Coral Coast Distributors (CAIRNS) Pty Ltd and Australian Securities & Investments Commission
[2024] AATA 1585
•12 June 2024
Coral Coast Distributors (CAIRNS) Pty Ltd and Australian Securities & Investments Commission [2024] AATA 1585 (12 June 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2024/2710
Re:Coral Coast Distributors (CAIRNS) Pty Ltd
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Senior Member Grigg
Date:12 June 2024
Place:Melbourne
The Applicant’s application for a stay order pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) is denied.
..................................[SGD]......................................
Senior Member D K Grigg
Catchwords
PRACTICE AND PROCEDURE – STAY APPLICATION - STOP ORDER – Stop order under s 994J(2) of the Corporations Act - whether stay necessary to secure effectiveness of hearing and determination of the application for review – prospects of success – prejudice to parties - public interest – whether the review application would be rendered nugatory - applicant prevented by ASIC from providing customers at its retail stores a payment facility using a credit facility provided by Services Australia known as Centrepay – relevance of impact on third parties - stay order not granted
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Australian Securities and Investments Commission Regulations 2001 (Cth)
Corporations Act 2001 (Cth)
Corporations Regulations 2001 (Cth)
Cases
Anderson v Australian Securities and Investments Commission [2022] AATA 339
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130
Australian Securities and Investments Commission v Hutchison [2020] FCA 978
Daly and Australian Securities and Investments Commission [2020] AATA 1516
Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159
McLean and Australian Securities and Investments Commission [2016] AATA 22
MRWL and Australian Securities and Investments Commission [2022] AATA 3366
Re Celik and Department of Immigration and Ethnic Affairs (1988) 9 AAR 215
Re Dart and Director-General of Social Services (1982) 4 ALD 553
Re IMS FX Services Pty Ltd and Australian Securities and Investments Commission (2016) 70 AAR 197
Re Liddle and Commissioner for Superannuation [1991] AATA 191; 14 AAR 456
Re Scott and Australian Securities and Investments Commission [2009] AATA 798
Sahai and Australian Securities and Investments Commission [2021] AATA 590
Sgaravizzi and Australian Securities and Investments Commission [2019] AATA 6890
Van Dieren and Australian Securities and Investments Commission [2019] AATA 4777
Secondary Materials
Centrepay Policy & Terms v3.0 Effective from 10/12/2018
Centrepay Procedural Guide for Businesses, V6.0 effective March 2024
Explanatory Statement Issued by authority of the Treasurer, Corporations Act 2001 , Corporations Amendment (Design and Distribution Obligations) Regulations 2019
REASONS FOR DECISION
Senior Member D K Grigg
12 June 2024
Contents
INTRODUCTION
BACKGROUND
Centrepay System
LEGISLATIVE REQUIREMENTS
Australian Securities and Investments Commission Act 2001
Credit facilities and financial products
Design and Distribution Requirements
Stop Orders
Power and Criteria for the Grant of a Stay
ASIC INVESTIGATION & DECISION
Application for review
ISSUES FOR THE TRIBUNAL
APPLICANT’S BUSINESS AND CENTREPAY FACILITY
CCDC’s TMD
ASIC EVIDENCE
Financial Counsellors
Mr Gray - the managing director and a registered financial counsellor for Bush Money Mob.
Bettina Cooper – financial counsellor, Financial Rights Legal Centre
Fiona Jane Pettiford
Kelly Gulliver
Former Customers
Ms Winton
Mr Wanambi
Doctor Djambawa Terry Marawili AM HC.
Kathy Liyawaday Marawili
CONSIDERATION
The Prospects Of Success Of The Substantive Application For Review
Applicant’s Submissions
ASIC’s Submissions
Consideration
The consequences to the Applicant if the request for a stay is refused
The Applicant’s Submissions
ASIC’s Submissions
Consideration
The Public Interest
Applicant’s Submissions
ASIC’s Submissions
Consideration
Application for review would not be rendered nugatory
STAY APPLICATION – CONCLUSION
DECISION
INTRODUCTION
The Applicant, Coral Coast Distributors (Cairns) Pty Ltd (CCDC) operates a retail business, under the name Urban Rampage, in remote parts of northern Australia, particularly in Queensland and the Northern Territory.[1] CCDC’s clientele are largely people residing in remote Aboriginal communities who are recipients of Centrelink payments.
[1] Affidavit of James Hughes-Morris, [4]-[5].
CCDC says it sells “essential household goods to consumers on Centrelink payments” and provides “an essential service to its customers, by permitting them (in certain circumstances) to pay for those essential goods via Centrepay”.
CCDC says its business has all but come to a halt because of a final stop order issued by the Respondent (ASIC) under s 994J(2) of the Corporations Act 2001 (Decision).
ASIC’s stop order prohibits CCDC, until further notice, from allowing its customers to use Centrepay to pay for items at CCDC’s retail outlets.
CCDC has applied for a review of the Decision.
Pending the review, the Applicant has made an interlocutory application for a stay of the Decision pending the final hearing and decision of the Tribunal.[2]
BACKGROUND
[2] Exhibit 3, Request for a Stay Order dated 12 April 2024.
Centrepay System
Centrepay is a voluntary facility bill paying service provided by Services Australia. It enables Centrelink recipients to pay expenses from Centrelink benefits.[3]
[3] Exhibit 4.1, Centrepay Policy, [1].
Centrepay is regulated and managed by Services Australia. Its policy and governance are set out a document called “Centrepay Policy & Terms” (“Centrepay Policy”). The Centrepay Policy “is intended to provide clear information about the Centrepay Framework and how Centrepay works”.
Services Australia has also produced a Centrepay Procedural Guide for Businesses (“Centrepay Procedure”).
The stated objective of Centrepay is:[4]
…to assist Customers in managing expenses that are consistent with the purposes of welfare payments, and reducing financial risk, by providing a facility to have regular Deductions made from their welfare payments
(emphasis added)
[4] Exhibit 4.1, Centrepay Policy, [2.1].
A simplified description of the way the Centrepay system works in practice is that a customer who wishes to purchase goods from an approved Centrepay business signs a consent form (Deduction Authorisation Form) authorizing specified amounts to deducted from their Centrelink account before any Centrelink payment is made.
The Policy sets out:
what a Business should consider before applying to use Centrepay
the eligibility criteria that a Business must meet to use Centrepay
the requirements for any Business approved to use Centrepay
how a Customer may authorise Deductions
the types of goods or services that can and cannot be paid for with Centrepay
assurance and compliance actions the Agency may take in respect of Centrepay
circumstances in which the Agency will suspend or withdraw its approval for a Business to use Centrepay, and
the process for reviewing decisions made by the Agency.
According to the Policy, Centrepay:
(a)may only be used with businesses registered (and approved) with Services Australia;
(b)can only be used to acquire for certain goods and services;
(c)cannot be used to buy alcohol or cigarettes for example.[5]
[5] Exhibit 4.1, Centrepay Policy, [3].
Pursuant to the Services Australia website, Centrepay gives people choices to manage their deductions. It states:[6]
[6] How to use Centrepay - Centrepay - Services Australia
You can choose when to start, change or stop Centrepay deductions.
For example, you can:
set a target amount the deduction will stop at automatically
set an end date in the next 12 months for the deduction to stop on
choose which deduction we pay first
vary the deduction you need to pay if the amount goes up or down
make a temporary change for up to 13 weeks to the amount, the deduction will then change back to the original amount
suspend deductions for up to 13 weeks, then they’ll start again.
While Centrepay lets you manage your deductions you still need to meet your obligations to pay a registered business.
Centrepay deductions are made prior to the balance of any welfare payment being paid to a Centrelink recipient.[7]
[7] Exhibit 4.1, Centrepay Policy, [1.2].
Deductions cannot be made without an executed deduction authority. A “deduction authority can only ever be authorised by Customer or Customer Representative.”[8]
[8] Exhibit 4.2, Centrepay Procedure, 10.
Deductions amounts must be a minimum of $10 per fortnight. The Policy states “Customers can choose to use the full amount of their welfare payment”.[9]
[9] Exhibit 4.2, Centrepay Procedure, 11.6.
Fees and costs associated with the use of Centrepay cannot be passed on to customers.[10]
[10] Exhibit 4.2, Centrepay Procedure, 3.
In terms of approving a business to provide Centrepay facilities, Services Australia reserves the right to withdraw or suspend the approval of a Business if, in the Agency’s opinion, any of the following apply:
a.the Business (or its Business Representative) has not conducted, or is unlikely to conduct, its operations in a lawful manner
b.the Business (or its Business Representative) has conducted, or may potentially conduct, its operations in a manner that is unethical, inconsistent with the Centrepay objective or takes unfair advantage of Customers
c.the Business (or its Business Representative) fails to, or is unlikely to, fully comply with the Centrepay Framework
d.making payments to the Business through Centrepay would adversely affect the reputation of the Agency or the Australian Government
e.the Business (or its Business Representative):
i.is under investigation by a Regulatory Body or law enforcement agency
ii.is, following an investigation, the subject of adverse findings by a Regulatory Body or law enforcement agency, or
iii.has had enforcement proceedings brought against it or other sanctions imposed by a Regulatory Body or law enforcement agency, or
f.the Business ceases to comply with any of the essential criteria listed above.[11]
[11] Exhibit 4.2, Centrepay Policy, 5.2.
CCDC was, until recently an approved Centrepay business. It first became an approved business eight years ago. Services Australia has suspended its approval for CCDC to provide Centrepay credit facilities to its customers following ASIC’s stop order.
LEGISLATIVE REQUIREMENTS
Australian Securities and Investments Commission Act 2001
The Australian Securities and Investments Commissioner Act 2001 (ASIC Act) sets out ASIC’s statutory obligations in section 1(2). Two of those obligations are to:
(a) maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and
(b) promote the confident and informed participation of investors and consumers in the financial system…
One of the critical underlying purposes of the ASIC Act is the objective of protecting the public from harm.[12]
[12] Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159, at [110].
Credit facilities and financial products
Part 7.8A of Chapter 7 of the Corporations Act deals with design and distribution requirements relating to financial products for retail clients.
Section 760A sets out that the main objects of Chapter 7 include the promotion of:
(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(aa) the provision of suitable financial products to consumers of financial products.
(emphasis added)
What is a financial product?
A facility is a financial product if it falls within that definition set out in section 763A: s 762A(1).
Section 763A(1) provides:
(1) A financial productis a facility through which, or through the acquisition of which, a person does one or more of the following:
(a) makes a financial investment;
(b) manages financial risk;
(c) makes non - cash payments.
Section 766A(1)(b) of the Corporations Act provides that a person provides a financial service if the person deals in a financial product. Issuing a financial product constitutes dealing in a financial product: see s 766C(1)(b).
Section 9 of the Corporations Act defines a "financial product" for the purpose of Part 7.8 as having the meaning given by Division 3 of Part 7.1 and as affected by subsection 994AA(1).
Section 994AA(1) sets out that for the purpose of Part 7.8:
(1) …a financial productincludes a financial product within the meaning of Division 2 of Part 2 of the ASIC Act.
Note: Whether a target market determination is required to be made in relation to financial products covered by this extendeddefinition is determined under section 994B, including any regulations made for the purposes of paragraph 994B(3)(f).
Under section 12BAA of Division 2 of Part 2 of the ASIC Act “financial product” is defined relevantly as follows:
Definition of financial product
General definition of financial product
(1) Subject to subsection (8), for the purposes of this Division, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:
(a) makes a financial investment (see subsection (4));
(b) manages financial risk (see subsection (5));
(c) makes non - cash payments (see subsection (6)).
(2) Subject to subsection (8), for the purposes of this Division, a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non - cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.
(3) A facility does not cease to be a financial product merely because:
(a) the facility has been acquired by a person other than the person to whom it was originally issued; and
(b) that person, in acquiring the product, was not making a financial investment or managing a financial risk.
