Australian Securities and Investments Commission v Kobelt [2018] FCAFC 18
Undesirable business practices; consumer protection; unconscionable conduct in connection with financial services.
Facts: Kobelt, a storekeeper in a remote region of Australia, provided credit to local customers by means of a ‘book-up’ scheme. Under this scheme, the customer (typically a member of the Anangu Indigenous community) would hand over their bank card and PIN number to Kobalt, thus giving him control of the account to which their wages or Centrelink payments were paid. Kobalt was authorised by the customer to withdraw funds from the account to pay off the customer’s debt for goods received in advance. Many of the customers involved in the scheme had limited education and financial knowledge and were living in conditions of poverty. Kobelt’s record keeping for the scheme was found to be less than adequate and often illegible.
Issue: In the overall circumstances, did the ‘book-up’ scheme amount to unconscionable conduct in connection with the supply of financial services as prohibited by s 12CB(1) of Australian Securities and Investments Commission Act 2001 (Cth).
Decision: The scheme did not amount to unconscionable conduct.
Reason: The aim of s 12CB(1) is to ensure certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made, and the protection of vulnerable persons who are in a position that calls for legal protection from those who would take advantage of them. Although the prevailing conditions made customers vulnerable to unconscionable conduct, the court found that they had a reasonable understanding of the scheme, were generally supportive of Kobelt’s business, and found the scheme a practical way to obtain credit. In addition, the scheme provided a mechanism that allowed customers to avoid the sometimes unwelcome cultural practices of sharing resources with kin, and had the effect of smoothing out financial expenditure between pay days. On balance, Kobel had not taken unconscionable advantage of his customers’ vulnerability.