A financial services director has been banned from engaging in credit activities for three years after being found guilty of running an unlicensed payday lending business.
ASIC, the financial services regulator, imposed the ban on Robert Legat following the decision by the Federal Court to impose $730,000 of fines on Fast Access Finance Pty Ltd, Fast Access Finance (Beenleigh) Pty Ltd and Fast Access Finance (Burleigh Heads) Pty Ltd.
The court found that the Fast Access Finance companies used a business model that funnelled unlicensed loans to customers through the sale and purchase of diamonds.
“The Federal Court found that the diamond model was designed to conceal the true nature of the transaction, which was the provision of credit. As such, the FAF companies should have held an Australian credit licence under the National Credit Act,” according to ASIC.
“This conduct demonstrated a lack of judgement, integrity and professionalism on Mr Legat’s part and a disregard for the law. ASIC determined that Mr Legat is not a fit and proper person to engage in credit activities.”
Mr Legat has the right to appeal to the Administrative Appeals Tribunal.
Lender wanted to charge excessive interest rates
The Federal Court found that Fast Access Finance provided small-value loans – usually ranging from $500 to $2,000 – after asking customers to sign documents purportedly related to the purchase and sale of diamonds.
ASIC told the court that this was a sham, because there were no diamonds involved in the transaction and consumers had no intention of buying or selling diamonds.
According to the court, the underlying reason for the diamond model was to get around a rule that prevents payday lenders from charging interest rates above 48 per cent per annum.
The court also found that Fast Access Finance and its controlling officers must have had at least a strong suspicion that the diamond model contravened the National Credit Legislation.
In announcing the three-year banning of Mr Legat, ASIC deputy chair Peter Kell said the legislation contains important consumer protections.
“ASIC will take action against people who seek to deprive consumers of these protections,” he said.