The Australian Competition and Consumer Commission (ACCC) has launched legal action against a property company that connects struggling borrowers with investors.
Federal court proceedings have been instituted against We Buy Houses and Rick Otton for alleged contraventions of the Australian Consumer Law.
The ACCC said consumers have allegedly been told that they can learn at seminars how to buy a house for $1, as well as how to build property portfolios without their own money invested and without new bank loans.
“The ACCC alleges that the strategies do not enable consumers to buy a house for $1 but rather involve consumers acting as middlemen to facilitate property transactions between third-party sellers and third-party buyers,” the regulator said.
“The ACCC is concerned that the strategies promoted by We Buy Houses and Mr Otton target vulnerable consumers who don’t qualify for bank loans or who are having difficulties meeting their mortgage repayments.”
The regulator is seeking penalties, permanent injunctions and corrective advertising against We Buy Houses and Mr Otton. It is also seeking a disqualification order against Mr Otton.
Mr Otton said he would vigorously fight any action to ban his book, How to Buy a House for a Dollar.
“It seems that the ACCC thinks the public are fools, that they will take the title literally and think that they only need a dollar to buy a house,” Mr Otton said.
“People know that the expression is often used in business: to buy a business for $1 – that is, for the value of the debt owed by the business.”
Mr Otton said his strategy involves investors taking over the properties of struggling mortgagees along with their loan repayments.
“Put simply, what if the loan repayments on a house are creating hardship for the owner, and the loan amount is so high that the owner cannot sell the house for enough money to pay out the loan?” he said.
“Why wouldn’t the owner welcome someone new who can step in, agree to buy the house and pay out the loan down the track?”
Mr Otton said the National Consumer Credit Code advises people who cannot afford mortgage repayments to give the property to someone who can take over the repayments, provided that the credit provider gives permission.
“That’s exactly what the ‘We Buy Houses’ technique is all about,” he said.
The matter is listed for a directions hearing in Sydney on 1 April.
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