DEPARTMENT FOR CONSUMER AND EMPLOYMENT PROTECTION and CHEQUECASH PTY LTD
[2008] WASAT 168
•28 JULY 2008
DEPARTMENT FOR CONSUMER AND EMPLOYMENT PROTECTION and CHEQUECASH PTY LTD [2008] WASAT 168
| Link to Appeal : |
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| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2008] WASAT 168 | |
| CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996 (WA) | |||
| Case No: | CC:1726/2007 | DETERMINED ON THE DOCUMENTS | |
| Coram: | MR T CAREY (MEMBER) | 28/07/08 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application unsuccessful | ||
| B | |||
| PDF Version |
| Parties: | DEPARTMENT FOR CONSUMER AND EMPLOYMENT PROTECTION CHEQUECASH PTY LTD |
Catchwords: | Consumer credit Alleged contravention of key requirement in consumer credit contract by misstatement of total interest charges payable Whether contravention made out |
Legislation: | Consumer Credit (Western Australia) Act 1996 Consumer Credit (Western Australia) Code, s 15(E), s 100(1), s 102(2) |
Case References: | Nil |
Orders | 1. There is a declaration that the respondent has not contravened the key requirement referred to in s 15(E) of the Consumer Credit (Western Australia) Code as alleged in this proceeding.,2. The application is dismissed. |
Summary | The respondent, the holder of a credit provider's licence, overcharged a number of its clients by charging interest on the basis of applying a daily rate to the loan principal without taking into account repayments made by the clients. The overcharging also breached the maximum amount chargeable under the applicable consumer credit legislation.,The applicant sought a penalty against the respondent under another provision of the same legislation concerned with contraventions of "key requirements" in consumer credit contracts. The key requirement relied upon was that the credit contract must contain the total amount of interest charges payable under the contract.,The Tribunal found that there had been no contravention of the key requirement, but rather, an overcharge of interest as against the standard of the interest charge which was correctly stated in the contract. It made a declaration of the lack of contravention and dismissed the application. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996 (WA) CITATION : DEPARTMENT FOR CONSUMER AND EMPLOYMENT PROTECTION and CHEQUECASH PTY LTD [2008] WASAT 168 MEMBER : MR T CAREY (MEMBER) HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 28 JULY 2008 FILE NO/S : CC 1726 of 2007 BETWEEN : DEPARTMENT FOR CONSUMER AND EMPLOYMENT PROTECTION
- Applicant
AND
CHEQUECASH PTY LTD
Respondent
Catchwords:
Consumer credit - Alleged contravention of key requirement in consumer credit contract by misstatement of total interest charges payable - Whether contravention made out
Legislation:
Consumer Credit (Western Australia) Act 1996
Consumer Credit (Western Australia) Code, s 15(E), s 100(1), s 102(2)
(Page 2)
Result:
Application unsuccessful
Category: B
Representation:
Counsel:
Applicant : Ms L Black (Acting as Agent)
Respondent : Self-represented
Solicitors:
Applicant : Department for Consumer and Employment Protection
Respondent : Self-represented
Case(s) referred to in decision(s):
Nil
(Page 3)
Summary of Tribunal's decision
1 The respondent, the holder of a credit provider's licence, overcharged a number of its clients by charging interest on the basis of applying a daily rate to the loan principal without taking into account repayments made by the clients. The overcharging also breached the maximum amount chargeable under the applicable consumer credit legislation.
2 The applicant sought a penalty against the respondent under another provision of the same legislation concerned with contraventions of "key requirements" in consumer credit contracts. The key requirement relied upon was that the credit contract must contain the total amount of interest charges payable under the contract.
3 The Tribunal found that there had been no contravention of the key requirement, but rather, an overcharge of interest as against the standard of the interest charge which was correctly stated in the contract. It made a declaration of the lack of contravention and dismissed the application.
Application and agreed facts
4 In this application, the applicant seeks a civil penalty pursuant to s 102(2) of the Consumer Credit (Western Australia) Code (Code) for alleged contraventions by the respondent of s 15(E) of the Code in respect of a number of credit contracts entered into by the respondent. The respondent has admitted the contraventions.
5 The parties filed a statement of agreed facts. That statement usefully sets out many of the facts pertinent to the matter, and for that reason, is reproduced here in full. In the following section of these reasons I will supplement the agreed facts with some further facts or observations arising on the evidence produced by the parties.
