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ASIC Enforcement Report - 1 July 2016 to 31 December 2016

Wednesday, May 31, 2017 - Posted by Michael McCulloch

The Australian Securities and Investments Commission ("ASIC") has recently released the enforcement results achieved by them for the period 1 July 2016 to 31 December 2016.

The report provides an overview of ASIC's enforcement results for the period. In summary:

- 98 investigations commenced
- 5 persons charged in criminal proceedings
- 102 investigations completed
- 47 criminal charges laid
- 39 individuals removed from financial services
- 194 persons charged in summary prosecutions for strict liability offences
- 63 infringement notices issued
- 382 criminal charges laid in summary prosecutions for strict liability offences
- $2.9m infringement notices paid
- $159.4m compensation / remediation

In the Consumer Credit space ASIC's focus during this period was on continued failure to comply with consumer protection provisions with 54 infringement notices issued for breaches requiring payment of penalties totalling $1.8 million.

Case Study Focus - Cash Converters

44. We commenced an investigation into payday lender Cash Converters as a result of concerns that it had failed to make reasonable inquiries into consumers’ income and expenses when processing small amount credit contracts through its website, particularly when the loan was unsuitable under the National Consumer Credit Protection Act 2009 (National Credit Act). We were also concerned that Cash Converters did not take reasonable steps to verify consumers’ expenses in accordance with its responsible lending obligations, instead merely applying an internally generated benchmark with no relationship to the actual expenses of individual consumers.

45. Cash Converters paid infringement notice penalties of $1.35 million for this conduct. In addition, we accepted an enforceable undertaking from Cash Converters which requires it to:
(a) refund eligible consumers fees totalling $10.8 million through a consumer remediation program overseen by an independent expert; and
(b) engage the independent expert to review its current business operations and compliance with the consumer credit regime and report to ASIC.


Case Study Focus - Mintable Stores


46. In May 2014, we issued proceedings against Lindsay Kobelt, the owner of Nobby’s Mintabie General Store—which is located in the Anangu Pitjantjatjara Yankunytjatjara lands in the north of South Australia. The proceedings concerned the store’s system of providing credit (known as ‘book up’) to Indigenous consumers.

47. We alleged that Mr Kobelt’s book up practices were unconscionable and that he had also engaged in credit activity without an Australian credit licence (credit licence). Consumers were required to provide Mr Kobelt with debit cards, personal identification numbers (PINs) and income details, which he used to withdraw the majority or all funds from consumers’ bank accounts. Between 1 July 2010 and 30 November 2012, Mr Kobelt withdrew just under $1 million from the accounts of 85 book up customers.

48. On 9 November 2016, the Federal Court found that Mr Kobelt had engaged in unlicensed credit activity and unconscionable conduct. It further found that Mr Kobelt’s customers were particularly vulnerable due to environmental, socio-economic and cultural circumstances, specifically their remoteness of living, limited education and poverty. The court found that Mr Kobelt was aware of and took advantage of his customers’ vulnerability in implementing a system that provided considerable financial benefit to his business to the customers’ detriment. Mr Kobelt has appealed against this decision.

ASIC has indicated the their areas remain consistent with a particular focus on:

- Ensuring gatekeepers adhere to the high standards required by law, particularly where breaches indicate poor corporate culture or governance;
- Enforcing responsible lending practices in the credit industry, including a focus on systemic breaches by licensees; and
- Conduct risk and the integrity of financial market benchmarks.

You can download a copy of Report 513 - ASIC Enforcement Outcomes: July to December 2016 here.


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