01 May 2018

Credit 'Fixing' and the ACL

The Federal Court has found that 'credit repair' business Malouf Group Enterprises Pty Ltd and its sole director, Jordan Francis Malouf, breached the Australian Consumer Law during the period January 2014 to December 2015 by making false and misleading representations and by engaging in unconscionable conduct. The Court described the conduct as "cynical and calculated"

 Action was taken by the Australian Securities and Investments Commission (ASIC) on a delegated basis from the ACCC under the ACL.

The penalty for that misleading and unconscionable conduct was $1.7 million, with $100,000 towards ASIC's costs. In determining the penalties, the Court took into account an enforceable undertaking in which the respondents will refund $1.1 million to consumers who did not have any negative listings on their credit files when they entered into contracts with Malouf Group during the 2014-2015 period. The penalties were towards the limit of the financial resources available to the respondents.

Malouf Group claimed to “clean up” a consumer's credit history by removing negative listings. It primarily operated through on-line and by telephone sales. The Court accepted ASIC's  allegation that the Malouf Group sales tactics misrepresented the services that Malouf Group actually provided because Malouf Group had not ascertained if the consumer had negative listings or if any negative listings were able to be removed.

The Court found that Malouf Group engaged in misleading or deceptive conduct in inducing consumers to enter into contracts, with  false representations on Malouf websites regarding its standing as a credit repair company; the display of false testimonials on the Malouf Group websites; the making of false representations as to Malouf Group's ability to clean up a consumer's credit history; and the making of false representations in Malouf' Group's sales scripts about the work  done for the consumer prior to the payment of the Malouf Group fee.

It characterised  examples of the tactics used to induce consumers to enter into contracts as "disturbing and unconscionable". It found that Mr Malouf was knowingly involved in the contraventions of the Australian Consumer Law, having devised and implemented the business model of Malouf Group; approved the content of the websites and advertising; approved the content of the sales scripts; and was involved in the training and supervision of sales staff to ensure that they followed the sales scripts.