Last month, ASIC released MR 24-209 . ASIC alleges “Lansvale Motor Group (operated by Diamond Wheels Pty Limited) and Keo Automotive Pty Ltd offered unlicensed car loans with principal, interest and other fee payments. In many instances, ASIC is concerned consumers were charged roughly double the amount of interest that could lawfully be charged.”
Furthermore, “ASIC alleges Ken Keomanivong was involved in the contraventions by Diamond Wheels and Keo Automotive as he played a central role in arranging and administering the loans.”
ASIC Deputy Chair Sarah Court said “This is the first civil proceeding we have taken to address lending practices by car dealerships. Car dealers offering finance should be on notice that ASIC is looking closely at how they are operating.”
ASIC’s investigation
- Between March 1995 and July 2024, Ken Keomanivong was a director of Diamond Wheels.
- He has also been a director of Keo Automotive Pty Ltd since August 2019.
- Neither Diamond Wheels nor Keo Automotive has ever held an Australian Credit Licence (“ACL”).
- Keo Automotive did enter into an Authorised Credit Representative arrangement with Timothy Slarke who held an ACL in his name as a credit assistanmce provider, not a credit provider. Consequently, that arrangement did not permit Keo Automotive to engage in credit activities as a credit provider. In addition, Keo Automotive never became a member of AFCA.
- ASIC’s Concise Statement states that “In the above circumstances, the purported appointment was ineffective pursuant to ss 64(4) and 64(5)(c) of the Act. Accordingly, at no time has Keo Automotive been an authorised credit representative of an ACL holder.”
- Between at least 24 September 2018 and 17 November 2019, Diamond Wheels entered into credit contracts with consumers for new and used vehicles.
- Between 24 September 2018 and 5 December 2019, Diamond Wheels received payments in relation to approximately 271 credit contracts.
- Between 6 December 2019 and 30 April 2024, Keo Automotive received payments in relation to approximately 335 credit contracts.
- From 21 January 2020, DCP Capital Pty Ltd (“DCP Capital”), trading as Keo Finance, entered into credit contracts with consumers purchasing vehicles from Keo Group Pty Ltd trading as Maureen Motors. Funding for these loans was provided by Keo Automotive.
- Interest was charged at a flat rate on the contracts instead of a daily reducing methodology, as per s.28 of the National Credit Code.
Penalties sought
ASIC is seeking against the companies:
- declaratory relief;
- Orders for pecuniary penalties;
- Injunctive relief and Costs.
Additionally, ASIC is seeking significant penalties against Ken Keomanivong.
Both companies and the director face possible penalties amounting to 30,000 penalty units each. There is also the question of whether ASIC might pursue a criminal charge against Mr. Keomanivong because of his intimate involvement and control.
Likely outcome
As ASIC’s Deputy Chair has said, this is the first prosecution of its kind. It will likely want the Court to send a strong message to the industry sector.
ASIC might not be successful in getting the $9.39 million possible awarded against each respondent but at even half that amount, it will be expensive for a small business. Remember, too, this is without reparation of the interest and fees overcharged (if any). That will likely be on top.
This case ought to send a clear message to those intent on flouting the law. Be compliant or else it’ll cost you dearly!
Finally
If you need assistance with a compliance, contact a specialist credit lawyer. If you need a compliant system, we may be able to assist.
It will be interesting to see if any of these companies are still operating when the matter comes before the Court.