…
Meaning of makes non - cash payments
(6) For the purposes of this section, a person makes non - cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian currency in the form of notes and/or coins.
Note: Examples of actions that constitute making non - cash payments are:
(a) making payments by means of a facility for direct debit of a deposit account; or
(b) making payments by means of a facility for the use of cheques; or
(c) making payments by means of a purchased payment facility within the meaning of the Payment Systems (Regulation) Act 1998 , such as a smart card; or
(d) making payments by means of traveller's cheques in Australian currency.
(7) Subject to subsection (8), the following are financial productsfor the purposes of this Division:
…
(k) a credit facility (within the meaning of the regulations);
Regulation 2B of the ASIC Regulations provides that for the purpose of section 12BAA(7)(k) of the ASIC Act each of the following is a “credit facility”:
(1) For paragraph 12BAA(7)(k) of the Act, each of the following is a credit facility:
(a) the provision of credit:
(i) for any period; and
(ii) with or without prior agreement between the credit provider and the debtor; and
(iii) whether or not both credit and debit facilities are available;
(3) In this regulation:
credit means a contract, arrangement or understanding:
(a) under which:
(i) payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred;
…and
(c) including any of the following:
(iii) credit provided for the purchase of goods or services;
Design and Distribution Requirements
Financial products covered by section 994AA(1) may be required to make what is known as a target market determination (TMD). A TMD is a determination required for certain financial products provided to retail clients., The TMD describes the targeted class of customers for the financial product.
ASIC set out the history of the introduction of the design and distribution obligations (DDO) in its outline of submissions as follows:
7. The design and distribution requirements were introduced by the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth). According to [1.2]-[1.3] of the Revised Explanatory Memorandum for the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 (Cth), those requirements were introduced to ameliorate “shortcomings of the existing disclosure regime” relating to financial products for retail customers, in the context of expert findings that “disclosure can be ineffective for a number of reasons, including consumer disengagement, complexity of documents and products, behavioural biases, misaligned interests and low financial literacy”, particularly where “[t]he availability of financial advice may not be sufficient to overcome these issues” and a consumer “may not seek financial advice or may receive poor-quality advice”. According to [1.7] of the Revised Explanatory Memorandum, the design and distribution requirements are intended to “improve consumer outcomes by ensuring that financial services providers have a customer-centric approach”.
8. ASIC is empowered to review and stop suspected contraventions of the design and distribution requirements and, in particular, conduct that does not assist consumers to understand and select “appropriate financial products”.[13]…
9. ASIC’s powers are consistent with its mandate that, “[i]n performing its functions and exercising its powers, ASIC must strive to … promote the confident and informed participation of investors and consumers in the financial system.[14]
(emphasis added)
[13] Revised Explanatory Memorandum, Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 (Cth), [1.2].
[14] ASIC Act, s 1(2)(b). On review, standing in the shoes of ASIC, the Tribunal will be guided by the same consideration.
Section 994B(1)-(4) of the Corporations Act sets out when a TMD is required as follows:
Target market determinations for financial products
Requirement to make a target market determination
(1) Subject to subsection (3), a person must make a target market determination for a financial product if:
(a) under Part 6D.2, the person is required to prepare a disclosure document for the product; or
(b) under Part 7.9, the person is required to prepare a Product Disclosure Statement for the product; or
(ba) the product is not a financial product (as defined in Division 3 of Part 7.1) and:
(i) the personissues the product to another person as a retail client; or
(ii) the person sells the product under a regulated sale; or
(c) regulations made for the purpose of this paragraph require the person to make a target market determination for the product.
(2) A person required by subsection (1) to make a target market determination for a financial product must do so before:
(a) if paragraph (1)(a), (b) or (ba) applies--any person engages in retail product distribution conduct in relation to the product; or
(b) if paragraph (1)(c) applies:
(i) the time or eventspecified in regulations made for the purposes of that paragraph; or
(ii) if there is no time or event so specified--any person engages in retail product distribution conduct in relation to the product.
Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Note 2: This subsection is also a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this subsection, see section 1317S.
(3) Subsections (1) and (2) do not apply to:
(a) a MySuper product; or
(b) a margin lending facility; or
(d) a fully paid ordinary share in a company or a foreign company (except a fully paid ordinary share covered by subsection (4)); or
(e) a financial productissued, or offered for regulated sale, by an exempt body corporate of a State or Territory or by an exempt public authority; or
(f) a financial product of a kind prescribed by regulations made for the purposes of this paragraph.
Note: Division 1A of Part 7.12 (Employee share schemes) contains a separate regime for the making of offers in connection with employee share schemes. Subsections (1) and (2) of this section do not apply in relation to securities that are issued, sold or transferred under an offer that is eligible to be made under that Division: see subsection 1100ZC(6).
(4) Paragraph (3)(d) does not apply to a fully paid ordinary share in a company or a foreign company if:
(a) on the issue of the share, the company intended that the share be converted into a preference share within 12 months after the date of issue; or
(b) the company:
(i) carries on a business of investment in financial products, interests in land or other investments; and
(ii) in the course of carrying on that business, invests funds subscribed, whether directly or indirectly, after an offer or invitation to the public (within the meaning of section 82) made on terms that the funds subscribed would be invested.
Section 994B(5) of the Corporations Act sets out what a TMD must contain:
Requirements for target market determinations
(5) A target market determination for a financial product must:
(a) be in writing; and
(b) describe the class of retail clients that comprises the target market (within the ordinary meaning of the term) for the product; and
(c) specify any conditions and restrictions on retail product distribution conduct in relation to the product ( distribution conditions), other than a condition or restriction imposed by or under another provision of this Act; and
(d) specify events and circumstances ( review triggers ) that would reasonably suggest that the determination is no longer appropriate; and
(e) specify the maximum period from the start of the day the determination is made to the start of the day the first review of the determination under section 994C is to finish; and
(f) specify the maximum period from the start of the day a review of the determination under section 994C is finished to the start of the day the next review of the determination is to finish; and
(g) specify a reporting period for reporting information about the number of complaints about the product (see subsection 994F(4)); and
(h) specify the kinds of information needed to enable the person who made the target market determination to identify promptly whether a review trigger for the determination, or another event or circumstance that would reasonably suggest that the determination is no longer appropriate, has occurred and, for each kind of information, specify:
(i) the regulated person or regulated persons that, under subsection 994F(5), are required to report the information to the person who made the determination; and
(ii) a reporting period for reporting the information under subsection 994F(5).
Note 1: For paragraph (c), an example of a distribution condition for a financial product is a restriction limiting the distribution of the product to specified methods of distribution.
Note 2: The requirements of this subsection also apply when a new target market determination is made as a result of a review under section 994C.
(6) A period specified under paragraph (5)(e) or (f), and a reporting periodspecified under paragraph (5)(g) or subparagraph (5)(h)(ii), must be reasonable.
(7) In determining what is reasonable for the purposes of subsection (6), regard must be had to:
(a) the need to identify promptly whether a review trigger for the determination, or another event or circumstance that would reasonably suggest that the determination is no longer appropriate, has occurred; and
(b) the likelihood, nature and extent of detriment to retail clients that may result if:
(i) a review trigger for the determination, or another event or circumstance that would reasonably suggest that the target market determination is no longer appropriate, has occurred; and
(ii) the target market determination is not promptly reviewed.
(8) A target market determination for a financial product must be such that it would be reasonable to conclude that, if the product were to be issued, or sold in a regulated sale:
(a) to a retail client in accordance with the distribution conditions--it would be likely that the retail client is in the target market; and
(b) to a retail client in the target market--it would likely be consistent with the likely objectives, financial situation and needs of the retail client.
(emphasis added)
In summary a TMD sets out the class of consumer the product in question is designed for and their likely needs, objectives, and financial situation, distribution channels and conditions and provisions for monitoring and review.
An appropriate TMD is intended to protect the specified class of consumer by minimising the risk of financial harm from products or product terms and conditions that may not be appropriate for their needs and circumstances.
A TMD for a financial product is appropriate if it satisfies the requirements of section 994B(8): section 994B(8A).
Stop Orders
A stop order may be made under section 994J of the Act if certain circumstances arise. Those circumstances are where ASIC is satisfied that a provision of Division 2, or section 994E, has been contravened in relation to a financial product.
If ASIC is satisfied those preconditions have been met, section 944J(2) provides:
(2) ASIC may order, in writing, that specifiedconduct in relation to retail clients in respect of the financial product (except excluded conduct) must not be engaged in while the order is in force. The order is not a legislative instrument.
ASIC must conduct a hearing and give a reasonable opportunity to any interested person to make submissions prior to making a stop order: s994J(3).
Pursuant to section 1311(1), conduct contrary to a stop order decision constitutes an offence.
Power and Criteria for the Grant of a Stay
The power of the Tribunal to grant a stay of the operation or implementation of a reviewable decision, derives from section 41(2) of the AAT Act which provides:
The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
(emphasis added)
The discretion to exercise the power to grant a stay depends upon it being “desirable” and “appropriate”. In Re Liddle and Commissioner for Superannuation[1991] AATA 191; 14 AAR 456, the Tribunal considered authorities on the meaning of the word “desirable” in the immigration and superannuation jurisdictions and referred to Re Celik and Department of Immigration and Ethnic Affairs (1988) 9 AAR 215, at 222-223:
[desirable] implies a positive aspiration. If something is desirable, it is more than something that is merely advisable. It is something worthy of achievement towards which one should actively aim.
Whether a stay for the purpose of section 41(2) of the AAT Act is “desirable” or something worthy of achievement must be considered in its context. Here, the context is a scheme which enables ASIC to make an order to protect the public from credit financial products which are consistent with the likely objectives, financial situation and needs of the targeted retail client. A stop order is a protection mechanism. As was said by the Full Federal Court in Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130 at [52], orders of this kind are “intended to protect the public from obtaining financial services from a person who (amongst other things) has not, or ASIC reasonably believes has not, complied with a financial services law”.
Desirability must be determined after considering the competing interests of affected parties. If following that consideration, it is desirable, the question is whether a stay is appropriate to “secure the effectiveness” of the final hearing.
Pursuant to section 41(6) of the AAT Act, a stay order may be made subject to conditions.
Stays are not automatically granted (s 41(1) of the AAT Act). Without the grant of a stay the appealed decision takes effect and may be implemented.
The factors relevant to the exercise of the discretion to grant a stay are:[15]
(a)the prospects of success of the substantive application for review;
(b)the consequences to the Applicant if the request for a stay is refused;
(c)the public interest;
(d)the consequences for ASIC in carrying out its functions; and
(e)whether the substantive application for review would be rendered nugatory if the request for a stay order were not granted.
[15] Re Scott and Australian Securities and Investments Commission [2009] AATA 798, [4] (Downes J).
To determine whether it is appropriate to exercise its discretion the Tribunal must have whatever information is necessary for it to do so: Re XTWK and Australian Securities and Investments Commission; (2007) 46 AAR 350, [15].
ASIC INVESTIGATION & DECISION
ASIC investigated CCDC in relation to its compliance with the Design and Distribution Obligations (DDOs) under Part 7.8A Corporations Act.
ASIC was concerned CCDC’s TMD contravened sections s994B(5)(b), s994B(5)(c), s994B(5)(d), s994B(5)(e), s994B(5)(f), s994B(5)(h), s994B(8)(a) and s994B(8)(b) of the Corporations Act 2001.
Following the investigation, ASIC made an interim order pursuant to section 994J of the Corporations Act 2001 on 28 February 2024.[16]
[16] T-document 3, 15; Interim order extended on 15 March 2024: T-document 4.
ASIC determined the TMD made by CCDC for the credit facility offered at its Urban Rampage retail outlets did not comply with the requirements of s 994B(8)(b) because:[17]
(a)the TMD did not exclude from the target market “those customers who will not be financially burdened by deductions but will be at risk of financial hardship if they are issued with the Product and are then faced with an unexpected expense”; and
(b)“the class of vulnerable consumers (possessing limited English skills and financial literacy) … remain largely within the target market for the Product”, and the Credit Facility.
