FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Money3 Loans Pty Ltd (No 3) [2025] FCA 1086

ORDERS

THE COURT ORDERS THAT:

1.    The further hearing of the proceeding is adjourned to a date to be fixed.

2.    The applicant is to file by 4pm on 10 October 2015, a draft document that sets out the declaratory relief it seeks, consistent with the contraventions as established.

3.    A further case management hearing will take place at 10.15 am on 30 October 2025.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MCELWAINE J:

1.    SYNOPSIS

1    The Australian Securities and Investments Commission (ASIC) brings this proceeding for declaratory relief, injunctions, compliance orders and the imposition of pecuniary penalties against Money3 Loans Pty Ltd (Money3) for contraventions of various responsible lending provisions in the National Consumer Credit Protection Act 2009 (Cth). In these reasons, each reference to a statutory provision is to the Act unless otherwise stated.

2    Money3 is a wholly owned subsidiary of Solvar Limited (previously named Money3 Corporation Limited) (ACN 117 296 143), a publicly listed company, and is a member of the Money3 Group (comprising Solvar Limited and its subsidiaries), which is a provider of consumer automotive finance and consumer personal loans across Australia and New Zealand. Money3 provides a range of finance products, including loans to customers through direct access, broker and dealer channels.

3    Amongst other products, Money3 offers a “Micro Motor” loan. The Micro Motor business of Money3 involves lending to a maximum of $8,000 for a secured product. Subject to other conditions, the product is available to consumers who receive government benefits comprising of up to 100 per cent of their income. Money3 utilised internal documents which set out the features, conditions and lending criteria of the Micro Motor loan. Its form has evolved. Relevant to this proceeding is the Micro Motor Matrix which applied between July 2018 and August 2019. It was replaced by successive versions of Product Guides in August 2019 and October 2020. In evidence, the collective reference Product Guide was often used, including references to the Matrix. These reasons adopt that nomenclature where appropriate. The Product Guides contain “knockout” criteria which used by Money3 to determine whether an applicant is eligible for the product. Amongst other things, the knockout criteria render the product unavailable to applicants with “poor banking conduct” or applicants who have more than two current “payday” loans.

4    ASIC contends that between 8 May 2019 and 18 February 2021 (the relevant period) Money3 contravened its responsible lending obligations. The allegations relate to five Micro Motor credit contracts that Money3 entered into with six consumers (the credit contracts). It is ASIC’s case that shortly after entering the credit contracts each consumer suffered financial hardship. The credit contracts provided for, among other things, finance to purchase second-hand vehicles. Each credit contract comprised an amount of $8,000 advanced to purchase a vehicle, as well as additional amounts of approximately $3,000 for application fees, broker fees, and insurance warranties (add-on fees). Each credit contract was provided by Money3 to the consumer through its broker channel. The credit contracts and the consumers are identified below:

5    There were three versions of the Product Guides at different times during the relevant period:

(1)    The July 2018 Matrix, relevant to Consumer 1 (CB 6245);

(2)    The August 2019 Product Guide, relevant to Consumer 2, Consumer 3 and Consumer 6 (CB 6377); and

(3)    The October 2020 Product Guide, relevant to Consumers 4 and 5 (CB 6624).

6    During the relevant period, Money3 held, and continues to hold an Australian Credit Licence which authorises it to engage in credit activities, including as a credit provider under the credit contracts.

7    In respect of each credit contract, ASIC alleges multiple contraventions of cascading legislative requirements for the six consumers. In all, 15 contraventions are alleged, most of which are pleaded conjunctively and disjunctively for each consumer. Multiple contraventions are alleged of ss 128, 130, 131 and 133 for the five credit contracts plus four contraventions of s 47 which require determination. That does not exhaust the permutations that ASIC advances to establish each contravention. For each, ASIC relies on a plethora of submissions, where acceptance of one establishes a contravention. These reasons resolve 83 separate contentions relating to the credit contracts plus the general conduct contraventions, where ASIC in closing submissions identifies 17 contraventions founded on 81 separate findings of fact. With some grouping, these reasons reduce the general conduct contraventions to 12. Working through the ASIC case to prepare these reasons has consumed an inordinate and disproportionate amount of the judicial and administrative resources of the Court. When a regulator chooses to proceed in this way questions arise as to whether a proceeding is conducted consistently with the overarching purpose at ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

8    Stepping back and through an objective lens, the question that s 37M(1) of the FCA Act requires a party to consider, before commencement of a proceeding, is how it may be framed, arranged and prosecuted as quickly, inexpensively and as efficiently as possible. In a civil penalty proceeding, the issue is not how many contraventions (often a related course of conduct) can be established, but how many are material to achieve the purpose of specific and general deterrence? Another question is whether it is efficient to press multiple claims of the same type of conduct where selection of the best (or worst example) run as a separate case will achieve the regulator’s objective? Relatedly, will proceeding by reference to an example case with a limited number of the more egregious contraventions, if established, likely result in an agreed penalty proceeding for the balance of the claims?

