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A non-bank business lender and loan introducer have both been found guilty of engaging in unlicensed credit activity.
The Federal Court has found that now-defunct business lender Green County Pty Ltd - and business loan introducer Max Funding Pty Ltd - both engaged in unlicensed credit activity in relation to two consumers.
In a court case brought against the two parties by the Australian Securities & Investments Commission (ASIC), it was alleged that neither of the two parties had a credit licence under the National Consumer Credit Protection Act 2009, as they were not writing loans for consumer purposes.
Instead, ASIC alleged that Green Country had made it a condition of their provision of credit to some borrowers that they made a “business purpose declaration” (declaring the funds were being used wholly or predominantly for business purposes). However, it argued that the business purpose declarations were ineffective without the lender also making reasonable inquiries about the credit purpose, noting that its failure to do so resulted in credit being used for personal matters in some cases.
ASIC’s case included a case where the borrower was suffering from gambling addiction and another who was under financial distress and declared they were seeking loans for business purposes, but actually lied in order to use the money for personal reasons.
ASIC alleged that had Green County or Max Funding made reasonable inquiries of either of them, they would have identified that the loans were not for business purposes.
The Federal Court agreed with ASIC’s position, finding that Green County and Max Funding could not simply rely on the ‘Business Purpose Declaration’ procured from consumers and should have done more by way of reasonable inquiries and that the entitled had therefore provided consumer loans without an appropriate licence.
While the two parties did make some inquiries from the borrowers, the judge said that “the information they had obtained was scant and called for further scrutiny and inquiry”, particularly as the information was vague and “begged questions”.
Justice Shariff said, ‘In my view, if reasonable inquiries were made of Consumer 2 of a better content and quality than those that were made of her, then, there was no rational or substantive information that Consumer 2 could have provided consistent with a business purpose.”
In relation to one of the consumer loans and the information that Green County and Max Funding had been given, Justice Shariff added: “It is frankly perplexing that credit was provided by the corporate respondents to Consumer 1 notwithstanding the unequivocal position that had been conveyed.”
The Court found Green County also contravened consumer protection provisions in the Credit Code.
ASIC Deputy Chair Sarah Court commented: “The integrity of the financial system relies on compliance with licensing requirements. ASIC pursued this matter as engaging in unlicensed credit activities undermines consumer protection and can lead to significant financial harm for vulnerable individuals.”
The financial services regulator also brought a charge against Green County director Ivy Tang Gy Ng, arguing she had breached her director’s duties, however, the court did not find she had done so.
The Court will determine the next steps in the matter.
The case marks one of ASIC’s litigations under its ambition to crack down on high-cost and predatory lending.
In 2023, ASIC warned it was cracking down on lenders that “look to take advantage of vulnerable consumers”, as it looked to stamp out predatory lending, high-cost credit, and lending misconduct.
At the time, ASIC deputy chair Sarah Court said that ASIC would continue to “sharpen its focus” on credit providers and debt management firms, including those that are unlicensed or ‘fringe’ entities, as it looks to protect consumers.
ASIC’s enforcement priorities for 2025 are as follows:
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Business models designed to avoid consumer credit protections (particularly in private credit)
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used car finance sold to vulnerable consumers by finance providers
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misconduct impacting small businesses and their creditors
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unlawful debt management and collection misconduct;
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unscrupulous property investment schemes (particularly those that exploit superannuation savings)
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Failures by insurers to deal fairly and in good faith with customers.
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Licensee failures to have adequate cyber security protections.
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Greenwashing and misleading conduct involving ESG claims.
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Member services failures in the superannuation sector.
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Auditor misconduct.
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Strengthening investigation and prosecution of insider trading.
[Related: ASIC launches review into car finance]
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