[17] ASIC Decision, [228]-[236].
It is not in dispute that the target market of CCDC includes vulnerable people.[18]
[18] ASIC Decision, [139(a)]; T 673 - A report prepared by the Northen Territory Government, Pathways to the Northern Territory Aboriginal Justice Agreement (2019) provides (para 2.4) that one of the aims of the Agreement is to recognise that Aboriginal Territorians are vulnerable and to address the compounded disadvantages they suffer.
The final stop order, the Decision, was made by ASIC on 24 April 2024.[19]
[19] T-document 5, page 17.
The Decision provides:
Under s994J(2) of the Corporations Act 2001 (Act) the Australian Securities and Investments Commission hereby makes an order that, while the order is in force, retail product distribution conduct other than excluded conduct must not be engaged in with respect to the following financial product:
- the Credit Facility issued by Coral Coast Distributors (Cairns) Pty Ltd ACN 082 866 957 which permits repayments to be made from Centrelink benefits using the Centrepay bill paying service.
Under subsection 994J(7), the person on whom the order is served must take all reasonable steps to ensure that other people who engage in conduct to which the order applies are aware of the order.
The person on whom this order is served, or a person who is aware of this order, must not engage in conduct contrary to this order (subsection 994J(8)).
Interpretation
retail product distribution conduct has the meaning given in subsection 994A(1) of the Act.
excluded conduct has the meaning given in subsection 994A(1) of the Act
It is accepted by the parties that CCDC’s target market includes consumers with low income, in receipt of specified Centrelink payments who have no other access to retail credit.
By the end of the ASIC hearing and prior to the Decision being made, CCDC had provided various amended TMDs to ASIC for the purpose of addressing ASIC’s expressed concerns.[20]
[20] The third amended TMD was provided on 19 March 2024: T-document 8.10.
The Amended TMD excluded the following categories of vulnerable customers from its target market:
a. Consumers who are under 18 years of age
b. Consumers who are under public trustee administration or a guardianship order
c. Consumers who cannot verify their identity
d. Consumers who are assessed as having less than $50 per fortnight
The ASIC delegate considered the Amended TMD still failed to comply with s994B(8)(b) because although it was accepted that the Amended TMD excluded from its target market customers who would be financially burdened by deductions, some customers who are not excluded “will be at risk of financial hardship if they are issued with the Product and are then faced with an unexpected expense”.[21] In addition ASIC was concerned about “the class of vulnerable consumers (possessing limited English skills and financial literacy remain[ing] largely within the target market for the Product”.[22]
[21] ASIC Decision [229]-[231].
[22] ASIC Decision [233].
As a result of these concerns ASIC found that the product, if issued, would not likely be consistent with the likely objectives, financial situation and needs of the retail client, in breach of section 994B(8)(b).[23]
[23] ASIC Decision [234]-[235].
The effect of the Decision is that ASIC prohibits the Applicant from allowing its customers to use Centrepay to pay for items sold at its stores.
Application for review
The Applicant submits that the Decision should be stayed on the following grounds:
(a)it does not provide a “financial product”;
(b)it has good prospects of success at a final hearing;
(c)ASIC has not demonstrated any actual harm to its customers who have used Centrepay to pay for goods;
(d)because ASIC’s real challenge is to the policy and practice of the whole Centrepay regime rather than any specific concern about the Applicant;
(e)the public interest, and the interest of certain third parties favour the granting of the stay; and
(f)the Applicant’s business would suffer irreparable harm if a stay order were not made and would effectively render the final hearing nugatory.
ASIC opposes the stay orders sought by the Applicant. ASIC submits CCDC’s Centrepay customers “are vulnerable and their use of Centrepay to purchase CCDC goods inherently risks financial hardship to them”.[24]
[24] Applicant’s Outline of Submissions for the Stay Application, [1].
ASIC also disputes that the matter is about Centrepay. ASIC states it is about the credit facility they provide that uses a payment service called Centrepay.[25] The CCDC TMD is, or should be, tailored to the target market it is designed for. The Centrepay Policy provides the “boundaries” or minimum requirements of what a Centrepay facility must cover. The Stop Order is to prevent the Centrepay facility provided by CCDC at urban Rampage stores from being used, it does not prohibit the use of Centrepay more generally.
[25] TR50.
It may be that there are some inherent issues with Centrepay which need amendment or tightening (which is the purpose of the Government review), but this matter is about CCDC’s TMD.
The Tribunal has jurisdiction to review the Decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”) and section 1317B of the Corporations Act.
ISSUES FOR THE TRIBUNAL
The issue for the Tribunal is whether, pending a final determination of the application for review pursuant to section 41(2) of the AAT Act, to grant a stay of the Decision.
The Tribunal had the following material before it:
No.
Description
Date
Relevance
1
Applicant’s Outline of Submissions for the Stay Application
22.05.24
2
Affidavit of James Hughes-Morris
22.05.24
23.05.24
Director, CCDC
3
Affidavit of Andrew Hughes-Morris
22.05.24
02.06.24
Chief Operations Officer, CCDC
No.
Description
Date
Relevance
1
Respondent’s Outline of Submissions Opposing Stay Application
29.05.24
2
Witness statement of Kathy Liyawaday Marawili
24.05.24
Former customer of CCDC
3
Witness statement of Doctor Djambawa Terry Marawili AM HC
23.05.24
Community Elder, former customer of CCDC
4
Witness statement of Billy Ngalakan Wanambi
25.05.24
Former customer of CCDC
5
Witness statement of Revona Winton
23.05.24
Former customer of CCDC
6
Affidavit of Bettina Cooper
24.05.24
71. Mob Strong Debt Strategy Co-Lead, advocate for Centrepay reform
7
Affidavit of Kelly Gulliver
27.05.24
Manager of Financial Wellbeing and Housing Support for Catholic Care Northern Territory
8
Witness statement of Fiona Pettiford
27.05.24
72. Manager of the Money Support Hub East Arnhem program, qualified Financial counsellor and member of the Centrepay Reform committee
9
Affidavit of Alan Thomas Gray
27.05.24
Registered financial counsellor, managing director of Bush Money Mob
10
Affidavit of Nathan Boyle
26.05.24
Senior Analyst in the Indigenous Outreach Program, ASIC[26]
11
Affidavit of Peta Anne Seddon
28.05.24
Senior Manager in the Enforcement and Compliance branch, ASIC[27]
12
Affidavit of Cameron Alexander Lockett
28.05.24
Lawyer, ASIC
13
Documents lodged by ASIC with the Tribunal pursuant to s 37 of the AAT Act (the T documents)
[26] Assisted Dr Marawili, Mrs Marawili and Mr Wanambi with preparation of their statements.
[27] Assisted Ms Winton with preparation of her statement.
No witnesses were cross-examined. The parties agreed that this did not mean the witnesses’ evidence was accepted or that they would not be challenged on their evidence at a final hearing.
The Tribunal was well assisted by both parties in their written and oral submissions.
APPLICANT’S BUSINESS AND CENTREPAY FACILITY
CCDC has been operating retail stores under the “Urban Rampage” brand since 2013. It has been an approved business for the purpose of Centrepay since 2016. CCDC currently operates 10 Urban Rampage stores.[28]
[28] Affidavit of James Hughes-Morris, [4]-[7].
In addition to Centrepay, CCDC also offers EFTPOS and cash as alternative payment methods.
The Applicant submits that it provided Centrepay as a facility to its customers in a way which was consistent with Centrepay’s objectives and alleviates any perceived concerns.
The Applicant explained it has implemented significant protective factors to safeguard the users of its Centrepay facility:[29]
[29] Affidavit of James Hughes-Morris, [7]-[12] and Annexures JHM-1, JHM-2, JHM-3, JHM-4.
6. … CCDC provided customers the opportunity to manage expenses by providing a facility to have regular deductions made from their welfare payments. Critically:
(a) CCDC did not charge any fee for use of Centrepay.
(b) CCDC did not charge any interest for use of Centrepay.
(c) CCDC’s customers can cancel their Centrepay deductions at any time. If a customer cancels their Centrepay deductions, they may keep the goods purchased from CCDC. CCDC does not make any demand for payment from the customer, or for return of the goods. The only consequence for the customer is that they are not permitted to purchase another product from CCDC via Centrepay.
7. These are significant protective factors in respect of the Centrepay deduction offered by CCDC. Properly understood, these factors entirely address ASIC’s stated concerns because:
a. Centrepay and CCDC’s operations in allowing customers to use Centrepay to pay for essential goods, is simple to understand and easy to use;
b. if for any reason a customer of CCDC finds themselves in financial difficulties while Centrepay deductions are scheduled to be removed from their Centrelink payments, they can immediately stop those deductions without any legal consequence.[30]
1. The Chief Operating Officer of CCDC gave the following evidence of the way customers historically entered instalments arrangements with CCDC using Centrepay in the form of the Deduction Authority forms:[31]
8. The Deduction Authority form would be completed by customers with the assistance of CCDC's staff to identify the Centrepay payments the instalment payments would be deducted from, the amount to be deducted per fortnight, the start date of the deductions, that the customers agree that information in the Deduction Authority Form may be disclosed to Services Australia, and that the deductions can be changed or cancelled at any time.
[30] Applicant’s Outline of Submissions for the Stay Application, [6] - [7].
[31] Affidavit of Andrew Hughes-Morris, [8], Annexures AHM-2.
One The Urban Rampage Deduction Authorisation Form (version provided to ASIC on 3 November 2023) contains the following section for completion by the customer:[32]
[32] T-document 7.8, page 497.
Following the engagement of Cross Cultural Consultants (CCC) to review CCDC's operations and provide feedback and recommendations from a cultural perspective, changes were made to simplify the wording in CCDC’s Deduction Authority Form.[33] On 15 May 2024 CCC also recommended the visual aids should be incorporated to make the Deduction Authority Forms easier to understand by customers.[34]
[33] Affidavit of Andrew Hughes-Morris, [10]-[11], Annexures AHM-2.
[34] Affidavit of Andrew Hughes-Morris, [13], Annexures AHM-4.
CCDC states following CCC’s recommendations it has:[35]
(a)engaged Alternative Contracting to create visual contracts for customers who wish to pay for their purchases in instalments, as part of the recommendations made by CCC to use visual aids to communicate the affordability assessment process and the terms and conditions of entering instalment arrangements; and
(b)engaged CCC to assist with training and providing advice in relation to cross cultural communication for staff members.
[35] Affidavit of Andrew Hughes-Morris, [13]-[15], Annexures AHM-4.
It is not clear on the current material whether any amendments to the CCDC Deduction Authority Form have been made or if training has been implemented as at the date of this hearing. The documents provided from CCC and Alternative Contracting are only quotations and proposals.
CCDC’S TMD
The Amended TMD was made a TMD in October 2023[36] and provides the Product is:[37]
“For the provision of credit through a deduction facility service [i.e. the Centrepay service] for the purpose of goods at Urban Rampage stores.”
“…for people who are looking for a limited recourse, no fee credit facility and who meet specific eligibility criteria for the product.”
[36] The TMD is available to the public via CCD’s website T-document 14.
The key attributes of the Product are stated to be:
• limited credit assessed on a case by case basis having regard to the customers financial circumstances to allow the customer to purchase essential and certain desirable consumer goods and have payments made through deductions from Centrelink payments
• repayments are tailored with reference to a customer's individual financial circumstances
• limited recourse – CCD's only recourse against the customer for non-compliance with the terms and conditions of the provision of credit through a deduction facility service is to disallow the customer further purchases on credit.
• interest free
• no fees or charges
The “use of the credit facility is only for to (sic) purchase limited household goods.”[38]
[38] T-documents 14, page 1204; T8.11.
