ASIC SEEKS DECLARATORY RELIEF TO HOLD NAB RESPONSIBLE FOR VIOLATING THE NATIONAL CREDIT ACT ON 260 OCCASIONS DUE TO ITS LOAN-INTRODUCER PROGRAMME
This case involves a financial programme by the National Australian Bank Limited (NAB) which is said to violate certain provisions of the National Credit Act where ASIC seeks declaratory relief to hold NAB responsible for contravening the National Credit Act 260 times.
Facts:
The National Australian Bank Limited (NAB) put in place “spot and refer” a programme whereby unlicensed “Introducers” would “spot” prospective customers and “refer” them to bankers; if the bank then advanced a loan, the Introducers were rewarded by a payment – the bigger the loan, the bigger the reward. There were no uniform processes for selection of the Introducers, no requirement that they have any particular training and no minimum level of due diligence; there was also no relevant formal training for “frontline” bankers, including as to the nature of the information the Introducer could lawfully provide. The programme at times resulted in the bank receiving information and documents about customers from financially interested third parties.
An Introducer could be an individual or a company engaged in a business not ordinarily involving finance or lending. If NAB advanced a loan to a referred customer, Introducers were paid a commission. Critically, an Introducer did not hold an Australian Credit Licence (ACL).
ASIC seeks declarations that NAB contravened s 47(1)(d) of the National Credit Act on 260 occasions by failing to comply with credit legislation; and s 47(1)(a) of the National Credit Act on 260 occasions by failing to do all things necessary to ensure that the credit activities authorised by its ACL were engaged in efficiently, honestly and fairly.
ASIC says that s47(1)(a) and (d) are now civil penalty provisions and a declaration may be relevant to assessing any civil penalty sought against NAB in the future in respect of those provisions and any disciplinary sanctions under s55 of the National Credit Act (suspension or cancellation of an ACL). ASIC also says that it has a real interest in obtaining declarations in respect of breaches of legislation over which it has a regulatory role. The declarations sought are said to both vindicate the regulator’s claim and assist the regulator carry out its duties.
Issue: Should the court grant ASIC’s declaratory relief that NAB contravened the National Credit Act on 260 occasions?
Legal Basis:
- Australian Competition and Consumer Commission v Francis [2004] FCA 487; (2004) 142 FCR 1 (at 36 [110])
- Australian Securities and Investments Commission v AMP Financial Planning Pty Ltd (No 2) [2020] FCA 69; (2020) 377 ALR 55
Analysis:
To accede to ASIC’s request in these circumstances would be to satisfy the “fetish” of certain regulators seeking, and the Court granting, declaratory relief simply because the Court finds that a contravention has occurred. There is simply no point. The declarations sought would have no impact on the penalty. Contrary to ASIC’s submission, it would also have no impact on any sanctions under s 55 of the National Credit Act because the relevant factor under that section is the contraventions themselves (s 55(1) (a)), not whether declarations have been made. Had it been relevant to any part of the National Credit Act, one would expect that a mandatory declaration, such as that found in s 166, would have been provided for – as is now the case. Rather, the “reality is that both the Court’s disapproval of contravening conduct and clarification of the law is much more likely to emerge from a perusal of reasons than the bare terms of essentially repetitive declarations”.
Conclusion: Declaratory relief denied.