9    In any event it is now too late to visit those matters in this proceeding. The Court must deal with the case as framed and prosecuted. In broad summary, ASIC alleges that Money3 contravened:

(1)    Section 128(c) because the credit contracts were entered into without making the unsuitability assessment required by s 129;

(2)    Section 128(d) because the credit contracts were entered into without having:

(i)    made reasonable inquiries about the consumer’s requirements and objectives as required by s 130(1)(a);

(ii)    made reasonable inquiries about the consumer’s financial situation as required by s 130(1)(b); and/or

(iii)    taken reasonable steps to verify the consumer’s financial situation as required by s 130(1)(c);

(3)    Section 130(1) because the inquiries and verification required by s 128(d) (before making the assessment under s 128(c)) were not undertaken;

(4)    Section 131(1) because it failed to assess the credit contracts as unsuitable for each consumer on the basis that:

(i)    pursuant to s 131(2)(a) it was likely that the consumer would be unable to comply with their financial obligations under the credit contract, or could only comply with substantial hardship; and/or

(ii)    pursuant to s 131(2)(b) the credit contracts would not meet the consumer’s requirements or objectives if it was entered into;

(5)    Section 133(1) because the credit contracts were entered into with each consumer in circumstances where the contract was unsuitable on the basis that:

(i)    pursuant to s 133(2)(a) it was likely that the consumer would be unable to comply with the financial obligations under the credit contract, or could only comply with substantial hardship; and/or

(ii)    pursuant to s 133(2)(b), the credit contract would not meet the consumer’s requirements or objectives if it was entered into;

(6)    Section 47(1)(g) and (4) by failing to ensure that its representatives were adequately trained and competent to engage in the credit activities authorised by the Licence during the relevant period; and

(7)    Section 47(1)(e) and (4) by failing to take reasonable steps to ensure that its representatives complied with the credit legislation (relevantly, ss 128, 130(1), 131(1) and 133(1)).

10    It is ASIC’s case that, at the time of applying for a loan and entering the credit contracts, each consumer was in precarious financial circumstances. Each consumer was unemployed and relied on Government payments or child support for income. Four of the consumers were Indigenous single mothers and several lived in community housing. In each case, the consumers’ debits exceeded or were near-equal to their credits in the 90-day period prior to the loan application. Each consumer sought finance to purchase a second-hand car at a cost of $8,000, and the add-on fees of approximately $3,000 were not part of the consumers’ requirements or objectives in relation to the credit contract. In that regard, ASIC submits that Money3 did not make reasonable inquiries about each consumers’ objectives and requirements in relation to the credit contract or make reasonable inquiries or take reasonable steps to verify the consumers’ financial situation.

11    Another key aspect of ASIC’s case is Money3’s reliance on the expense amounts contained in the Product Guides. The lending criteria that the Money3 credit analysts used in assessing applications for the Micro Motor loans were set out in Product Guides that applied at the time of each finance application. Each includes a ‘minimum living expense’ amount. How the minimum living expense amounts contained in the Product Guides were arrived at by Money3 is in issue.

12    The general conduct, s 47 contraventions, focus on the policies, procedures and training of Money3, which according to an expert report of Mr Michael Hartman dated 19 December 2023 (Expert Report) fell short of the minimum standards of reasonable and prudent lenders at the time. There is a large dispute about the value of the opinions of Mr Hartman which turns on whether he exposed his reasoning process.

13    For the reasons that follow I have concluded that in limited respects, Money3 contravened the responsible lending provisions of the Act, in that its credit analysts did not make reasonable inquiries about the requirements and objectives or the financial situation of the consumers and relatedly did not take reasonable steps to verify the financial situation of each consumer. These are contraventions of ss 128(d) and 130(1) and each occurred during the assessment period. ASIC has failed to establish each other contravention.

14    The appropriate order at this time is to adjourn the proceeding for further hearing and conduct a case management hearing with a laser-like focus on the overarching purpose.

