Court orders credit assistance provider and its director to pay $220,000 after failing to comply with AFCA determination

In proceedings brought by ASIC, the Federal Court has ordered that credit assistance provider, Lightspeed Finance Pty Ltd, and its director Mark James Fitzpatrick, pay $220,000 for failing to give effect to Australian Financial Complaints Authority (AFCA) determinations (see ASIC v Lightspeed Finance Pty Ltd [2022] FCA 469).

We first wrote about this case in April 2021, when ASIC commenced the action.  As we noted then, the outcome is of interest because ASIC did not just step in to enforce the law; in a rare occurrence, it also effectively stepped into the shoes of borrowers to obtain a practical resolution for them that they might not otherwise have been able to achieve.

The Court found that, as Lightspeed’s director, Mr Fitzpatrick was knowingly involved in the company’s breach of the National Consumer Credit Protection Act 2009 (Cth) and its credit licence obligations, notably being bound by the AFCA external dispute resolution scheme.

Lightspeed is a credit assistance provider which arranged a $90,000 loan from a third party lender for its clients to complete works on a property secured by a mortgage. The borrowers completed declarations that the loan was “predominately for business purposes”.  However, this was clearly not the case, because the funds were expressly provided to complete home renovations.  

When the borrowers defaulted because the loan was unaffordable, the lender took possession, and sold the home for more than twice the value of the loan.  

The borrowers made a complaint to AFCA, which Lightspeed defended.  AFCA found in the borrowers’ favour, requiring Lightspeed pay the loan debt (including interest) owed by the borrowers to the third party lender, prior to the borrowers repaying to Lightspeed the initial loan amount.

For unknown reasons, Lightspeed failed to comply with the AFCA determinations, which is what prompted ASIC to bring the Federal Court proceeding.

The $220,000 Court ordered payments are made up of the following:

• $150,000 in compensation paid by Lightspeed and Mr Fitzpartrick to the consumer’s partner, who lost her home due to Lightspeed’s failure to comply with the AFCA determinations;
• $15,000 penalty paid by Lightspeed for failure to give effect to the AFCA determinations;
• $5,000 penalty paid by Mr Fitzpatrick for his knowing involvement in Lightspeed’s contravention; and
• $50,000 paid by Lightspeed and Mr Fitzpatrick towards ASIC’s legal costs.

In commenting on ASIC Deputy Chair Sarah Court said:

“When an external dispute resolution decision is made, ASIC expects the determination will be carried out. Complying with AFCA determinations is a critical part of a licensee’s obligations and ensures that consumers have access to a dispute resolution system that works.”

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.

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