Non-bank lender sued for alleged evasion of consumer protection regulations
The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings against Oak Capital Mortgage Fund and Oak Capital Wholesale Fund, alleging that the non-bank lender engaged in “unconscionable conduct” aimed at circumventing consumer protection laws.
According to ASIC, Oak Capital issued 47 loans totalling over $37 million between March 2019 and October 2023 using a model allegedly designed to bypass the National Credit Code and the National Consumer Credit Protection Act 2009.
This model, ASIC claims, involved lending to companies instead of individuals, even when the loans were intended for personal, domestic, or household purposes — transactions that would normally fall under consumer credit regulation.
“As a result of loans being treated as unregulated, we allege Oak Capital deprived its clients of important consumer protections, including responsible lending obligations, the right to make a hardship application and protection from being charged excessive fees and interest,” said ASIC deputy chair Sarah Court (pictured above).
“These protections are critical in the current financial climate where borrowers are more likely to be at risk of serious financial hardship. ASIC will continue to take action where we consider business practices are designed to avoid consumer credit protections.”
ASIC has commenced proceedings against Oak Capital for allegedly engaging in unconscionable conduct to avoid the National Credit Code https://t.co/2tL7l9CHF3 pic.twitter.com/M6iZPoxKoa
— ASIC Media (@asicmedia) October 30, 2024
The corporate regulator, in documents filed in the Federal Court, said that in many instances, the companies had no assets or operating history and were set up shortly before the loan’s settlement. Despite this, the loans were secured against the personal homes of the individuals behind the companies.
Oak Capital Mortgage Fund and Oak Capital Wholesale Fund operate under Australian Financial Services Licences for contributory mortgage investment funds, which allow investors to select individual loans from a portfolio of approved mortgage products. However, neither entity holds an Australian Credit Licence, which would be necessary to offer regulated consumer loans.
ASIC claims Oak Capital knew, or should have known, that these loans were primarily for personal use, and thus should have been regulated under the National Credit Code. By structuring the transactions in this way, the company allegedly avoided the requirement for an Australian Credit Licence and associated consumer protections.
Oak Capital’s lending practices reportedly led to multiple defaults among borrowers facing financial difficulties, resulting in the repossession of homes. ASIC is using these 47 loans as examples to demonstrate what it describes as a systematic effort to avoid regulatory obligations.
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