2.    LEGISLATIVE FRAMEWORK

2.1 The provisions in issue

15    As I have noted, ASIC pleads multiple contraventions of the Act. In the legislative scheme, the starting point is Chapter 1, Part 2-2, Division 5 which sets out the general conduct obligations of licensees. Section 47 relevantly provides:

(1)    A licensee must:

(a)  do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly; and

(b)  have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives; and

(c)  comply with the conditions on the licence; and

(d)  comply with the credit legislation; and

(e)  take reasonable steps to ensure that its representatives comply with the credit legislation; and

(ea)  comply with the Reference Checking and Information Sharing Protocol; and

(f)  maintain the competence to engage in the credit activities authorised by the licence; and

(g)  ensure that its representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence; and

(h)  have an internal dispute resolution procedure that:

(i)  complies with standards and requirements made or approved by ASIC in accordance with the regulations; and

(ii)  covers disputes in relation to the credit activities engaged in by the licensee or its representatives; and

(ha)  give to ASIC the same information it would be required to give under subparagraph 912A(1)(g)(ii) of the Corporations Act 2001 if it were a financial services licensee (within the meaning of Chapter 7 of that Act); and

(i)  be a member of the AFCA scheme; and

(j)  have compensation arrangements in accordance with section 48; and

(k)  have adequate arrangements and systems to ensure compliance with its obligations under this section, and a written plan that documents those arrangements and systems; and

(l)  unless the licensee is a body regulated by APRA:

(i)  have available adequate resources (including financial, technological and human resources) to engage in the credit activities authorised by the licence and to carry out supervisory arrangements; and

(ii)  have adequate risk management systems; and

(m)  comply with any other obligations that are prescribed by the regulations.

Assessment of whether compliance is adequate

(2)  For the purposes of paragraphs (1)(b), (g), (k) and (l), in considering whether a matter is adequate, the nature, scale and complexity of the credit activities engaged in by the licensee must be taken into account.

16    Chapter 3 is concerned with responsible lending conduct. It commences with the guide at Part 3-1, s 111 which in part provides:

This Part has rules that apply to licensees that provide credit assistance in relation to credit contracts. These rules are aimed at better informing consumers and preventing them from being in unsuitable credit contracts. However, these rules do not apply to a licensee that will be the credit provider under the credit contract.

17    Part 3-2 sets out general rules for licensees that are credit providers under credit contracts. The guide at s 125 provides:

This Part has rules that apply to licensees that are credit providers. These rules are aimed at better informing consumers and preventing them from being in unsuitable credit contracts.

Division 2 requires a licensee to give its credit guide to a consumer. The credit guide has information about the licensee and some of the licensee’s obligations under this Act.

Division 3 requires a licensee, before doing particular things (such as entering a credit contract), to make an assessment as to whether the contract will be unsuitable. To do this, the licensee must make inquiries and verifications about the consumer’s requirements, objectives and financial situation. The licensee must give the consumer a copy of the assessment if requested.

Division 4 prohibits a licensee from entering or increasing the credit limit of a credit contract that is unsuitable for a consumer.

18    In this Part, the relevant provisions commence with s 128 which imposes an obligation to assess unsuitability and where the assessment must comply with s 129:

128 Obligation to assess unsuitability

A licensee must not:

(a)  enter a credit contract with a consumer who will be the debtor under the contract; or

(aa)  make an unconditional representation to a consumer that the licensee considers that the consumer is eligible to enter a credit contract with the licensee; or

(b)  increase the credit limit of a credit contract with a consumer who is the debtor under the contract; or

(ba)  make an unconditional representation to a consumer that the licensee considers that the credit limit of credit contract between the consumer and the licensee will be able to be increased;

on a day (the credit day) unless the licensee has, within 90 days (or other period prescribed by the regulations) before the credit day:

(c)  made an assessment that:

(i)  is in accordance with section 129; and

(ii)  covers the period in which the credit day occurs; and

 (d) made the inquiries and verification in accordance with section 130.

Civil penalty: 5,000 penalty units.

129 Assessment of unsuitability of the credit contract

 For the purposes of paragraph 128(c), the licensee must make an assessment that:

(a)  specifies the period the assessment covers; and

(b)  assesses whether the credit contract will be unsuitable for the consumer if the contract is entered or the credit limit is increased in that period.

Note:     The licensee is not required to make the assessment under this section if the contract is not entered or the credit limit is not increased.

