UPDATE What issues will decide ASIC v Malouf?
Our Previous note said-
On 31 July 2017 Malouf Group Enterprises (“MGE”) and Mr Malouf filed a 5 page response to ASIC’s concise statement.
What does MGE deny saying?
MGE denies engaging in misleading and deceptive conduct and (at par 15) has specifically denied saying to customers that:
a) MGE could determine whether negative listings had been correctly listed on a consumers credit file;
b) after receiving the consumer’s application, MGE would obtain the consumer’s credit report to establish whether the consumer’s credit file could be repaired;
c) before approving a consumer’s application, MGE would establish whether credit providers had failed to correctly follow relevant procedures prior to making a negative listing on a consumer’s credit file;
d) MGE would only approve a consumer’s application if it established that the credit file could be repaired;
e) MGE’s fees would only be payable if it established that negative listings could be removed; or
f) after accepting a consumer, MGE itself would act on behalf of the consumer in dealing with third parties to remove incorrect negative listings from the credit file.
So what DID MGE do for their $1,095 fee?
MGE has agreed (at par.8) that the services they provided consisted of MGE providing the consumer with
• a copy of the consumer’s credit report; and
• written instruction about, among other things, how to seek to repair their credit file.
MGE, it seems, was not required itself to act on behalf of the consumer in dealing with third parties.
MGE says that its customers knew what MGE would and would not do for them and so were not misled or deceived.
As part of the process to date:
- the applicant bought a concise statement of fact, and
- the respondent filed a response.
Those documents were reviewed previously (see above).
There has subsequently been an application filed in the proceedings within which are put more detail into the allegations made by ASIC.
Unfortunately, that application doesn’t form part of the publicly available documents.
Both ASIC and MGE have filed updated documents (an amended concise statement of fact and an amended response). The judge limited the number of pages the amended documents could run to and so both ASIC and MGE, to save space, have referred to details contained within the application when amending their documents.
This leaves a bit of a gap for the observer trying to piece together the issues. Nevertheless we have a reasonable idea of what the allegations now are.
The broad thrust of the allegations by ASIC are that customers were misled and deceived by the things that they were told by the respondent company MGE (and for which the sole director Mr Malouf was therefore responsible).
The number of customers involved
The allegations in the first 26 paragraphs of the 28 paragraphs of the amended concise statement don’t specifically refer only to Veda Advantage but to refer to credit reporting bodies more generally. It would appear, however, that the evidence used by the ASIC seems to rely upon a comparison between customers of MGE and records kept by Veda Advantage.
Part of the alleged harm set out by the ASIC refers to people who paid MGE for its services, but did not have any negative listing on their Veda Advantage credit file.
ASIC then say that of the remaining 9000 odd consumers with a negative listing on their Veda Advantage credit file, MGE was only able to assist 35.93% of those to remove a negative listing from their Veda Advantage credit file
Overall ASIC say that roughly 70% of those who paid the company had no negative listings removed from their Veda Advantage credit file within 90 days of their Veda Advantage credit file being obtained by MGE.
MGE and Malouf say that only 10,302 consumers not 10,638 consumers paid MGE during the relevant period.
MGE says that the statistics being used by ASIC do not take into account:
- work on credit files not maintained by Veda Advantage (Equifax). Presumably this is a reference to other credit reporting bodies such as Dun & Bradstreet; and
- files where a resolution was achieved after 90 days. The response doesn’t specify how many matters would have been resolved after 90 days.
MGE agrees there were 1537 unique customers whose Veda Advantage files had no adverse findings (which would be approximately 14% on Malouf’s numbers).
Specific allegations- Misleading and Deceptive Conduct
Some specifics of the allegations made against Malouf are set out in an originating application filed with the court which is not available to the public.
ASIC alleges that each of the consumer testimonials which appeared on the MG websites were misleading and deceptive.
ASIC alleges prospective clients were told that their credit file was being looked at during the initial conversations with the client.
MGE says that the relevant sales script stated that MGE sales consultants were “looking at your application”.
MGE sales consultants in fact asked prospective customers a series of questions to obtain information about their credit position. The purpose of asking those questions was to enable MGE to determine whether or not the customers were accepted and approved by MGE for the provision of services that it provided. MGE services could not assist the customer to take steps taken negative listing removed from the credit file if the relevant credit provider had complied with the relevant privacy laws and/or credit reporting codes of conduct before the negative listing was placed on the credit file. After the questionnaire had been completed, and subject to a minimum number of questions having been answered so as to enable MGE to determine that it services may be able to assist, the customer was told by MGE sales consultants that they had been accepted by MGE and they were asked to pay a one-off fee of $1095 including GST.
Furthermore, (and apparently not in contradiction to the paragraph just stated) MGE denies saying:
- that it could determine whether negative listings had been correctly listed on a consumer’s credit file
- after it received the consumers application, MGE would obtain the consumers credit report to determine whether the consumers credit file could be repaired;
- before approving a consumer’s application, MGE would establish whether credit providers had failed to follow relevant procedures prior to making a negative listing on a consumer’s credit file;
- MGE would only approve a customer’s application if it established that there credit file could be repaired
MGE admit their websites/advertisements included the words “credit defaults” “clear out” and “court judgement” and “instant approval for finance”. MGE says that the benefits of its services included these things but not that it services did any of these things.
The essence of the defence is that whilst certain things may have been said they were not able to be seen as misleading or deceptive of customers.
The anticipated extent of the evidence
There was extensive investigation before the charges were laid. The discussions between the parties have included processing large amounts of data in relation to thousands of clients over a number of years. The trial itself will involve some actual clients giving evidence as a representative of what happened with clients more generally. The court doesn’t want to have to sit through evidence from literally thousands of people.
Because Mr Malouf is said to have been the creator of the system is used by the company he will have to give evidence himself and be cross-examined as part of the trial. ASIC allege that he was knowingly concerned with breaches of the law and so they must not only prove the law was breached but also that the director knew about this happening.
The company doesn’t deny that the services it provided were limited in nature but says that the customers should have known the limitations of what was being provided because it was set out in writing. The company is therefore relying on the “fine print” in the matter whereas the ASIC wants the court to look at the bigger picture rather than be bogged down on detail.
It will be interesting to see what the judge ultimately decides. From what we have been able to glean from the back of the court it would seem that the ASIC has invested a lot of time and money in the investigation and prosecution of this matter.