Debt administrator cops fine for predatory actions

The debt agreement administrator A&M Group trades as debt negotiators and collects payments from debtors to distribute to creditors.

The group admitted that it sent text messages, emails and made telephone calls to six separate debtors where it made statements that were untrue.

Threats included that a consumer could be imprisoned or that they would contact the consumer’s family or work colleagues unless the debt was paid.

Justice Bromwich said the penalty represented the absolute minimum for “such predatory and flagrant conduct” without going against the dominant consideration of general deterrence.

Prior to the final hearing, A&M Group admitted liability for the contraventions and consented to the declarations sought by Australian Securities and Investments Commission (ASIC), implementing substantial remedial changes to address its conduct.

The court considered these were important considerations in reducing the level of penalty required for deterrence.

Justice Bromwich said this should be treated as a caution to other commercial debt administrators.

“The message to them was that if they engaged in such contravening conduct and did not admit to the contravening conduct at the first opportunity without taking any remedial steps, the penalty to be imposed would be well in excess of any minimum provided by statute,” Justice Bromwich said.

“All participants in the business of administering registered debt agreements must be given the clearest and most forceful incentive not to behave in this way. It must be viewed by those industry participants as simply not being worth the candle to do so.”

The Federal Court found A&M Group contacted, or threatened to contact, 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 alleged claims included that the “debtors could be charged with fraud and imprisoned if they failed to make payments”, “creditors were in the process of terminating the debtors’ debt agreements and were considering legal action”.

In addition, “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”.

As well as if creditors obtained a garnishee order “the creditors would be entitled to take 80 per cent of the debtor’s income”.

This conduct, together with the untrue statements, was found to be unduly harassing or coercive, in breach of s12DJ of the ASIC Act, as well as misleading or deceptive and in breach of s12DA of the ASIC Act.

The ASIC deputy chair Sarah Court said A&M Group’s treatment of consumers who might have fallen behind on the repayments of their debt agreement was “unacceptable” and the threats should “never have been made”.

“ASIC understands the pressure consumers feel when they are in debt and need to make repayments.

“ASIC was determined to take this case to court to show that this conduct was predatory and in breach of the law.”

[Related: ASIC takes Firstmac to court over alleged DDO breaches]