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The Federal Court has found that business lender Green County Pty Ltd and business loan introducer Max Funding Pty Ltd engaged in unlicensed credit activity in connection with loans made by Green County to two consumers.
In a ruling that highlighted the importance of consumer protections, the court also determined that Green County breached key consumer protection provisions under the National Credit Code.
The court found that, in one case, Green County and Max Funding relied solely on a signed ‘Business Purpose Declaration’ from the borrower, rather than conducting reasonable inquiries into the actual purpose of the loan.
Had those inquiries been made, the court ruled, the companies would have known – or had reason to believe – that the loan was not for a business purpose.
Additionally, the court found that for both consumers, the loans were presumed to be consumer loans under the Credit Code and the entities failed to establish that they were business loans. As a result, the borrowers were denied important consumer protections provided under the legislation.
While ASIC was not successful in its case regarding one of the loans nor in its case against Green County director Ivy Tang Gy Ng – who the court found had not breached her director’s duties – the regulator welcomed the decision.
ASIC deputy chair Sarah Court said: “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.”
Justice Shariff was critical of the conduct, commenting on one loan: “It is frankly perplexing that credit was provided by the corporate respondents to Consumer 1 notwithstanding the unequivocal position that had been conveyed.”
Regarding another case, the judge 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.”
The court will determine next steps, including any potential penalties or enforcement actions, in due course.
ASIC commenced the proceedings in March 2023, alleging that Green County and Max Funding operated a lending model reliant on business purpose declarations to avoid the requirement to hold an Australian credit licence.
However, such declarations are not valid if a lender could have discovered – through reasonable inquiries – that a loan was for personal use.
The Credit Act and the Credit Code provide essential protections for consumers, including mandatory disclosures, interest and fee limitations, hardship provisions, and access to external dispute resolution services.
ASIC said the case forms part of its broader priority to stop misconduct that presents a high risk of significant consumer harm.
[RELATED: Lenders in court over ‘serious’ credit breaches]
