amount paid by the customer to the relevant FAF entity;
•deducting from that amount the total of the amount paid to the customer by DCH and the maximum amount of interest which could lawfully have been made payable under the relevant s 204 Contract, taking into account instalments paid; and
•adding to the resulting amount, interest at 5% per annum from the date of the final payment by the customer to the date of judgment.

Where the amount payable by a customer pursuant to the relevant transaction has not been paid in full, there will be an order for compensation in the amount derived by :
◦calculating the total amount paid by the customer to the relevant FAF entity;
◦adding to the amount paid to the customer …, the maximum amount of interest which could lawfully have been made payable under the relevant s 204 Contract, taking into account instalments paid, such interest to be calculated up until the date of judgment;
◦if the resulting amount is less than the total amount paid by the customer, deducting the lesser amount from the greater amount; and
◦adding to the difference, interest at 5% per annum from the date of the last payment made by the customer to the date of judgment.”

The matter will be listed for a further hearing, on a date to be set, in relation to civil penalties and other orders.