"1. At all material times, the respondent was the holder of a credit provider's licence pursuant to the Credit (Administration) Act 1984 [WA] and carried on business as a credit provider trading as Financial Express Highgate, Financial Express Morley and Financial Express Victoria Park.
2. Between the period approximately 1 August 2002 and 8 December 2007 the respondent entered into 13,525 written credit contracts from its Highgate, Morley and East Victoria Park offices with various individual consumers of which 3,443 were contracts which charged interest (the credit contracts).
(Page 4)
- 3. The credit contracts each included the following clauses:
1.1 Balance means the difference between all amounts credited and all amounts debited to the Customer under this Contract.
…
1.5 Daily Balance means the Balance at the end of a day.
…
5. Interest Charges
5.1 The annual percentage rate that applies to this Contract is set out in Item 4 of the Loan Summary …
5.2 The daily percentage rate is the Annual Percentage Rate Divided by 365.
5.3 Interest charges, including default interest charges, will be calculated on a daily basis by applying the daily percentage rate to the Daily Balance.
5. Of the 3,443 credit contracts which charged interest, 989 had overcharged interest affecting 320 individual consumers in total.
6. There were also a number of credit contracts where interest was undercharged. The applicant initially obtained a sample of 25 contracts from the respondent. Of these, 5 credit contracts were for business purposes and therefore not subject to the Code, 4 did not charge interest, 10 overcharged interest by $153.80 and 6 undercharged interest by $3,344.92.
7. On 23 August 2007, the applicant wrote to the respondent demanding a written undertaking by no later than 6 September 2007 that the respondent would,
- from 6 September 2007, at the latest, ensure that interest was calculated and correctly disclosed in accordance with the Code.
- 8. On 27 August 2007, the respondent wrote to the applicant advising that the interest component had been deleted from all credit contracts subject to the Code pending development of a program which complied with the Code. The letter also stated there was no intention to contravene the Code.
9. On 5 September 2007[,] the applicant wrote to the respondent seeking details of the respondents' [sic] proposal to compensate borrowers and requesting the respondent provide written advice by 13 September 2007 of the timeframe in which it would carry out the activities necessary to identify and compensate affected borrowers.
10. On 10 September 2007[,] the respondent wrote to the applicant advising it hoped to develop a program to identify interest overcharged within four to six weeks and that in the meantime manual calculations on less complicated accounts would commence.
11. The applicant filed this application on or about 29 October 2007.
12. The respondent wrote to the affected consumers in or about December 2007, advising of the error and that the consumers would be refunded the overcharged interest.
13. The total amount of interest overcharged by the respondent was $23,384.51. Most of this amount has now been refunded by the respondent to its customers.
14. The respondent's software technicians have now rectified the programming defect which led to the overcharging so that this does not occur again.
15. The respondent admits that it has contravened s 15(E) of the Code."
Further facts and observations
6 According to the respondent's Managing Director, Mr Gorman, the admitted excess interest charges occurred by reason of the fact that the computer program used to process loans did not discriminate between those loans which were repaid in full at the end of the loan period and loans where the customer made one or more repayments of the principal amount during the loan period. Therefore, the amount of interest charged continued to reflect the total principal amount in such cases of "divided payments". He said that of the 934 contracts with interest errors, only 246 contracts had an interest error of more than $20.
(Page 6)
7 Mr Gorman also explained that the respondent's computer program was set up originally to process loans on the basis of repayment in full being made at the end of the loan period. According to Mr Gorman, the computer program was examined by the company's solicitors and accountants who advised that it was suitable for processing loan transactions "inside the (Code)" - a reference to credit contracts subject to the provisions of the Code. What is not explained is why when part repayments of the principal commenced it was not readily appreciated that it would be necessary for there to be a recalculation of interest charges in accordance with cl 5.3 of the credit contract, and to the extent that this was not something the computer program could itself do, that the recalculation would need to be done manually. Having said that, no allegation is made that the error was wilful. Rather, the applicant put the respondent's failure in terms that:
"The respondent did not have systems in place to monitor and ensure that interest under the credit contracts was calculated correctly."
Alleged breach of the Code
8 In the course of considering the parties' competing submissions regarding penalty for admitted contraventions of s 15(E) of the Code, it has been necessary to reflect on the nature of the contraventions as the parties have advanced them. Section 15(E) provides:
"15. Matters that must be in contract document
…
(E) Total amount of interest charges payable.