The TMD states it is designed for the following “Class of customers”:
The Product has been designed for customers who:
• predominantly reside in remote Aboriginal communities and may have limited access to buy basic household items for use by household members and need the ability to buy goods in bulk to bring back to communities
• are low-income recipients of the following Centrelink payments
• do not have immediate funds to purchase household goods.
• do not otherwise have access to retail credit.
To be eligible for the Product the customer must meet the following eligibility criteria under the Amended TMD: [39]
[39] T-documents 14, page 1204; T8.11.
Eligibility criteria
To use the Product, customers must meet the eligibility criteria. Customers must:
• be in receipt of the specified Centrelink payments
• be at least 18 years old
• not be under public trustee administration or a guardianship order
• be able to verify their identity
• have the financial capacity to allow deductions (customers assessed to have less than $50 per fortnight of disposable income after applying CCDC's credit assessment process will not meet the eligibility criteria)
• meet CCDC’s affordability assessment to determine the maximum spending limit
• use the Product only to buy basic household items.
Customers who do not meet the eligibility criteria will not be able to buy goods using the Product.
If the eligibility criteria are not met the Product will not be made available.
The TMD sets out the distribution conditions are as follows:
The distribution of the product is subject to the following conditions and restrictions:
• Only distributed through CCDC’s retail stores
• Ensuring that distribution through stores is by appropriately trained staff
• Ensuring that retail clients meet the eligibility requirements for the product”
…
the product can only be distributed through a CCDC staff member at the front counter of a store utilising the Centrelink Business Online portal
CCDC states that it conducts credit and eligibility assessments prior to using the Product.
Deductions may be cancelled at the request of the consumer.
CCDC’s customers are predominantly from remote regional Indigenous communities who, because of their remote residential location, often purchase goods in bulk, and wish to pay for them via instalment. The Product provided by CCDC allows them to do this, provided they are eligible, using the Centrepay system.
Customers who are accepted and signed up for the product have deductions made from their Centrelink benefits for repayments before any balance of the Centrelink benefit is deposited into the person’s nominated bank account. These deductions are often automatic fortnightly deductions of certain pre-set and agreed amount.
ASIC considered that the proposed target market and class of consumer were “inherently unsuitable” for the Product[40] due to:
(a)their inherent risk of financial hardship; and
(b)because some “come from Aboriginal populations speaking a diverse range of Aboriginal languages other than English” and may have lower levels of financial literacy than the general Australian population due to limited levels of education.[41] That class of consumers:[42]
a. May not be aware of their consumer rights, including any right to make complaints;
b. May not be willing or able to complain to CCD or to third parties;
c. May not be able to compose a written complaint;
d. May not be aware of the role of financial counsellors and their ability to assist in presenting or referring complaints.
[40] ASIC decision, [61].
[41] ASIC decision, [65].
[42] ASIC decision, [117].
ASIC’s concern is that this class of consumer may not fully comprehend the CCDC financial product and its terms and would not be able to assess the risks of using such facility.[43]
[43] ASIC decision, [69]
ASIC EVIDENCE
ASIC tendered evidence in the form of affidavits and witness statements from:
(a)actual customers of CCDC; and
(b)financial counsellors.
The Tribunal does not consider it necessary for the purpose of the stay to go into all the evidence provided particularly given that a lot of it is hearsay evidence and unable to be scrutinised fully at this stage of the review.
A summary of the evidence is as follows.
Financial Counsellors
Mr Gray - the managing director and a registered financial counsellor for Bush Money Mob.
Bush Money Mob (BMM):
(a)is a small financial counselling agency which focuses on assisting remote Aboriginal people throughout the Kimberley and East Pilbara;
(b)helps to solve our clients' financial problems and helps clients with financial education, budgeting.
Mr Gray says this of his 600 First Nations clients:
(a)20% would have, or have had, an Urban Rampage deduction;
(b)between September 2023 to February 2024 87.5% rely on Centrelink as their sole income;
(c)all of them speak a native language, they also speak Kriol and a form of English;
(d)only 50% have English as a first language;
(e)the highest education level reached is around year 8;
(f)remote clients will rarely disagree with authorities or agencies;
(g)remote clients have “massive living expenses” due to their remote location;
(h)most do not understand that agreeing to fortnightly deductions leaves them at risk of being unable to buy food;
(i)they are generally not aware that they can cancel their Centrepay deductions or do not know, they have the ability, to do it;
(j)they fear that if they cancel their Urban Rampage Centrepay deductions, they will be banned from Urban Rampage, and that there might be other commercial repercussions for them that they are not aware such as being suspended from other stores; and
(k)they are unlikely to complain.
In Mr Gray’s experience:
(a)his clients’ comprehension of documents is low due to lack of education resources and limited English and financial proficiencies;
(b)only about 20% of BMM clients would have the literacy and comprehension skills to understand an Urban Rampage contract.
(c)a vast majority of BMM’s clients live below the poverty line;
(d)BMM clients are at serious risk of financial hardship because of the higher living costs in remote Aboriginal communities;
(e)“There is no street delivery of mail in the Kimberley, so people do not get their bank statements in the mail. When my clients go into the bank or if they have a banking app on their phone, they see their bank balance but have no clear picture of historical transactions or who has taken money out since their last Centrelink payment. They are often not able to tell me who is taking money from their account”.
Mr Gray is critical of CCDC’s affordability assessment form because in his opinion it:
(a)does not ask questions about what other Centrepay deductions that the client may already have in place; and
(b)only lists limited items for living expenses, and, as a consequence, overstates the client's available funds to pay for the purchase.
Mr Gray has been informed by clients that staff of CCDC Urban Rampage do not conduct a proper affordability assessment and have encouraged them to spend more.[44]
[44] Affidavit of Alan Thomas Gray, 37-38.
Mr Gray does not consider CCDC offers affordable clothing and does not believe his clients need to buy in bulk.[45]
[45] Affidavit of Alan Thomas Gray, 41-42.
Mr Gray made a statement to ASIC whereby he expressed “grave concern” about Urban Rampage’s claims it conducts affordability assessments. He stated he had witnessed Urban Rampage staff interacting with customers and:
At no stage did the Urban Rampage staff member ask the customer any of the following questions, which would be standard questions asked by a registered financial counsellor or qualified financial capability worker when doing a very basic affordability assessment for a client.
1.“What other Centrepays do you currently have in place?”
2. “How much are these other Centrepays and what is their finish date?”
3. “Are you repaying a Centrelink debt, and if so, how much is that repayment per fortnight?”
4. “What direct debits are coming out of your bank account each fortnight, for example,
Telstra repayments, debt repayments, or other regular direct debits?”
5. “What other living expenses and discretionary spending duo you have?”
Mr Gray states there are other retail options for customers to purchase clothes and household items, although he noted in his statement to ASIC:[46]
The one product area where Urban Rampage have specialised in stocking expensive products which are not extensively sold from other shops, is wreaths of plastic flowers - sought during Sorry Business for Aboriginal funerals
[46] Affidavit of Alan Thomas Gray, Annexure “D”.
Another area of grave concern to Mr Gray is his experience of what he considers to be Urban Rampage charging “grossly-inflated prices for low-grade products”. Mr Gray provided an example of the cost of a hoodie at an Urban Rampage store for $75 compared with the cost of a hoodie at Kmart for $22. In Mr Gray’s opinion:
…it seems hypocritical in the extreme for Urban Rampage to be championing the human rights of poor, remote Aboriginal people
Bettina Cooper – financial counsellor, Financial Rights Legal Centre
Ms Cooper is the Mob Strong Debt Strategy Co-Lead which is a First Nations led program within Financial Rights which provides free legal and financial counselling support to First Nations people with financial issues across Australia (Mob Strong).
Ms Cooper is also an advocate for Centrepay reform.
Ms Cooper says this of Mob Strong’s clients based on her own knowledge and professional experience:
(a)many are living below the poverty line and just trying to survive financially;
(b)they often need emergency assistance;
(c)they are at risk of living on the edge of hunger or homelessness;
(d)have little to no financial resilience because they have little to no financial reserves;
(e)their highest education level reached is around year 9;
(f)while they may speak plain English well, very few seem to understand the implications and wording of contracts and the impacts those contracts or documents can have on their lives;
(g)they do not seem to understand what they are signing and agreeing to, or the confidence to ask questions about what they are signing;
(h)in remote First Nations communities where English is the second or third language, the risk of clients signing contracts or forms without understanding them increases;
(i)for some clients, English is not their first language, particularly in remote areas;
(j)they are not likely to complain;
(k)they are digitally excluded due to their remote location;
(l)they have a lack of financial literacy.
In relation to Centrepay, Ms Cooper says this based on her own knowledge and professional experience:
(a)“First Nations people end up in debt because of multiple Centrepay deductions gobbling up their money which should otherwise go to housing and essentials before any remaining money is deposited into that person's bank account”;
(b)there can be very little money left after the Centre pay deductions to pay for essentials such as food;
(c)people are left to engage with local emergency relief providers.
(d)many of our clients using Centrepay do not see or understand the relationship between a Centrepay deduction and the hardship they are experiencing. This is especially the case with clients who are digitally excluded and in remote communities;
(e)clients are not aware of how to cancel deductions; and
(f)First Nations clients need the assistance of a financial counsellor to help them cancel or amend their Centrepay deductions.
Ms Cooper states that Mob Strong has made complaints to ASIC and Services Australia relating to Urban Rampage.
The Federal Government is currently considering Centrepay reform. Ms Cooper states Urban Rampage has been named directly as an example of the need for Centrepay reforms because of:
(a) the financial hardship caused to clients as a result of their Urban Rampage Centrepay deductions;
(b) the high cost of low value goods;
(c) concern over information provided to clients when they enter into the Centrepay agreement;
(d) the lack of ongoing information provided to clients about this; and
(e) some customers might be having deductions taken from their Centrelink benefit going to Urban Rampage, when they have not yet have taken possession of any goods, leading to them building up a credit balance with Urban Rampage.
Fiona Jane Pettiford
Ms Pettiford is a manager of the Money Support Hub East Arnhem program (Money Support Hub). She is a qualified financial counsellor.
Since 2023, Ms Pettiford has been on the Centrepay Reform committee and this year was on a working group looking at Financial Abuse in First Nations.
Money Support Hub provides financial counselling services across a wide geographic region, including Aboriginal communities in Arnhem Land. Ms Pettiford travels to Aboriginal communities across Arnhem Land to meet with clients.
Ms Pettiford says this of Money Support Hub’s clients based on her own knowledge and professional experience:
(a)98.5% are First Nations people;
(b)99% speak English as a second or further removed language;
(c)97% have some secondary equivalent education - the average education of is around year 9 or 10;
(d)they have some comprehension issues with technical English (such as financial, legal or medical);
(e)written English is a problem for a lot of clients;
(f)financial literacy of younger generations, who are not mission taught, is getting worse;
(g)they would not understand phrases such as "a limited resource and no fee facility";
(h)their financial objectives day-to-day is to just survive;
(i)they suffer financial distress from high unemployment and insufficient social security payments exacerbated by living in remote areas where the cost of living is much higher than in cities;
(j)for the majority, Centrelink is their only source of income;
(k)her clients do not have English comprehension or financial literacy to understand the content of a Centrepay deduction;
(l)clients would be unable to cancel their Centrepay deductions on their own and would need assistance from a financial counsellor;
(m)most customers are not aware that they are able to cancel the arrangements;
(n)it is not common practice for Money Support Hub's clients to make official complaints about a store like Urban Rampage; and
(o)clients come to see them “because their Centrelink money is not in their account, but they don't necessarily know why”.
In relation to Centrepay, Ms Pettiford believes it can be helpful for clients when it is used to pay for essentials services such as rent. However, customers can end up with very little, or no money from their Centrelink benefit in their pocket, because it has all been taken up by Centrepay deductions. Ms Pettiford says there are no rules around how many Centrepay deductions a client can have at one time which can add to a client’s financial problems;
“84. I have spoken to many clients who have multiple Centrepay deductions that brings the balance of their Centrelink income to zero, or nearly zero. It is usually the Centrepay deductions for non-essential items such as those sold by Urban Rampage, which causes the customer harm.
