$220,000 judgement over AFCA determination non-payment

At the same time that financial advisers worry about how the Compensation Scheme of Last Resort will be funded, the Australian Securities and Investments Commission (ASIC) has highlighted a $220,000 Federal Court judgement against a credit assistance provider for an unpaid Australian Financial Complaints Authority determination.

ASIC reported today that the Federal Court had ordered Lightspeed Finance Pty Ltd and its director Mark James Fitzpatrick to pay a total $220,000 for failing to give effect to an AFCA determination.

It said the court had found that Lightspeed Finance had failed to give effect to the determination and that Fitzpatrick was knowingly involved in a breach of the National Credit Act.

On 4 December 2018, AFCA made a determination against Lightspeed Finance following a consumer complaint about an unaffordable loan. AFCA determined that Lightspeed Finance pay a loan debt (including interest) owed by the client to a lender, prior to the client repaying Lightspeed the initial loan amount.

On 12 July 2019, AFCA made a second determination in favour of the same consumer, reducing the consumer’s liability even further. Both determinations were accepted by the consumer and were binding on Lightspeed under the AFCA rules.

The $220,000 payment ordered by the court includes $20,000 in penalties, $150,000 in compensation and $50,000 for ASIC’s costs.

ASIC noted that, in making the orders, Justice Derrington observed that Lightspeed and Fitzpatrick failed to meet the obligations of Lightspeed’s credit licence by refusing to comply with AFCA’s determinations, a central part of Lightspeed’s agreement to be bound by AFCA’s external dispute resolution scheme.

The regulator also pointed out that, since 13 March 2019, greater penalties apply for failures to co-operate with AFCA, which include a maximum penalty of $10.5 million for a company and $1.05 million for an individual.