Australian Finance Direct Ltd v Director of Consumer Affairs Victoria

Australian Finance Direct Ltd brought proceedings against the Director of Consumer Affairs Victoria, challenging the Director's decision that the company's arrangements with seminar providers for loan agreements violated the Consumer Credit (Victoria) Code. The loans in question were provided to consumers to pay fees for investment seminars, and as part of these arrangements, the credit provider retained a portion of the loan funds that would otherwise be payable to the seminar provider. Australian Finance Direct Ltd argued that this arrangement did not constitute a contractual obligation and was not required to be disclosed to borrowers as a payment of "credit." They further contended that the retention amount did not constitute interest and therefore did not breach the Consumer Credit Code.

The court examined whether the retention arrangement constituted a contractual obligation under the Consumer Credit (Victoria) Code. It determined that the retention was indeed a contractual obligation, as it was part of the loan agreement. The court also found that this retention had to be disclosed to borrowers as a payment of "credit." In examining whether the retention amount constituted interest, the court held that it did not meet the statutory definition of interest, yet it still fell under the ambit of the Consumer Credit Code, specifically sections 15 and 16(B), (C), (D), and (E). These sections address the disclosure of credit terms and the prohibition of certain practices in consumer credit arrangements.

Ultimately, the court found that Australian Finance Direct Ltd's practices breached the Consumer Credit (Victoria) Code. It ruled that the retention arrangement constituted a contractual obligation that needed to be disclosed to borrowers as a payment of "credit," even though it was not classified as interest. The court upheld the Director's decision, confirming that Australian Finance Direct Ltd had contravened the Consumer Credit Code. The final orders of the court affirmed the Director's decision and required Australian Finance Direct Ltd to comply with the Consumer Credit (Victoria) Code in its future dealings.