85. I see the problems with using Centrepay for non-essential items as being made worse by the fact that by the time clients ask for help, they often no longer have the items they have purchased from Urban Rampage. Sometimes people can't even tell us what they've bought.
Ms Pettiford’s knowledge and experience with Urban Rampage is as follows:
(a)the Centrepay deductions made from her clients Centrelink accounts were substantial considering the amount of Centrelink benefit they received;
(b)clients have told her Urban Rampage does not give them receipts for what they have purchased;
(c)customers would be reluctant to go back into Urban Rampage stores to ask to reduce their payments;
(d)she does not think her clients need to buy goods in bulk from Urban Rampage and says they cannot afford to when they are on a low Centrelink income.
Ms Pettiford also described complaints her team and made which, in her opinion, were not appropriately responded to by Urban Rampage.
Kelly Gulliver
Ms Gulliver is the Manager of Financial Wellbeing and Housing Support for Catholic Care Northern Territory (Catholic Care). She is a financial counsellor.
Ms Gulliver states a big part of her team's role is “identifying financial exploitation, where a client has signed up for something and money just keeps coming out of their bank account without providing any benefit to the client or leaving them with enough money to meet their expenses”.
Ms Gulliver says this of Catholic Care’s clients based on her own knowledge and professional experience:
(a)the clients come from a variety of locations including Darwin, Katherine, Tennant Creek and other remote locations;
(b)they have a “low understanding of money management” and are “vulnerable to predatory practices”;
(c)are in receipt of Centrelink benefits;
(d)finish secondary school to around year 9 equivalent;
(e)do not speak English as a first language;
(f)the more remotely located a client is the less likely it is that they can speak English;
(g)do not meet the affordability criteria for mainstream lending;
(h)they struggle with comprehension of financial terminology;
(i)“due to their low levels of education, low levels of financial literacy, and the nature of their culture, our First Nations clients believe what people tell them and I have seen them easily say 'yes' to situations that will put them in financial hardship”;
(j)many living in regional or remote locations, are digitally excluded;
(k)are at risk of financial hardship;
(l)clients do not understand financial terms such as 'limited recourse, no fee credit facility';
(m)clients residing in regional or remote communities do not need to buy items in large quantities and pay them off in instalments as this is not within their financial capacity; and
(n)“Aboriginal people simply don't complain”.
Ms Gulliver’s knowledge and experience with Urban Rampage is as follows:
(a)when she first became aware of Urban Rampage in 2018/19 she recalls seeing 'Urban Rampage' deductions on about half of the clients' Centrelink income statements, and the deduction amount was stopping them from being eligible for a Nils loan as it was affecting their affordability assessment;
(b)clients could not remember what the Urban Rampage deductions were for;
(c)there was sometimes a discrepancy between the target amount of an Urban Rampage Centrepay deduction, and how much the client thought they had spent;
(d)she reported her concerns to Urban Rampage and ASIC
(e)in her opinion a lot her team's First Nations clients, “have been and are still being harmed by Urban Rampage's continuing Centrepay deductions”;
(f)in her opinion Urban Rampage has high target amounts which does not align with the financial needs and objectives of Centrelink recipients;
(g)“clients generally don't realise how much money is coming out of their Centrelink payment each fortnight to pay Urban Rampage, or how long the Urban Rampage Centrepay deduction will continue for”;
(h)"Urban Rampage Centrepay deductions leaves CCNT's clients short of money to put food on the table, so they come to CCNT for emergency relief;”
(i)some clients know how to cancel their deductions and others do not; and
(j)“many clients in remote areas don't know their Urban Rampage Centrepay deductions exist, and if you don't know something exists, you can't cancel it.”
Ms Pettiford also described complaints her team made which, in her opinion, were not appropriately responded to by Services Australia.
FORMER CUSTOMERS
Ms Winton
Ms Winton is a First Nations woman.
Ms Winton’s evidence is that:
(a)she is not good at reading or writing English;
(b)she received Centrelink benefits of $700 to $800 per fortnight;
(c)when she went to Urban Rampage, she was never asked what other debts she had;
(d)she suffered financial hardship after entering a payment deductions arrangement with CCDC based on a lack of understanding about how little money she would be left with each week;
(e)she did not read the deduction form;
(f)the last time she visited an Urban Rampage store in January 2024 she was told by an Urban Rampage employee she could not use Centrepay because an amount she still owed to another Urban Rampage store had not been paid off; and
(g)she does not how to lodge a complaint about Urban Rampage and would be worried if she did that someone would blame her for entering the deduction plan.
Mr Wanambi
Mr Wanambi is a Yolgnu man from Arnhem Land.
English is Mr Wanambi’s second language. Mr Wanambi states he understands spoken English and can read and write English but finds it “hard to understand government or technical language like on forms”.
Mr Wanambi described his experience at Urban Rampage in 2021:
15. When I went into the Urban Rampage shop, I went to the counter and gave them my reference number. I watched the person put it into a computer. They told me how much money I could spend like $300 or $500.
16. The people who worked at Urban Rampage told me they would deduct money from my Centrelink payment. It was like $80 or $100 they would deduct slowly.
17. I got things from the shop and took them back up to counter. The person behind the counter scanned them and told me I could get more things, so I went and got more things and took them back to the counter.
18. They gave me a paper to sign to accept how it was going to work. I signed the paper but did not read it. They gave me a receipt but no other papers to take home.
(emphasis added)
Mr Wanambi understood that agreeing to the deduction arrangement meant he “would get less money in [his] Centrelink payments”. However, Mr Wanambi did not know how much money he was spending as it came out automatically from his Centrelink account. He says because Urban Rampage were taking about $80 a fortnight from his Centrelink payment which did not leave him with enough money to buy other things he needed. Mr Wanambi did not seek assistance from a financial counsellor.
Doctor Djambawa Terry Marawili AM HC.
Mr Marawili is a Yolgnu, Mathapa Yolgnu man from Baniyala Homeland.
Mr Marawali is a community leader, supporter and elder in Baniyala, and a well-known and acclaimed artist.
Mr Marawili states:
(h)there are 13 languages spoken in his community and then English, which is the last language;
(i)he finds it confusing to read English;
(j)he has been a Centrelink payment recipient at various times; and
(k)when he gets money, he shares it with other family in my community.
Mr Marawili’s experience with Urban Rampage is as follows:
17. Whenever I go into the Urban Rampage shop, they ask me for my Centrelink reference number. I give it to them, and they always give me a number which is how much I have to spend in the shop. It was something like $300 or $500.
18. When I go to the Urban Rampage shop, I go to buy one small thing, but the person in the shop tells me to take more. I got lots of things because they told me to take lots.
19. The person in the Urban Rampage shop does not ask me any questions about how much money I spend on things like food.
20. They give me some papers to sign. I don't know what the papers say. They just tell me I need to sign if I want to buy more. I don't read the papers.
21. They give me papers to take away. I don't know what they are. I just throw them away as I don't have anywhere to put them.
22. They don't tell me the money is going to come out of my Centrelink. They told me that the payment for what I got from the shop is going to come out automatically.
23. Sometimes when I go to take money out there isn't any money. I get money from other people in my community because we share money with everyone here. Our system and kinship and relationship is very strong.
24. If I don't have any money, I use a spear and a woomera to hunt for food for my family. Sometimes I get dugong, sometimes turtle, sometimes fish.
25. I know lots of people in my community who have shopped at Urban Rampage and pay automatically.
26. People in my community are always running out of money, and then they go and see Fiona from Anglicare NT for help with that. Every two weeks people get money and half way they run out of money. What can we do? We don't know the system where we can go and talk to them and we just wait around until the next pay comes. Family shares food with us during that time but when our money comes again then we are happy.
27. We always feel bad and angry when we find out from Fiona that too much money has come has come out of our accounts to go to Urban Rampage. We don't know how to track that Centrelink system. Our minds and feelings always feel poor, but lucky we have a Yolgnu system. Our relationships are very strong and we keep living in that system because Yolgnu are very strong on kinship and relationships but we don't understand the other systems.
Cancellations
28. The only way I know for the payments to the Urban Rampage shop to stop, is to stop going to the shop.
29. I did not know until the people from ASIC told me today that I could cancel it. I would not know how to do that.
(emphasis added)
Kathy Liyawaday Marawili
Ms Marawili is a Yolgnu woman.
Yolgnu is Ms Marawili’s first language, but she can also speak, read and understand English.
Ms Marawali is married to Djambawa Marawilli.
Ms Marawili is a recipient of two Centrelink payments (Newstart and Family Allowance) totalling $889 per fortnight from which she provides for herself, her husband and three grandchildren.
Ms Marawili is a customer of Urban Rampage and other retailers through which she uses Centrepay to buy goods.
Ms Marawili’s experience with Urban Rampage is as follows:
17. When I went to Urban Rampage the first time, I gave the person behind the counter my reference number and they told me I had $1000 to spend. They told me I would have to pay $200 a fortnight, and this would come out automatically.
18. The person behind the counter, did not ask me any questions about what I needed my money for, like food shopping. They asked me for my reference number, my name and my date of birth. I gave it to them. They asked me to sign a form. There was just the signing page. I signed the paper. There was nothing on it for me to read. The person behind the counter did not give me any papers to take away. They .did not give me a receipt.
19. I got the $1000 worth of clothes, towels and blankets. I got much more than I needed. If the person behind the counter did not tell me I had $1000 to spend, I would have bought a small amount of clothes.
20. When I finished paying off the $1000, I went back for more shopping. Then I stopped going to Urban Rampage because they were taking too much money from me.
21. I thought Urban Rampage were only going to take the $200 a fortnight. But when I got my money, there was none left for me to do my food shopping. My grandkids cry for food, but there is no money left to buy food.
22. I saw Fiona Pettiford who comes to Baniyala to help with money problems. I told Fiona I had no money left for food. Fiona spoke to Urban Rampage and she got them to get my Urban Rampage payments down from $200 each fortnight to $50 each fortnight.
(emphasis added)
Ms Marawili said she did not know she could cancel the payments to Urban Rampage and if she had known she would have cancelled because she had no money left in her bank account.
CONSIDERATION
ASIC submits the stay should not be granted for the following reasons:
(a) refusal of a stay would not make any meaningful difference to CCDC’s overall circumstances, where:
(i) Centrepay is central to the Credit Facility the subject of the Decision;
(ii) Services Australia has suspended CDCC from using Centrepay; and
(iii) that suspension is ongoing and remains in force;
(b) CDCC has poor prospects of success in its review application;
(c) even accepting the possibility that, without the Credit Facility, CCDC might attract fewer customers to its stores, the material filed by CCDC does not permit the Tribunal to be satisfied that CDCC’s business is at risk of imminent or even medium-term collapse, where, among other things, CCDC has no appreciable debt, has not sought any funding, and appears to have recourse to significant related-party loans; and
(d) further, and in any event, there is persuasive evidence of widespread harm and risks to consumers occasioned by CCDC providing the Credit Facility, so as to warrant the ongoing operation of the Decision pending the outcome of the review application.
The Prospects of Success of The Substantive Application for Review
It is not the role of this Tribunal to conduct a “mini trial” on the merits. The Applicant must merely show that they have an arguable case and a basis for their application.[47]
[47] Re Dart and Director-General of Social Services (1982) 4 ALD 553.
Applicant’s Submissions
The Applicant submits their appeal against the Decision has strong prospects of success for the following reasons:
(a) ASIC’s Concerns “are entirely speculative and lack an evidentiary basis”. In that regard the Applicant points to the following:
(i)customers can cancel their Centrepay deductions at any time, such as when an unexpected expense arises, with no legal consequences;
(ii)ASIC’s concerns regarding the target market’s financial literary are “patronising and without any evidentiary support”. The Applicant contends that high levels of English-language proficiency or financial literacy are not required to understand how the product works or its effects. Centrepay was not a complex product and was intended to protect consumers from harm.
