ASIC has succeeded in obtaining penalties against A & M group for false and misleading threatening and coercive conduct against debtors who had missed payments under their debt agreements. Australian Securities and Investments Commission v A&M Group Pty Ltd trading as Debt Negotiators [2022] FCA 1534 (fedcourt.gov.au)
A&M Group, which trades as Debt Negotiators, acts as a registered debt agreement administrator. It administers some 5,000 debt agreements, which was approximately 14% of the market as at October 2021.
A&M Group sent text messages and emails to six separate debtors, including to:
- threaten them with fraud charges and imprisonment if they failed to make payments;
- threaten to contact friends, family, work colleagues and landlords if the debtors failed to contact A&M Group;
- falsely claim that creditors were in the process of terminating the debtors’ debt agreements and were considering legal action;
- falsely claim that, if their debt agreement was terminated and they were forced into bankruptcy, the debtors’ finances would be examined to determine if they had been able to make payments under their debt agreement; and/or
- falsely claim that if creditors obtained a garnishee order against the debtor, the creditors would be entitled to take 80% of the debtor’s income.
ASIC had also claimed that A&M Group called and sent texts to the friends, family and work colleagues of the six debtors, with the intention of embarrassing or intimidating the debtors in order to get them to contact A&M Group.
The penalties imposed by the Federal Court including costs totaled $800,000.
While debt agreement administrators come under the Bankruptcy Act and the Inspector General in Bankruptcy has certain powers in respect of them, the misrepresentations in this case were more efficiently pursued by ASIC under its general financial services regulation powers: see ss 12DA, 12DJ ASIC Act.
The proceedings were initiated on the basis of an anonymous tip-off to AFSA who then referred the matter to ASIC. But for that taking place, the Judge thought it unlikely that the contravening conduct would have been detected.
The Judge took into account the financial position of the A&M Group, the limited financial benefit obtained, and the limited loss suffered by the relevant debtors apart from anxiety and embarrassment etc. Nevertheless, the breaches were serious and warranted penalties that took general deterrence into account.
As the Judge said,
“Debt Negotiators had no regime in place either to detect or to prevent such conduct. It does now”.
