ASIC launches legal action against Oak Capital over $37m in loans

Former footy stars were among those hit by Oak Capital’s lending model, and Australia’s corporate cop is fighting back.

ASIC says “unconscionable conduct” was used in lending $37 million. Picture: iStock

ASIC is stepping up its fight against predatory lending practices by turning the lenders into prey.

Australia’s financial services regulator has launched federal court action against a lender that repossessed peoples’ homes after its lending model denied consumers their rights to make hardship applications and avoid paying excessive fees and interest.

ASIC alleges Oak Capital engaged in “unconscionable conduct to avoid the National Credit Code” when it made up to 47 loans totalling more than $37 million between March 2019 and October 2023.

Oak Capital was a major creditor involved in the 2019 collapse of printing company Waratah, co-owned former AFL stars Stephen Kernahan and Craig Bradley, after charging up to 18 per cent interest on a loan.

ASIC says Oak Capital loans to 72 consumers had interest rates ranging from 11.6 to 23.2 per cent, and fees between 2.2 and 50.1 per cent. In one example a $1.55m home loan was refinanced with loan fees of $62,841 and an interest rate of 22 per cent.

ASIC Deputy Chair Sarah Court. Picture: NewsWire/Monique Harmer

Several more court actions are expected to be launched by ASIC in the coming weeks as the regulator targets lenders’ business models it feels are designed to avoid consumer protections.

“We want these actions to send a clear message – ASIC is watching, and ASIC will take action,” said ASIC deputy chair Sarah Court.

“As the number of Australians searching for financial assistance increase, the more they are becoming the target of what is known as predatory lending,” she said.

“We see it most commonly when lenders impose unfair high interest rates and fees.”

ASIC alleges Oak Capital’s lending model required a company to be named as the borrower, effectively bypassing the National Consumer Credit Protection Act.

“Oak Capital made loans to companies with no or minimal assets or current trading activities, and even companies that had been established for the purpose of obtaining the loan only days prior to the loan settlement,” it alleges.

“Given their distressed financial circumstances, several individuals defaulted on their loans and Oak Capital repossessed their homes. In its proceeding, ASIC relies on 47 loans as illustrative examples of the Oak Capital avoidance model.”

Among affected clients was Peter Aquino, who said: “the unconscionable lending and recovery practices of the Oak Group have had devastating results for me and my family”.

Oak Capital was contacted for comment Wednesday morning and says it is “in the process of obtaining legal advice and preparing a substantive response”.

ASIC’s Ms Court said ASIC was also targeting consumer loans that typically saw people paying four times the market price for everyday goods.

“Like the short-term loan dealer who was charging more in fees than the value of the loan itself, so the company made more than double in fees than it provided in credit,” she said. “Or the one that charged an unemployed consumer more than $4000 for a vacuum cleaner that could have been bought for $999.”

ASIC is also looking closely at lenders’ hardship arrangements, after criticising banks earlier this year.

“We are actively investigating suspected breaches of hardship obligations by banks and lenders and will not hesitate to ensure that they comply,” she said.

“More than one in three Australians have dropped out of financial hardship applications because banks and lenders made the process too difficult.”

ASIC says the non-bank lenders engaging in the avoidance conduct within the Oak Capital corporate group are Oak Capital Mortgage Fund and Oak Capital Wholesale Fund.

Last month ASIC sued a southwest Sydney car dealership over unlicensed lending to consumers, “many of whom paid an excessive interest rate”.

And in May this year it won a federal court case against Cigno Australia and BSF Solutions. These businesses’ “no Upfront Charge Loan Model” provided short-term loans totalling more over $34 million and charged over $70 million in fees to more than 100,000 consumers between July 2022 and December 2022”.

Ms Court said predatory lending and high-cost credit were priority issues for ASIC’s enforcement team.

“This is about protecting vulnerable Australians and small businesses and disrupting misconduct and poor practices across businesses that offer credit,” she said.

Originally published as ASIC launches legal action against Oak Capital over $37m in loans