Qantas Staff Credit Union Ltd and Various Debtors
[2007] WASAT 162
•25 JUNE 2007
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996 (WA)
CITATION: QANTAS STAFF CREDIT UNION LTD and VARIOUS DEBTORS [2007] WASAT 162
MEMBER: JUSTICE M L BARKER (PRESIDENT)
HEARD: 12 APRIL 2007
DELIVERED : 25 JUNE 2007
FILE NO/S: CC 935 of 2003
BETWEEN: QANTAS STAFF CREDIT UNION LTD
Applicant
AND
VARIOUS DEBTORS
RespondentsCOMMISSIONER FOR CONSUMER PROTECTION
Intervener
Catchwords:
Consumer credit - Non-disclosure of fees and charges - Overstatement of fees and charges - Understatement of fees and charges - Incorrect description of interest charging methodology - Insufficient disclosure of loan disbursement details - Errors in statements of account - Consumer Credit Code s 15 - Civil penalty
Legislation:
Consumer Credit (Western Australia) Act 1996 (WA), s 5
Consumer Credit (Western Australia) Code, s 15, s 15(B), s 15(D), s 15(G), s 32(E), s 102, s 102(1), s 102(2), s 102(3), s 102(4)
Credit Act 1984 (WA)
Result:
Contraventions of Consumer Credit (Western Australia) Code found
Civil penalty of $7900.39 imposed
Costs awarded to intervener
Category: B
Representation:
Counsel:
Applicant: Mr R Williams
Respondents : N/A
Intervener: Ms L Black
Solicitors:
Applicant: MacGillivrays Solicitors
Respondents : N/A
Intervener: Department for Consumer and Employment Protection
Case(s) referred to in decision(s):
Qantas Staff Credit Union Ltd and Various Debtors (Unreported, NSW CTTT, COM 02/31242, 30 October 2006)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicant credit union acknowledged in proceedings initially commenced in the Commercial Tribunal of Western Australia in 2004 and concluded in the State Administrative Tribunal in April 2007, that it had contravened the Consumer Credit (Western Australia) Code in six respects by failing to make disclosure as required by the Code.
The evidence before the Tribunal showed that once the credit union discovered errors it had made in 2001, it took appropriate steps both in New South Wales and in Western Australia to alert the consumer credit authorities to its mistakes and to remedy them.
The State Administrative Tribunal had regard to a recent decision of the New South Wales Consumer, Trader and Tenancy Tribunal and imposed a civil penalty on the applicant in the sum of $7900.39 consistent with a penalty imposed in New South Wales.
By consent the Tribunal ordered that the civil penalty be paid to the Commissioner for Consumer Protection in Western Australia and be applied by the Commissioner for certain purposes approved by the Minister for Consumer Protection.
Consent order as to penalty
On 12 April 2007 the Tribunal by consent of the parties involved in these proceedings made the following relevant orders:
"1.The applicant is granted leave to file a further amended application dated 3 April 2007.
2.The applicant is granted leave to file amended submissions as to penalty dated 11 April 2007.
3.The applicant pay the sum of $7900.39 as a civil penalty pursuant to s 102(2) of the Consumer Credit (Western Australia) Code (Code) within 28 days, such civil penalty to be paid to the Commissioner for Consumer Protection (Commissioner) and to be applied by the Commissioner for the following purposes approved by the Minister for Consumer Protection (Minister):
(a)the payment of such moneys as are approved by the Minister, on the terms approved by the Minister, for the following approved purposes –
(i)providing financial counselling services to consumers;
(ii)giving legal advice to consumers about consumer credit;
(iii)providing information about consumer credit; or
(iv)providing research about the use of credit;
(b)the administration of the Act;
(c)legal fees incurred by the Commissioner, or costs awarded against the Commissioner, in a proceeding under the Act; and
(d)legal fees incurred by the Commissioner, or costs awarded against the Commissioner, in a proceeding under the Credit Act 1984 (WA).
4.The applicant pay the Commissioner's costs of $13 000 within 28 days."
Proceedings in NSW Consumer, Trader and Tenancy Tribunal, Commercial Division
The final orders as to penalty made by consent in this Tribunal reflect orders made by the Consumer, Trader and Tenancy Tribunal, Commercial Division (CTTT) in New South Wales on 30 October 2006: see Qantas Staff Credit Union Ltd and Various Debtors (Unreported, NSW CTTT, COM 02/31242, 30 October 2006), reasons for decision delivered by Senior Member M Balding.
The proceedings in the CTTT in New South Wales and in this Tribunal relate to the same factual concerns but differ in relation to the various debtors affected. The proceedings in New South Wales concerned affected debtors in all parts of Australia, save for Western Australia. The proceedings in this Tribunal concerned only affected debtors in Western Australia.