In its written submissions the Applicant stated there was no evidence of harm. ASIC filed witness statements purporting to address the issue of harm (discussed at paragraphs [52] to [56]).
At the hearing the Applicant contended that this evidence was historical and could not be considered as extrapolative of the entire target market. The Applicant points to the protective mechanisms in place to protect the customer from harm. Further, CCDC states it does not pursue any debt owed in circumstances where a consumer cancels their Centrepay deductions.
The Applicant submits it has not contravened section 994B.
In addition, the Applicant states the provision of the Product is not the issuing of a “financial product” and therefore it was not required to publish a TMD and therefore there is no power for the stop order to have been made. The Applicant relies on s 994B(3)(f) of the Corporations Act which provides that the requirement to make a TMD (contained in ss 994B(1) and (2)) does not apply to a “financial product” of a kind prescribed by regulations made for the purposes of section 994B. Regulation 7.8A.20(9)(a) of the Corporations Regulations provides that for the purposes of s 994B(3)(f), a TMD is not required for:
(a) a credit facility that is not or was not issued, or that will not be issued, in the course of a business that is wholly or partly a business of providing credit;
The Applicant states that it is not operating a business of providing credit, and therefore it was not required to publish a TMD, let alone a compliant TMD.
CCDC referred to the Explanatory Statement issued by authority of the Treasurer, Corporations Act 2001, Corporations Amendment (Design and Distribution Obligations) Regulations 2019 which provides:
The purpose of the Regulations is to enhance the DDO regime by altering the products and persons in relation to which the DDO regime applies. The amendments extend the DDO to additional persons and products and exclude certain persons and products from its operation.
…
These Regulations exclude the following products from the DDO regime:
…
credit facilities not issued in the course of a business of providing credit;
…
Credit facilities - provision of credit not issued in the course of a business of providing credit
The Regulations exempt a credit facility that is not issued in the course of a business that is wholly or partly a business of providing credit. This excludes from the operation of the DDO regime individuals that provide credit for social or family reasons (for example, a parent that lends money to a child) and credit that is merely incidental to the operation of a non-credit business.
This is necessary given the breadth of the arrangements in the definition of credit facility in the ASIC Regulations. (Schedule 1, item 2, paragraph 7.8A.20(9)(a))
CCDC submits it provides and sells household goods and services. An option for the payment of those goods is Centrepay, which is merely incidental to the provision of basic household goods and services.[48]
[48] TR46.
ASIC’s Submissions
ASIC submits CCDC’s prospects of success at the final hearing are poor because the stop order was and will be found to be appropriate in the circumstances in which their evidence of harm and risk to the target market.[49]
[49] Respondent’s Outline of Submissions Opposing Stay Application, [4].
The target market being those who are in more vulnerable financial situations than others their being of low-income recipients of Centrelink payments, with potentially limited English language skills and limited financial literacy.
ASIC submits the Amended TMD still contravenes s 994B(8)(b) because it is not designed to meet the likely objectives, financial situation and needs of the targeted vulnerable people.
ASIC submits it is not enough for CCDC to simply state customers can cancel at any time.[50]
[50] Applicant’s Outline of Submissions for the Stay Application, [10].
ASIC relies on the following evidence from consumers and financial counsellors in respect of harm and risks to people in the target market for the Credit Facility.
ASIC submits this evidence demonstrates there has been harm and complaints made over several years by customers and their representatives to ASIC and CCDC.[51]
Consideration
[51] T-documents 33 to T56, being complaints provided to ASIC by CCDC under compulsory Notice; T-documents 57 to T77, being complaints received by ASIC from third parties; T-document 48, an email from Services Australia to CCDC about concerns regarding “the amount of fortnightly deduction entered and the deduction leaving the customer with no discretionary funds in their payment” and concerns that the “customer has been placed in financial hardship”. 46 See T-document 77, being ten de-identified complaints about CCDC received by the Northern Territory Commissioner of Consumer Affairs.
Is the Centrepay facility provided by CCDC a credit facility?
The parties are in dispute regarding whether the Centrepay facility provided by CCDC to its customers is a credit facility within the meaning of reg 2B(1)(a) of the Australian Securities and Investment Commission Regulations 2001 and, therefore, is a financial product within the meaning of s12BAA(7)(k) of the ASIC Act.
This is relevant to the final determination because, as identified earlier, if it is ultimately found that the Applicant does not provide a credit facility, it is not required to comply with the DDO before providing the Centrepay facility to its customers, and ASIC’s stop order power is not enlivened.
This alone is a serious issue to be determined.
In addition, there is controversial evidence regarding the extent to which CCDC can be said to have acted in contravention.
The Tribunal agrees with ASIC’s submissions that the evidence suggests:
…it is likely that a number of Urban Rampage customers the subject of the target market determination for the Credit Facility:
(a) have limited English-language skills;
(b) have limited financial literacy;
(c) struggle to read and understand forms;
(d) either were not shown forms by CCDC staff or were shown such material in a cursory way;
(e) were not provided with copies of forms by CCDC;
(f) did not have the Credit Facility explained to them;
(g) did not understand the Credit Facility;
(h) did not know that they could cancel their deductions from CCDC;
(i) were not told that they could cancel their deductions from CCDC;
(j) suffered financial harm, including financial hardship, due to the Credit Facility;
(k) presented to financial counsellors for emergency financial assistance due to the Credit Facility; and
(l) have levelled ongoing complaints against CCDC and its practices and conduct in relation to the Credit Facility.
The last version of the Amended TMD on the Urban Rampage website acknowledges the consumers in the target mark are:[52]
(a)Welfare dependent;
(b)Have low levels of financial literacy;
(c)Low levels of formal education; and
(d)“struggle with understanding any language that is not the language spoken in the community”.
[52] T-document 14, page 1203.
The untested evidence gives rise to a concern that the Product may be in contravention of section 994B(8) in that it may not be consistent with the objectives, financial situation and needs of persons in the target market. That risk must be weighed against the fact that there are alternative venues where essential purchases can be made.[53] CCDC has acknowledged that some customers have switched to rival stores who provide Centrepay.[54]
[53] Affidavit of Alan Thomas Gray, 43; Affidavit of Bettina Cooper, 58-60; Affidavit of Cameron Alexander Lockett, 13-17; Affidavit of Fiona Jane Pettiford, 63-65, 93; Affidavit of Kelly Gulliver, 114-118.
[54] Affidavit of James Hughes-Morris, [14].
This evidence needs to be scrutinized and expanded upon before final determinations on this issue can be made.
It is not this Tribunal’s place to make any findings of fact or findings of credibility for the purpose of the stay application.
There are differing views on prospects and serious and complex matters to be determined, particularly in light of the fact that to date there has been no consideration by a Court or the Administrative Appeals Tribunal of any exercise by ASIC of its powers under s994J(2).
The prospects are unclear but the Tribunal is satisfied there are a number of arguable issues that need to be determined at a final hearing.
The consequences to the Applicant if the request for a stay is refused
The Applicant’s Submissions
CCDC contends its business will collapse in two weeks if a stay order is not granted. CCDC states that the cost of doing business combined with the significant drop in custom resulting from the Decision, means the business is not sustainable.[55]
[55] Applicant’s Outline of Submissions for the Stay Application, 10-11
In the last four months 147 customers have cancelled their Centrepay deduction authorities for CCDC.[56] A full timeline of cancellation data was not before the Tribunal.
[56] TR29, 33.
If it collapses CDCC states the following consequences will flow from that decision:
(a)it will be forced to terminate the employment of its staff;
(b)it will lose its retail store venues; and
(c)its relationships with suppliers and customers will inevitably and irretrievably be damaged.
The Applicant submits these consequences will be significant and irreparable.
Mr James Hughes-Morris, director of CCDC, deposed that:[57]
[57] Affidavit of James Hughes-Morris, [16] – [23], Annexures JHM-8 to JHM19.
(a)following the issue of the first interim stop order sales had decreased;
(b)If the stop order remains in effect during the review proceedings its cashflow will be such that it “will run out of cash reserves [within two weeks] and will have to stop operating immediately unless it is able to secure funding outside the company” which it believes will be difficult in the circumstances;
(c)If CCDC stops operating, CCDC will:
(i)be in breach of its lease obligations;
(ii)be forced to terminate the employment of employees;
(iii)terminate its supply arrangements with suppliers:
(d)given the difficulty of employing staff in the remote locations where CCDC operates, CCDC has incurred costs in recruiting experienced store managers including obtaining visas with work rights, relocation costs, and organising housing for employees; and
(e)if CCDC continues to operate it is anticipated that CCDC will be forced to increase the price of its goods for sale.
ASIC’s Submissions
Financial Hardship
ASIC submitted that hardship, alone, is normally not a sufficient basis for securing a stay.[58]
[58] McLean and Australian Securities and Investments Commission [2016] AATA 22, at [21]-[22]; See also Van Dieren and Australian Securities and Investments Commission [2019] AATA 4777, at [40].
The Tribunal has in previous decisions confirmed that hardship is not decisive of a stay application, particularly in circumstances where there is considerable risk of public harm.[59]
[59] Sahai and Australian Securities and Investments Commission [2021] AATA 590, at [27]; Re IMS FX Services Pty Ltd and Australian Securities and Investments Commission (2016) 70 AAR 197; MRWL and Australian Securities and Investments Commission [2022] AATA 3366, at [81]; Daly and Australian Securities and Investments Commission [2020] AATA 1516, [19]; Anderson v Australian Securities and Investments Commission [2022] AATA 339, [9].
ASIC submitted that even if hardship was a sufficient basis, there is no reliable evidence of financial hardship because the financial material discloses that:
37.
(a) CCDC “has sufficient funds” to continue trading in the immediate term, and has continued trading for a significant period of time since 28 February 2024 when the first interim stop order was made, and where there is nothing more than a simple assertion by one of the directors that its funds will run out in “2 weeks”;[60]
[60] Affidavit of James Hughes-Morris, [21].
(b) financial statements prepared for the year ended 30 June 2023 (2023 Financial Statements) are unsigned by a director of CCDC;
(c) no updated financial figures, other than unverified sales analysis and a cash flow analysis, have been provided to the Tribunal by CCDC; and
(d) there is no evidence that CCDC has no access to further or additional funds, including where:
(i) the 2023 Financial Statements purport to show that CCDC has:
A. no material debt (page 3, Note 10); and
B. substantial related-party loans of approximately $5.3M (page 3, Note 4), including what are apparently loans to J & N Hughes Morris (presumably, the directors of CCDC) of approximately $2.8 million and Hughes-Morris Holdings Pty Ltd of approximately $2.5 million, the latter being a company owned by the directors of CCDC; and
(ii) there is no evidence that CCDC has attempted to obtain finance
38. Further, and in any event, the 2023 Financial Statements suggest that CCDC owns and operates a lucrative and successful business with considerable net profits, retained earnings, and net assets and equity.
No utility in stay order
Further, and more importantly, if a stay order were granted, ASIC submits it would not have any impact on CCDC’s situation because Services Australia has separately suspended CCDC’s ability to use Centrepay.[61] There is no current application for a review of Services Australia.[62]
[61] Affidavit of Cameron Lockett, [18] and Annexure CAL-6.
[62] Affidavit of Cameron Lockett, [18] and Annexure CAL-6.
In short, there is no practical utility in granting any stay of the Decision and would do nothing to impact the status quo until final hearing.
Consideration
The financial hardship evidence before the Tribunal was not fulsome or sufficiently persuasive.
The summary financial document provided by CCDC indicated:
(a)receivables have decreased;
(b)payment by Centrepay represented approximately 70% of sales prior to the interim stop order;
(c)cash payments represented approximately 8% of sales prior to the interim stop order;
(d)EFTPOS represented approximately 21% of sales prior to the interim stop order; and
(e)a direct debit facility is currently being trialed.[63]
[63] This is the subject of a separate ASIC investigation.
