ASIC appears to be intensifying its crackdown on illicit practices within the debt collection industry after launching court action against Sydney-based Ultimate Credit Management Group.
The regulator is taking legal action against UCM for the company’s alleged practice of filing legal proceedings in NSW courts against stressed borrowers living in other states.
The practice is banned under national consumer credit regulations, which specifically require debt recovery proceedings to be commenced in the state or territory in which the borrower lives.
In a civil claim lodged in the Federal Court on Monday, ASIC alleges that UCM continued to initiate legal actions in NSW courts against interstate borrowers even after the company was warned by the Financial Ombudsman Scheme and the Australian Financial Complaints Authority it had a “possible systemic issue” regarding the practice.
According to ASIC’s statement of claim, UCM began proceedings against 24 borrowers living outside NSW between May and December 2019 for unpaid loans ranging between A$400 and $2850.
While the loans were small they attracted annual interest rates of 48 per cent.
“ASIC is concerned that these alleged failures resulted in significant consumer harm,” the regulator said.
“Commencing proceedings outside of a borrower’s home state makes it much more difficult for borrowers to defend themselves in the proceedings, especially if they wish to appear in person.”
ASIC’s action against UCM follows a case brought by the regulator in March against a group of companies trading as ClearLoans that also allegedly tried to enforce credit contracts in states outside of where debtors lived.
Matters relating to the ClearLoans remain before the Federal Court.