19    Section 130 sets mandatory requirements for the inquiry and verification obligation at s 128(d) and relevantly provides:

130 Reasonable inquiries etc. about the consumer

Requirement to make inquiries and take steps to verify

(1)  For the purposes of paragraph 128(d), the licensee must, before making the assessment:

(a) make reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract; and

(b) make reasonable inquiries about the consumer’s financial situation; and

(c) take reasonable steps to verify the consumer’s financial situation; and

(d) make any inquiries prescribed by the regulations about any matter prescribed by the regulations; and

(e) take any steps prescribed by the regulations to verify any matter prescribed by the regulations.

Civil penalty:     5,000 penalty units.

…

(2)    The regulations may prescribe particular inquiries or steps that must be made or taken, or do not need to be made or taken, for the purposes of paragraph (1)(a), (b) or (c).

20    No regulation has been made for the purposes of s 130(2).

21    A licensee must assess a credit contract as unsuitable where s 131 applies. It relevantly provides:

131 When credit contract must be assessed as unsuitable

Requirement to assess the contract as unsuitable

(1)  The licensee must assess that the credit contract will be unsuitable for the consumer if the contract will be unsuitable for the consumer under subsection (2).

Civil penalty: 5,000 penalty units.

Note: Even if the contract will not be unsuitable for the consumer under subsection (2), the licensee may still assess that the contract will be unsuitable for other reasons.

Particular circumstances when the contract will be unsuitable

(2)  The contract will be unsuitable for the consumer if, at the time of the assessment, it is likely that:

(a)  the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship, if the contract is entered or the credit limit is increased in the period covered by the assessment; or

(b)  the contract will not meet the consumer’s requirements or objectives if the contract is entered or the credit limit is increased in the period covered by the assessment; or

(c)  if the regulations prescribe circumstances in which a credit contract is unsuitable—those circumstances will apply to the contract if the contract is entered or the credit limit is increased in the period covered by the assessment.

…

Information to be used to determine if contract will be unsuitable

(4)  For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:

(a)  the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 130(1)(d) or (e);

(b)  at the time of the assessment:

(i)  the licensee had reason to believe that the information was true; or

(ii)  the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 130.

22    Division 4 prohibits a licensee from entering into a credit contract if the contract is unsuitable for the consumer. Relevantly, s 133 provides:

133 Prohibition on entering, or increasing the credit limit of, unsuitable credit contracts

Prohibition on entering etc. unsuitable contracts

(1)  A licensee must not:

(a)  enter a credit contract with a consumer who will be the debtor under the contract; or

(b)  increase the credit limit of a credit contract with a consumer who is the debtor under the contract;

if the contract is unsuitable for the consumer under subsection (2).

Civil penalty: 5,000 penalty units.

When the contract is unsuitable

(2)  The contract is unsuitable for the consumer if, at the time it is entered or the credit limit is increased:

(a)  it is likely that the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship; or

(b)  the contract does not meet the consumer’s requirements or objectives; or

(c)  if the regulations prescribe circumstances in which a credit contract is unsuitable—those circumstances apply to the contract.

…

Information to be used to determine if contract will be unsuitable

(4)  For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:

(a)  the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 130(1)(d) or (e);

(b)  at the time of the contract is entered or the credit limit is increased, the information:

(i)  the licensee had reason to believe that the information was true; or

(ii)  the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 130.

Credit contract not unsuitable under regulations

(5) The regulations may prescribe particular situations in which a credit contract is taken not to be unsuitable for a consumer, despite subsection (2).

2.2 General principles

23    There is a large divide between ASIC and Money3 as to the meaning of the unsuitability assessment provisions and how they apply to the credit contracts and consumers in issue. It is of assistance to commence by understanding their structure and interrelationship: a task greatly assisted by the decision of the Full Court in Australian Securities and Investments Commission v Westpac Banking Corporation [2020] FCAFC 111; (2020) 277 FCR 343, Middleton, Gleeson and Lee JJ (Westpac). In what follows, I focus only on the requirements applicable to entry into a contract; I do not address the separate credit contract provisions.

24    The central obligation of a licensee is to make an assessment: ss 128(c) and 129. That is a decision which is an evaluative judgment involving a prediction as to the future in two respects. One, the likely ability of a consumer to comply with the consumer’s financial obligations under the contract (or whether the consumer could only comply with substantial hardship): s 131(2)(a). There is a rebuttable presumption of substantial hardship if the consumer could only comply with the consumer’s financial obligations by selling the consumer’s principal place of residence: s 131(3).

25    The other, the likelihood that the contract will meet the consumer’s requirements or objectives if the contract is entered into: s 131(2)(b).

