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ASIC has commenced legal proceedings against Oak Capital’s mortgage and wholesale branches after allegedly engaging in “unconscionable conduct to avoid the National Credit Code.”
According to ASIC deputy chair Sarah Court, the lender “deprived” clients through irresponsible lending.
“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 Court.
“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 alleges Oak Capital made up to 47 loans totalling over $37 million under a model designed to avoid the application of the Code and the National Consumer Credit Protection Act 2009, between 7 March 2019 and 4 October 2023.
According to ASIC, the organisation allegedly provided loans to companies rather than the individuals requiring the loan to avoid the operation of the Code and the Credit Act. ASIC said the lender did this knowingly.
ASIC said that Oak Capital’s lending model required loans to be taken out in a company’s name, even when the company had no direct benefit or legitimate interest in the loan, nor any realistic ability to repay it. Typically, the individuals applying for the loan used their own homes as collateral.
Oak Capital issued loans to companies with few or no assets and little to no active trading. In some cases, these companies were established just days before the loan settlement, solely to obtain the loan.
Due to their financially distressed situations, several individuals defaulted, leading Oak Capital to repossess their homes. ASIC’s case highlighted 47 loans as examples of what it described as Oak Capital’s avoidance model.
ASIC said: “The non-bank lenders engaging in the conduct within the Oak Capital corporate group are Oak Capital Mortgage Fund Ltd and Oak Capital Wholesale Fund Pty Ltd.
“Neither entity has ever held an Australian Credit Licence. Both entities hold Australian Financial Services Licences in connection with contributory mortgage investment funds they operate which allow investors to select individual investments from a range of approved mortgage products. The National Credit Code applies to loans to individuals where the loan is wholly or predominantly for a personal, domestic, or household purpose.”
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