Mr James Hughes-Morris deposed, among other things, that:
(a)CCDC's sales for the period February 2024 was $1,079,164.79;
(b)following the issue of the first interim stop order on 28 February 2024, CCDC's sales fell to $219,838.59 for the period of March 2024 and to $358,139.37 for the period of April 2024;
(c)there has been a drop in sales from 812 average per week to 472 sales per week;
(d)annual expenses were more than $11,000,000; and
(e)he forecasted a drop in cash flow from 282,000 in May to 195,000 in August.
The sales summary indicates sales using cash, EFTPOS and other credit facilities such as Stripe and the NAB direct debit facility have slightly increased.
What is not before the Tribunal is any indication of:
(a)dollar sales values – the summary contains numbers of sales not the value of those sales;
(b)detailed information around why its relationships with suppliers will inevitably and irretrievably be damaged;
(c)specifics of which staff would need to be terminated? Presumably this is only if the stores are unable to operate at all (albeit at a smaller turnover);
(d)all relevant lease information – who are landlords of all the tenancies – are they related to CCDC or its directors? Have they had any discussions with those landlords about their current position?
(e)what steps, if any, have been taken to obtain funding;
(f)sales figures for May 2024 to indicate whether sales using other payment methods were continuing to trend up.
The 2023 financial statements indicate CCDC:[64]
(a)has profits and significant retained earnings of $11 million in the 2023 up from approximately 2022 were $7.8 million in 2022;
(b)has loaned to either directly or through companies, its two directors, James and Naomi Hughes-Morris (CCDC’s shareholders), $5.3 million;
(c)has a debt of $20,000; and
(d)loans from the Company increased from 1.8 million to 5.3 million in the financial year from 2022 to 2023;
[64] Affidavit of James Hughes Morris, Annexure JHM-6; T-documents 17-18.
The matters above, particularly concerning the $5,300,000 loan to the directors was not addressed in the CCDC material. Mr James Hughes-Morris only deposed to needing to secure “outside” funding. There is no reference to these personal loans and the question could be asked why could this loan not be called upon if the financial circumstances became so dire as was submitted?
CCDC submitted the 2023 financial statements do not reflect the current position. It was for CCDC to put on sufficient material to explain why the 2023 position cannot be relied on. There was no evidence about the retained earnings, and no evidence about the loans. Only CCDC is privy to those facts.
The Tribunal accepts there will be a financial impact to CCDC in the event the implementation of the Decision is not stayed.
Despite this, based on the current financial material before it, the Tribunal is not sufficiently satisfied that the Applicant’s business will collapse in two weeks without the making of a stay order.
The Public Interest
Applicant’s Submissions
Harm/Likelihood of Harm
The Applicant submits there is no specific or unique harm to people in the CCDC target market in circumstances where all Centrepay users are vulnerable because it is only available to Centrelink welfare recipients.
There are safeguards imposed by Services Australia to minimise the risk of harm including the fact that:
(a)Centrepay is free for the consumer;
(b)consumers are not charged interest;
(c)customers can cancel at any time for any reason;
(d)limitations are placed on what goods can be purchased using the service;
(e)if a deduction is cancelled, the customer is not required to either return the goods or otherwise pay for them in some alternative way; and
(f)only authorised businesses are permitted offer the Centrepay facility
The consequence of cancellation of a deduction is that CCDC will not permit that customer to purchase any goods using Centrepay until any outstanding amount is paid.
Further, the Applicant submitted that Centrepay assists against the purchase of harmful products and if Centrepay is not available, it could lead to outcomes where Indigenous population buys excluded harmful products which are excluded from Centrepay purchases.[65] The Tribunal notes there is reference to this in a report of Jason Elsegood, Director of Cross Cultural Consultants, provided by to ASIC following the making of the interim order. Mr Elsegood writes:[66]
If Centrepay were removed as an option for customers/ there is the risk of customers not having funds to buy clothes for themselves and their families if their benefits were withdrawn to be spent as cash and others put demands on that cash.
[65] TR17.
[66] T-document 8.4, page 837.
There was no evidence that it was inevitable, if a stay was not granted, that target market consumers would use their Centrelink benefits for “excluded goods”.
Mr Elsegood told ASIC that of the Urban Rampage customers they surveyed (CCC surveyed a small selection of available customers outside each of the 4 stores visited over a nine-day period between 20 November 2023 to 29 November 2023) “understood that they could cancel their Centrepay repayments at any time, and the consequences of doing that/ because they have used Centrepay many times and understand the rules”.[67]
[67] T-document 8.4, pages 838-839.
Because of these protections CCDC submits ASIC’s primary concern is unfounded. The Applicant submitted:
“Taken to its logical conclusion, would mean that any Centrepay provider supplying household goods with a similar target market would necessarily be in breach of s994B(8)(b) of the Act.”
In its written submissions the Applicant stated:
(a)there was no evidence of actual financial harm to customers;
(b)no reason to contend that a consumer will actually or conceivably suffer any financial hardship in the event the Decision is stayed.
If a stay is not granted CCDC submits that:
(a)there is a public interest in allowing CCDC consumers the choice to shop at the store for basic household goods and in the method convenient to them.
(b)there is a significant risk of harm to consumers from CCDC being put out of business (in the short term and/or permanently);
(c)it will result in:
(i)decreased retail options for already marginalised Australians;
(ii)reduced competition in areas already suffering from a lack of competition and consumer choice.
CCDC modified its policies and procedures “to further protect its consumers from any risk of financial harm by engaging with cross-cultural consultants and by amending its deduction authority form”.
The Applicant provided evidence of complaints made about the inability to use Centrepay at CCDC’s stores, since the Stop Order has been in place (Complaints).[68]
[68] Affidavit of James Hughes-Morris, [13], Annexure JHM-5; T-document 8.4.
There was also a petition to allow Urban Rampage to use Centrepay with 733 signatures obtained at various stores.[69]
[69] T-document 8.7, page 945.
ASIC’s Submissions
ASIC refers to the filed witness statements as evidence of actual/potential for of widespread harm and risks to vulnerable consumers occasioned by CCDC providing the Credit Facility. There are concerns with whether CCDC is performing appropriate eligibility and credit assessments – these matters are not set out in the TMD.[70]
[70] T-document 08.11. This matter also goes to compliance with ss 994B(5) and (8) of the Corporations Act.
The evidence indicates that it not enough to state a customer can cancel the deductions.
Further, customers have other payment options (cash or EFTPOS), and other retailers, so they are not deprived of the ability to access essential goods.[71]
[71] Affidavit of James Hughes-Morris , [7]-[12] and Annexures JHM-1, JHM-2, JHM-3, JHM-4. JHM -13; T22, ASIC Report: “Book up” Some Consumer Problems (March 2002), page 5; T23, ASIC Report 451 “Book up in Indigenous communities in Australia: A national overview” (October 2015), [49]-[59]; Affidavit of Cameron Lockett, [13]-[17], Table 1 and Table 2.
In terms of the Complaints relied on by CCDC, ASIC notes:
(a)This feedback material is not probative because:
(b)no one has deposed to the material – either the disgruntled customer of any complaint handling employee of CCDC;
(c)it is so de-identified as to be relatively meaningless;
(d)some documents appear to be duplicates, albeit with different time and date stamps;
(e)a significant number do not have any store listed;[72]
(f)there is no evidence of how the material was collected or by whom it was entered, and who produced it in the form in which it now appears;
(g)many of the documents contain review type content, including for instance one with irrelevant comments about customer service and no reference to Centrepay.[73]
[72] See, for example, Affidavit of James Hughes-Morris, Annexure JHM-5 (pdf 401, 405, 428, 464, 466, 472).
[73] Affidavit of James Hughes-Morris, Annexure JHM-5 (pdf 499).
ASIC submits the public interest militates strongly against the grant of a stay pending the outcome of the review application.
Consideration
ASIC is responsible for regulating and protecting consumers of credit facilities.
The Court in Australian Securities and Investments Commission v Hutchison [2020] FCA 978 described the object of Chapter 7 of the Corporations Act as follows:
…protection of consumers is central, but the object recognises that such protection and the minimisation of risk is facilitated in a number of ways: by the promotion of fairness, honesty and professionalism by 'those who provide financial services'; by ensuring there is transparency in the market and by reducing systemic risk
The Tribunal acknowledges that there is a financial impact on CCDC as a result of the stop order and that it may:
(a)lose customers to other retailers who continue to provide a Centrepay facility;
(b)suffer reputational damage.
The Applicant made the point that Centrepay is operated by Services Australia. As briefly outlined above, Services Australia determines who can operate as an approved business, what goods and services are obtainable using Centrepay, and so on. CCDC asks why it should have to take further responsibility for the product already managed, administrated, and regulated by Services Australia.
It is potentially concerning that the Stop Order, which was purportedly made to protect vulnerable customers from the potential financial risk, does not hinder those customers from continuing to use Centrepay at other retailers in the vicinity of the Applicant’s retail locations. But nothing is known about those alternative Centrepay providers.
The purpose of Centrepay, as outlined in the policy, is to reduce the financial risk for vulnerable customers who are the recipients of Centrelink benefits. Having this service assists welfare recipients to protect their payments from being used by others and ensures that they can utilize the funding given to them for essential goods and services.
The Applicant has been an approved operator of a Centrepay facility for 8 years. Until the Stop Order made by ASIC, Services Australia had never suspended CCDC from providing a Centrepay facility. The Applicant submits continues to meet the necessary criteria for an approved business in accordance with the Centrelink policy.
CCDC submitted it “does not do anything outside of what is permitted by Centrepay and in fact it raises the bar in terms of what it does to protect customers in terms of financial risk.”[74] Even if it is compliant with the Centrepay Policy, this does not render it unnecessary to comply with the statutory requirements in section 994J.
[74] TR23.
Prior to the hearing statements were lodged as addressed above.
The Applicant pointed out that some of those statements refer to events that are historical in nature and may not reflect current practices of the Applicant. This was accepted by ASIC. However, two of the consumers are talking in terms of their present circumstances, and the financial counsellors’ statements reflect their knowledge and experiences.
Mr Gray has a current client:[75]
who already had $460 per fortnight in other Centrepay deductions before Urban Rampage set up a new deduction. The effect of the Urban Rampage Centrepay deduction was that the client was then plunged into further poverty with not enough money for food. This client told me that they were asked several questions by staff at the Urban Rampage store when they bought their goods. I then got a copy of an affordability assessment for my client from Urban Rampage dated 6 December 2023
[75] Affidavit of Alan Thomas Gray, [35], Annexure C.
On 27 February 2024 ASIC received the following information via email from a financial counsellor in Broome, Western Australia about an Urban Rampage client seeking emergency relief:[76]
I have just seen a client who came into Broome CIRCLE looking for emergency relief as she had no money left to feed her children.
The client advised that she went into Urban Rampage in Broome and was wanting to purchase $500 worth of goods and Urban Rampage advised her she could have $600 worth of goods, she then has the Centrepay deductions taken out at $170 which has clearly left her with no money for food. I asked her if she was asked or if an affordability check was done and she advised that Urban Rampage did not, she has also advised that some people only want $150 worth of goods and Urban Rampage won’t allow them.
It is very clear to see that Urban Rampage business tactics are detrimental to client’s affordability given that they are mostly on a Centrelink payment, they are continuing to prey upon the most vulnerable.
I thought I would share this with you as this has come to my attention today.
[76] T-document 76.
The Tribunal agrees with ASIC that the financial counsellors who provided evidence of their experienced are best placed to inform the Tribunal of the general position of customers in this target market group.[77] It is important to remember this matter is about the appropriateness if a product for a described target market as a whole, not specific individuals. CCDC did refer to survey participants who apparently told them they knew how to cancel but there is no indication in the Report of how many people were canvassed.
[77] TR75.