The total amount of interest charges payable under the contract, if ascertainable (but only if the contract would, on the assumptions under sections 158 and 160, be paid out within 7 years of the date on which credit is first provided under the contract)."
9 By reason of s 102(2) of the Code, the Tribunal may make an order requiring the credit provider to pay an amount as a civil penalty if it is of the opinion that the credit provider has contravened a "key requirement". Section 100(1) prescribes that s 15(E) is a key requirement. The Tribunal must on an application for a civil penalty declare whether or not the credit provider has contravened a key requirement: s 102(1).
10 Whether or not s 15(E) of the Code has been contravened in the case of any credit contract turns on whether the contract document accurately records the total amount of interest charges payable under the contract.
(Page 7)
- It is only where there is some misstatement in the contract in respect of that subject that there can be a breach of s 15(E).
11 On the basis of the agreed facts, the relevant clause in all the credit contracts is cl 5.3. There is no suggestion that that clause misstates the interest which is actually payable. To the contrary, the applicant has gone to some lengths to demonstrate that the respondent has been guilty of overcharging interest as against the standard for the correct charge, being that set by cl 5.3. The respondent has admitted the overcharging, and attempted, and in almost every case succeeded in its attempt, to credit the account or refund the customer the amount overcharged. In these circumstances, and despite the respondent's admission of such contravention, there can be no contravention of s 15(E) of the Code, which, as I have said, is concerned solely with accuracy in credit contracts of providing for interest charges.
12 By a letter from the Executive Officer of the Tribunal dated 14 July 2008, the parties were invited to provide written submissions in response to the finding referred to in the previous paragraph, and both parties availed themselves of the opportunity. The nub of the submission from the applicant's legal representative is contained in 2 paragraphs which are reproduced here:
"The Department maintains that the Respondent breached s 15E of the Code in that it failed to calculate interest in accordance with s 26(1) (a) of the Code as a result of which the credit contracts contained a misstatement of the total interest payable and consumers were overcharged interest. Specifically, as set out in paragraph 1(c) of the Department's application filed with the Tribunal on 29 October 2007, the Respondent applied a daily interest rate on the principal amount of the loan instead of on the unpaid daily balances as required by s 26(1)(a).
Accordingly, the Department submits that s 15E has been breached as the credit contracts misstated the total interest charges payable as being more than the amounts which they were entitled to charge consumers in contravention of s 26(1) (a)."
13 I must say that I have some difficulty in grasping what it was that was being said in these paragraphs. That difficulty is contributed to in no small measure by the fact that the nature of the asserted misstatement in the credit contract is put on different bases. The first sentence asserts that the misstatement arose as a consequence of the respondent's failure to calculate interest in accordance with a limit imposed by s 26(1) of the Code, whereas the second sentence suggests that the "credit contracts misstated" the charges when reference is made to s 26(1).
(Page 8)
14 The applicant's invocation of s 26(1) of the Code further clouds the issue. Section 26(1) is in the following terms:
"The maximum amount of an interest charge that may be imposed or provided for under a credit contract is-
(a) where only one annual percentage rate applies to the unpaid balances under the contract - the amount determined by applying the daily percentage rate to the unpaid daily balances; or
(b) in any other case - the sum of each of the amounts determined by applying each daily percentage rate to that part of the unpaid daily balances to which it applies under the contract."
15 Far from misstating the interest payable by providing for charges in excess of what is permitted by the formula prescribed by s 26(1) allows, the relevant clause in the credit contracts, cl 5.3, reproduces that formula. This leads to yet another difficulty with the applicant's position, namely, that had the respondent sought to pursue, in any forum, recovery of any charges in excess of the prescribed maximum, it would have failed. Its rights would have been limited to the maximum prescribed by the Code (and by cl 5.3). In those circumstances, an argument of misstatement of the contractual term, based upon the discrepancy between the amount for which the contract provided and the amount charged (though not ultimately recovered), is untenable.
16 There will be a declaration that the respondent has not contravened the key requirement as alleged and the application will otherwise be dismissed.
Orders
17 The Tribunal orders:
1. There is a declaration that the respondent has not contravened the key requirement referred to in s 15(E) of the Consumer Credit (Western Australia) Code as alleged in this proceeding.
2. The application is dismissed.
(Page 9)
- I certify that this and the preceding [17] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR T CAREY, MEMBER
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