The conduct of the applicant and how it affected various debtors
The reasons for decision of the CTTT in New South Wales may effectively be adopted in relation to the factual matters that give rise to these proceedings and, for that reason, the Tribunal does not need to repeat the detail of the factual background.
Put relatively shortly, consumer credit legislation throughout Australia requires strict disclosure of the fees and charges and accurate statements of fees and charges and the interest charged for the provision of credit.
Throughout Australia a Consumer Credit Code exists to achieve a degree of uniformity of regulation of consumer credit providers. In Western Australia s 5 of the Consumer Credit (Western Australia) Act 1996 (WA) (CC(WA) Act) applies the Consumer Credit (Western Australia) Code (Code). The CC(WA) Act and the Code together create the relevant consumer credit provider obligations.
The CC(WA) Act and Code have the effect of creating a strict consumer credit regulatory regime. The application or enforcement of that regime is, in part, achieved by the oversight of the regulatory system by State and Territory based consumer authorities, such as the Commissioner for Consumer Protection in Western Australia. However, the system also depends, in part, for its efficacy on the self‑regulation of consumer credit providers.
For example, under s 102(1) of the Code, a provider may seek a declaration as to whether or not it has contravened one or other of the key requirements contained in s 15 of the Code concerning disclosures and statements.
What happened in relation to this credit union is that the loans manager of the credit union between 1993 and July 1998 made a range of decisions concerning what disclosure was required in respect of loan contracts. Amongst other things that he later did, he did not act on legal advice concerning the credit union's statutory obligations. When he was later replaced, the credit union, on legal advice, decided to deal with the non-disclosure of credit fees and charges by way of applications under the relevant legislation, initially in New South Wales, by application to the CTTT. Further applications were then made to deal with all errors acknowledged by the credit union.
The types of loan contracts involved in these proceedings included:
•home loans;
•overdrafts;
•personal loans; and
•lines of credit.
Later, in August 2003, the current proceedings were commenced in the former Commercial Tribunal of Western Australia (Commercial Tribunal). Those proceedings were later amended at various times so that, prior to the hearing of the current application in the State Administrative Tribunal (in which the jurisdiction formerly exercised by the Commercial Tribunal has been exercised since 1 January 2005) the applicant sought a declaration under s 102(1) as to whether or not the applicant has contravened one or other of the key requirements contained in s 15 of the Code. At the time of the hearing the applicant further amended the application to seek an order under s 102(2) of the Code requiring the applicant to pay an amount as a civil penalty, instead of seeking a declaration under s 102(1) of the Code.
The applicant at the hearing contended that the appropriate civil penalty to be imposed in all of the circumstances was an order that the applicant be required to pay an amount of $7900.39 as a civil penalty in respect of all contraventions identified in the application.
Relevant provisions of the Code
Section 102 of the Code confers upon this Tribunal jurisdiction to impose a civil penalty for a contravention of a key requirement:
"The Court [which plainly includes the Tribunal for the present purposes] may make an order, in accordance with this Division [Pt 6, Div 1], 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 102(3) requires the Tribunal to have regard to certain matters:
"Prudential standing.
The Court, in considering the imposition of a civil penalty, must have regard primarily to the prudential standing of any credit provider concerned … if the credit provider … takes deposits or is a borrowing corporation … However, the Court is to have regard to that prudential standing only if the credit provider requests the Court to do so."
In this case, the applicant did not ask that the Tribunal take into account its prudential standing. However, it acknowledged that it was open to the Tribunal not to accept that the recommended penalty agreed to by the parties was appropriate in the circumstances. In that event, the applicant would rely upon the prudential standing as a relevant consideration. The Tribunal, however, decided not to take that course.
The Tribunal in considering imposition of a civil penalty is required by s 102(4) to have regard to certain other matters:
"Other matters to be considered.
The Court, in considering the imposition of a civil penalty, must have regard to the following –
(a)the conduct of the credit provider and debtor before and after the credit contract was entered into;
(b)whether the contravention was deliberate or otherwise;
(c)the loss or other detriment (if any) suffered by the debtor as a result of the contravention;
(d)when the credit provider first became aware, or ought reasonably to have become aware, of the contravention;
(e)any systems or procedures of the credit provider to prevent or identify contraventions;
(f)whether the contravention could have been prevented by the credit provider;
(g)any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions;
(h)the time taken to make the application and the nature of the application;
(i)any other matter the Court considers relevant."
The contraventions
In this case, the credit union applicant and the Commissioner for Consumer Protection as intervener in these proceedings agreed relevant facts. While notices were given to various classes of persons who had loan contracts with the credit union at material times, none expressed any desire to participate in the proceedings. In those circumstances, the protection of the interests of the consumers was achieved through the intervention of the Commissioner for Consumer Protection.