Here, based on the evidence currently available in the form of witness statements, the Tribunal is concerned there is a risk of harm to unsuspecting vulnerable consumers of the CCDC Product. The Tribunal appreciates that some evidence relates to general practices or anecdotal and hearsay accounts of customer experiences several years ago, but there is also evidence before the Tribunal which states the expressed concerns and experiences are still applicable now. This evidence was not responded to by the Applicant.
CCDC states that if a customer is facing financial hardship they can cancel the deductions. This is set out on the Centrepay deduction authority form. The form provides a tick-box and the words “I can ask a staff members at Urban Rampage or Centrelink to change or cancel my deduction at any time”. If the customers ability to read and understand English is limited, this may not be effective to alert the customers to their rights. Other cultural issues might also be at play, as indicated in some of the anecdotal evidence.
Mr Elsegood’s survey also indicated that affordability assessments were not being performed because of the resistance of customers as it may trigger collective and personal trauma (making them feel shame).[78]
[78] T-document 8.4, page 838.
There was also an acknowledgement by Mr Elsegood of CCC that although Centrepay was the preferred method of payment for Indigenous customers, “they may not understand is that if Centrelink stops their benefits, usually through non-compliance, it will have a flow-on effect and stop their Centrepay repayments”.
Urban Rampage Store Operations Manual[79] sets out the procedures to be followed for staff for customers wanting to make payments by Centrepay which includes performing an affordability assessment. A customer is meant to be told they cannot make a purchase unless they subject themselves to an affordability assessment. The Manual also states that customers are to be given their receipts. The anecdotal evidence suggests that these requirements of the Manual are not, or have not always been, complied with by CCDC staff.
[79] T-document 7.6, page 462.
The risks and concerns highlighted by ASIC are, if ultimately substantiated, of genuine concern to the Tribunal. The anecdotal evidence provides insights, and this evidence is yet to be tested, of concerns about the CCDC facility product. Some witnesses highlight the extreme financial stress some users have been faced with, including a lack of money for food following the deductions from their Centrelink entitlements. Other witnesses refer to the fact that because English is not their first language or that of many in their communities, it is unlikely that the users of the CCDC product know and comprehend the terms and conditions for which they have signed up. There is also evidence about cultural norms within the communities which render these customers less likely to ask questions or complain. They also may not be aware of their cancellation rights, and this results in an increased likelihood of financial hardship.
On the other hand, there is evidence that not everyone in the target market is happy about the CCDC Centrepay product no longer being available. ASIC accepted that customers who have attended CCDC stores since the making of the interim stop order of 28 February have suffered inconvenience and may feel angry at their inability to pay for purchases via Centrepay.[80] It is unclear who typed the Complaints, and it was clearly not the customer. The complaints often start with “customer said” or “customer states”
[80] ASIC decision, [238].
There is evidence that other retail outlets are available for the CCDC customers to purchase their household items. Further, they can still use cash and other payments facilities at CCDC stores.
Some media outlets have reported that CCDC has claimed ASIC’s action are racist and paternalistic.[81]
[81] National Indigenous Times article dated 26-04-2024; Guardian article dated 26-04-2024.
It is not for the Tribunal to determine these matters at the stay hearing. Suffice it to say, the protection of the community and the public interest is of paramount importance. The Tribunal considers that this outweighs any financial harm or reputational damage, which may be incurred by CCDC in the event the stay is not granted.
If the stay was granted, the Tribunal still considers that this would not alleviate any financial harm or reputational damage suffered because Services Australia has suspended CCDC and the Tribunal is not convinced a stay would result in an automatic lifting of that suspension. Indications from Services Australia to ASIC are that it would still need to investigate the matter, giving appropriate procedural fairness to all relevant parties to be heard. This would render the stay of the ASIC Decision inutile.
CCDC submitted that Services Australia has only suspended their approval because of ASIC’s action and that it likely they will lift the suspension if a stay order is granted. The Tribunal considers it more likely that Services Australia will lift the order once, and if, a final decision has been made in CCDC’s favour.
Counsel for the Applicant informed the Tribunal that CCDC had written to Services Australia to request an undertaking that it would remove the suspension pending the stay, but as at the date of this hearing there had been no response.[82]
[82] TR67.
ASIC asked Services Australia if it would maintain CCDC's partial suspension if CCDC was successful in obtaining a stay of ASIC's Final Stop Order dated 24 April 2024. Services Australia stated:[83]
5. The Agency could not be certain whether the partial suspension would remain if the stay order was made because we cannot know the nature of the terms of the stay order. If an order was made, the Agency would need to consider that order in the context of the Centrepay program and then the delegate would make a decision after allowing CCDC procedural fairness. This may take more than 28 days depending on the matters raised by the CCDC and any other relevant stakeholders, which may include (not limited to) advocacy groups, affected customers and ASIC.
[83] Affidavit of Cameron Alexander Lockett, Annexure CAL-6.
One of the bases for a suspension in the Centrelink Policy (see paragraph 233 above) is where the business:
(iv)is under investigation by a Regulatory Body or law enforcement agency
(v)is, following an investigation, the subject of adverse findings by a Regulatory Body or law enforcement agency, or
(vi)has had enforcement proceedings brought against it or other sanctions imposed by a Regulatory Body or law enforcement agency, or
It would be consistent with this Policy for the suspension to remain in place pending the outcome of the proceeding.
It may be that the potential for harm for persons who are part of this target market is primarily a result of the Centrepay system as a whole, rather than anything specific concerning CCDC’s TMD. This is a matter which will no doubt be elucidated and expanded upon at the final hearing.
On 21 May 2024, the Commonwealth Government announced it was undertaking a review of Centrepay targeting exploitation. A media release from The Hon Bill Shorten MP, Minister for The National Disability Insurance Scheme and Minister For Government Services provides that:[84]
Services Australia is also prioritising support for customers who have Centrepay arrangements in place with Urban Rampage, following a decision by ASIC to permanently stop Centrepay's use in the company's stores. The agency is carefully reviewing the ASIC decision in the broader context of the current review of the program
[84] T-document 19, page 1231.
For this matter though, it is important to recognise harm, or the potential for it, and act accordingly. It is not an answer to say other retailers are still able to provide Centrepay to this group of consumers. Information regarding those other retailers and their circumstances are not before the Tribunal. The Tribunal cannot know at this stage if there a reason to distinguish those other retailers conduct from that of CCDC. It is also not an answer to submit the objective and purpose of Centrepay is to address and alleviate the very risk that ASIC relies on.[85] That is the stated intention of Centrepay but clearly some in the community do not accept it is having that intended effect.
[85] TR16.
Claims that the stop order is significantly harming CCDC customers, rather than merely inconveniencing them, is not sufficiently made out on the current evidence.
The Tribunal is not persuaded that the consequence to CCDC, resulting from not granting a stay, outweighs the public interest to justify the grant of a stay.
Application for review would not be rendered nugatory
A date for the substantive hearing has not yet been set, however the parties indicated that, considering their respective availability, October 2024 is the earliest time the matter can be heard.
The length of time prior to the final hearing is a relevant factor in support in the grant of a stay until the application can be heard.
CCDC submitted its business will collapse and as a result a failure to grant the stay will render the application for review nugatory. CCDC referred to the Tribunal decisions in Sgaravizzi and Australian Securities and Investments Commission [2019] AATA 6890 at [36]:
That leaves the question of whether the review would be rendered nugatory if the stay were not ordered. This consideration captures the jurisdictional question which must be answered before the discretion is enlivened. As it happens, I am satisfied the applicant has made tolerably clear there is a real possibility the company’s business might founder in the absence of a stay. That harm may irreparable if the applicant obtained a more favourable outcome at the hearing but – more than that – there might be little point proceeding to a hearing if the company’s business collapses. It would be unfortunate if that collapse were then to raise further questions about the applicant’s acumen as a director.
For reasons outlined above, the Tribunal accepts that the CCDC has taken a financial “hit” but is not convinced that there is a real possibility CDCC’s business will “collapse” if a stay order is not granted. In the short term CCDC is generating only a proportion of its previous sales, but there is also an indication that sales utilizing different payment methods are rising. The Tribunal was not provided with comparative figures or sufficient data to take this any further. The Tribunal acknowledges that there will always be an impact when a stop order is initially implemented, but that is not sufficient to demonstrate the review would be rendered nugatory.
STAY APPLICATION – CONCLUSION
CCDC acknowledges that people in its target market are “marginalised Australians” living in “areas already suffering from a lack of competition and consumer choice”.[86]
[86] Applicant’s Outline of Submissions for the Stay Application, [47(a)-(b)].
The National Indigenous Languages Report confirms the following about the target market:[87]
Aboriginal and Torres Strait Islander people … can experience difficulties with equitable access to services when they are delivered only in English.
…high concentrations of traditional language speakers near the Urban Rampage store locations
…high concentrations of traditional and new languages in areas where Urban Rampage stores are located;
Aboriginal and Torres Strait Islander people experience difficulty accessing government and commercial services because these services are only offered in English, and not in the traditional or new languages that they speak.
[87] T-document 24.
There are outlined risks deposed to by witnesses. Those risks are stated to be based on knowledge and experience. There is some evidence of those that have suffered financial harm – although without further detail it cannot be said that it is definitively, or at all, a result of the CCDC product. The harm is perceived to have been caused by the CCDC Product. There is evidence of complaints being made to CCDC, and other Centrepay outlets, by Anglicare in 2022 after clients were presenting in extreme financial distress seeking emergency relief following Centrepay deductions. Anglicare requested changes be implemented to CCDC’s system (by limiting the amount that can be deducted by Centrepay) to reduce the risk of financial hardship (which was resulting in no funds for living expenses, such as necessities like food).[88] The suggestions made by Anglicare to CCDC were not adopted by CCDC. CCDC’s response to limiting deductions to $50 a fortnight was:[89]
Regarding you suggestion to limit deductions to $50 a fortnight, we can do this but it will mean that the maximum amount of credit for goods we can extend is $250. In our experience this is unlikely to work because we have many customers who are able to make higher repayments complaining that their spending limit is too low compared to the customers who fail to commit to their deduction agreement. This happened in our Derby store when Centrelink imposed a $50 maximum deduction. Customers complained to Centrelink who then changed this rule so customers could return to paying any amount they could maintain. The current policy allows customers who are satisfied with paying high fortnight payments can do so, while customers who are not satisfied with paying high amounts simply reduce their payments or cancel them. There is no restriction to reducing their payments to lower amounts or cancelling their payments.
[88] T-document 27, page 1590.
[89] T-document 27, page 1589.
The protection of the public is a paramount consideration of the Tribunal in determining whether to exercise its discretionary powers under section 41(2) of the AAT Act.
As this Tribunal noted in MRWL and Australian Securities and Investments Commission [2022] AATA 3366, at [115]:
The issue is primarily one of prospects and public interest and hardship. This is akin to the determination of a Court in considering an interim injunction application. Whether an injunction is granted often hinges not so much on prospects (or whether there is a serious question to be tried), but on balance of convenience aspects.
The financial and reputational damage that CCDC may suffer if a stay is not granted, including to third parties, does not outweigh the need to protect vulnerable people from potential harm.
Where there is a risk of harm it is not desirable to make a stay order.
The Applicant has not satisfied the Tribunal that the stay application should be granted.
DECISION
For the reasons outlined above the Tribunal refuses to stay the Decision pending the final hearing and determination of the Applicant’s application for review.
I certify that the preceding two-hundred and fifty-three (253) paragraphs are a true copy of the reasons for the decision herein of Senior Member D K Grigg
................[SGD]..................
Associate
Dated: 12 June 2024
Date of stay hearing:
3 June 2024
Counsel for the Applicant:
Mr C H Troung KC and Mr J P Stoller of Counsel
Solicitors for the Applicant:
Ward Keller
Counsel for the Respondent:
Mr R Knowles KC and Mr J Heard
Solicitors for the Respondent:
ASIC
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