A Victorian Consumer Credit Code prosecution that began in 2003 has finally concluded with an order that Australian Finance Direct Ltd (AFD) be fined $100,000.00 for breaches of section 15(B) of the Code.(Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (Credit) [2009] VCAT 129)

AFD made loans to people who wished to attend property investment seminars conducted by a third party but who did not wish (or were unable) to pay the fees for the seminars in cash.  The purpose of the credit was to enable them to defer payment.

But the loan contracts did not disclose "holdbacks" retained by AFD which amounted to between 10% and 40% of the loan amount depending on its assessment of the risk of the borrower.

The decision that AFD had committed a breach had previously been unsuccessfully appealed all the way to the High Court here.

The Tribunal Deputy President made the following comments:

1. AFD concedes and I agree that its breach was serious. It failed to disclose key information to its debtors – information which affected their choices and their understanding of the transaction. It stated incorrectly that the whole of the amount of credit was to be provided to the introducer. This statement had the potential to mislead debtors about the true nature of the transaction.
2. The breaches were systemic. They affected all the credit contracts entered into by AFD in relation to the introducers NII and Capital, in the period to which this proceeding relates. That period is relatively long – from February 2002 to November 2003.
3. While the total number of contracts affected is not in the hundreds of thousands, and the amounts involved are not in the hundreds of thousands or millions, the amounts involved and the number of contracts affected are substantial. This is the more so because AFD is (as the parties agree) a relatively small credit provider.
4. I did not find that there were breaches of multiple provisions of the Code. Only one provision was breached. All breaches arose out of the same kind of conduct, and not out of diverse kinds of conduct.
5. I do not agree with the Director’s submission that I should, in determining civil penalty, take into account that AFD retained the high risk holdback to guard itself against the risk it took in lending to people who did not meet its standard lending guidelines. The civil penalty is imposed for breach of the disclosure requirement of the Code, not for inappropriate lending practices.