There are six classes of contravention in this case:
•credit fees and charges contravention (s 15(G));
•understatement contravention (s 15(G)(c));
•overstatement contravention (s 15(G)(c));
•interest charging methodology contravention (s 15(D));
•loan disbursement details contravention (s 15(B)); and
•statements of account contravention (s 32(E)).
The Tribunal does not intend in these reasons for decision to set out the details of these contraventions. The Tribunal for these purposes adopts the account of the contraventions and the reasons why they happened as set out in the earlier mentioned decision of the CTTT in New South Wales.
Tribunal's findings on penalty in these proceedings
In the final order of the CTTT in New South Wales, a total civil penalty of $156 888.83 was imposed. That penalty related to the following affected contracts:
•16 215 contracts affected by the fees and charges contravention;
•2836 (maximum) contracts affected by the interest charging methodology contravention;
•220 contracts affected by the understatement error – mortgage insurance premiums;
•150 (approximately) contracts affected by the overstatement error;
•some contracts affected by the loan disbursement details error – identified by regular compliance and other compliance audits; and
•6069 overdrafts and 2433 lines of credit, a total of 9502, affected by the statements of account error.
In Western Australia the number of affected contracts comprises:
•817 contracts affected by the fees and charges contravention;
•93 (maximum) contracts affected by the interest charging methodology contravention;
•37 contracts affected by the understatement error – mortgage insurance premiums;
•7 (approximately) contracts affected by the overstatement error;
•possibly a few loan contracts affected by the loan disbursement details error; none actually identified in the regular compliance reviews conducted by the applicant; and
•230 overdrafts and 58 lines of credit, a total of 288 affected by the statements of account error.
As to the relevant considerations as to penalty, the Tribunal has regard to the consideration of those factors by the CTTT in New South Wales.
In particular, it is accepted that the contraventions were not deliberate, although it is acknowledged it is inexplicable why the relevant credit union officer did not act on legal advice when it was given to him.
The Tribunal further accepts that the evidence shows a detailed and ongoing attempt by the applicant to ensure compliance at the outset and at the time documents are prepared and completed. The Tribunal also accepts that steps are being taken to ensure, through internal audit procedures and the compliance program, the continuing compliance with the Code and to allow for early identification of any errors.
In all relevant respects, the credit union's actions subsequent to discovering the contraventions have been commendable. Every step has been taken to ensure that no debtor/borrower has been disadvantaged by the errors made by the credit union.
The credit union has moved positively after the contraventions were first identified from May 2001 onwards to rectify its default under the regulatory regime.
This Tribunal broadly accepts the precedent authorities concerning the contravention identified by Senior Member Balding in the decision of the CTTT and the applications of the principles to be drawn from those authorities in this instance.
The Tribunal accepts the submission of the applicant that the absence of any monetary loss or other financial loss or damage together with the fact that none of the debtors in Western Australia expressed any desire to involve themselves in the application are relevant considerations for the purpose of assessment of penalty.
In the New South Wales CTTT proceeding there were 16 215 loan contracts affected by the credit fees and charges contravention and the aggregate penalty imposed was $156 888.93.
In Western Australia there are 817 loan contracts affected by the credit fees and charges contravention. On the basis of the reasoning applied in the New South Wales CTTT, a civil penalty in Western Australia of $7900.39 is indicated.
I note that in these proceedings the Commissioner for Consumer Protection does not dispute the approach contended for by the applicant.
The applicant emphasises that, by reason of the fact that the credit fees and charges contravention is the most significant of the contraventions, the number of contracts affected by that contravention is the most appropriate basis to determine the appropriate level of civil penalty in this case. The evidence is that there are 817 loan contracts affected by the fees and charges non-disclosure contravention, of which 37 are mortgage loans and the rest non-mortgage loans.
In the case of mortgage loans, the applicant admits for the purposes of the application that fees were actually charged in all affected loan contracts, but not disclosed. In the case of non‑mortgage loans the contraventions relate to contingent fees, that is, fees that may or may not have been payable. The applicant contends and the Tribunal accepts that the contingency arose (and the fees were more likely than not charged, but not disclosed) in 1% of contracts written.
Nonetheless, the applicant submits and the Commissioner for Consumer Protection accepts that it would be both difficult and unrealistic to seek to impose a penalty distinguishing between mortgage loans on the one hand and non-mortgage loans on the other and that the more appropriate approach is to impose a penalty in respect of the whole of the portfolio of 817 loan contracts, but on the basis of the recognition that in respect of 99% of the non-mortgage loans, the likelihood is that the nondisclosed fees and charges were actually not charged.
On that basis and on the assumption that each contract should bear a separate penalty of a little under $10 per contract, the total penalty of $7300.39 for Western Australia is in the applicant's submission appropriate in all the circumstances.
The Tribunal accepts the submission of the applicant for the reasons set out above.
For these reasons the Tribunal on 12 April 2007 made the orders earlier set out.
I certify that this and the preceding [41] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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