26    Each of those requirements is conditioned by when the assessment is undertaken, which is a defined point in time: at the time of the assessment: s 131(2).

27    The assessment is a binary decision. Will the credit contract be unsuitable for the consumer if the contract is entered?: s 129(b). A mandated affirmative answer is required by s 131(1) where the conditions of s 131(2) apply.

28    The assessment is the outcome of a process which begins with the making of the inquiries and undertaking of the verifications in accordance with s 130: s 128(d). Section 130 specifies three steps: (1) making reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract; (2) making reasonable inquiries about the consumer’s financial situation; and (3) taking reasonable steps to verify the consumer’s financial situation. Although Parliament provided for a prescription mechanism by regulation of what inquiries must be made and verification steps taken (s 130(1)(d)-(e)), none have been promulgated to that effect. As such, these are matters for the licensee to determine: Westpac at [141], Gleeson J; [167], Lee J.

29    What is reasonable is a question of fact. The familiar analysis proceeds prospectively by what was known, or ought to have been reasonably known, at the time. It is an error to determine the content of the reasonableness obligation by analysing what has happened.

30    The reasonable inquiries and taking steps obligations open for consideration a range of matters, though constrained by the purpose of s 130, which as Gleeson J explained in Westpac at [117] by reference to the decision of the primary judge, is:

[T]o ensure that credit providers put themselves in an informed state about the financial position of the consumer before making an assessment of the suitability or otherwise of the loan.

31    Further as Middleton J stated in Westpac at [11]:

Chapter 3 as a whole has a specific purpose to create and enforce a new norm of conduct for credit providers (and brokers) when entering into credit contracts. This context explains the very specific and detailed requirements of the provisions of Pt 3-2, and the very significant penalties to which those contravening those requirements may be subjected. Each of the requirements is a critical part of a sequence leading up to the credit provider making an assessment of unsuitability, by reference to the consumer’s financial situation and requirements and objectives.

32    An obligation to act reasonably as a normative standard of conduct is well understood in the law of negligence, operating as the first prerequisite in a claim for damage caused by careless conduct. Unless a duty to take reasonable care is owed to a plaintiff, there is no cause of action. If there is a duty, the next step requires identification of its content: put simply, what was the defendant required to do in order to satisfy the standard? In simple cases, such as motor vehicle running down claims, the content of the duty that the defendant drove negligently is usually particularised by identification of why the driving fell short of the reasonable care standard. Familiar examples include driving at excessive speed, failing to give way, being under the influence of alcohol or failing to keep a proper lookout.

33    The duty in negligence to exercise reasonable care is not one that requires elimination of all foreseeable risks or to prevent harm from eventuating. The inquiry focuses prospectively on what measures could and should have been taken to address foreseeable risk. The answer is what a reasonable person or corporation in the position of the defendant would have done in response to the risk. Very often the answer to that question is straightforward; as examples, reference is commonly made to industry standards, statutory provisions and accepted practices and procedures in a field of operation.

34    Where the answer is not so clear, identification of the content of the duty may be assisted by expert evidence. The guiding principle is the classic formulation of Mason J in Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40 at 47-48, often referred to as the Shirt calculus:

In deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant's position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk. The perception of the reasonable man's response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have. It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of response to be ascribed to the reasonable man placed in the defendant's position.

35    Here, the obligation at s 130 invites a fact specific interrogation of what, if any, inquiries were made and what steps were taken compared with what a reasonable licensee would have done in the same circumstances to be reasonably informed about the individual consumer’s requirements and objectives in relation to a prospective credit contract and the consumer’s financial situation in conjunction with taking reasonable steps to verify the consumer’s financial situation.

36    There is an additional element that must be read with the obligation to make reasonable inquiries to obtain the information to be used in the unsuitability assessment at s 131(4). The licensee must subjectively have reason to believe that the information was true or objectively would have had reason to believe that the information was true if the licensee had made the inquiries or verification under s 130.

37    Lurking behind those apparently simple questions is the vice of prescriptively framing the content of the duty, which Hayne J identified in CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390 at [68]:

Because the duty relied on in this Court was framed so specifically, it merged the separate inquiries about duty of care and breach of duty. The merger that resulted carried with it the vice of retrospective over-specificity of breach identified in Romeo v Conservation Commission (NT) (1998) 192 CLR 431 at [163]-[164] and in the diving cases of Vairy v Wyong Shire Council (2005) 223 CLR 422 at [29], [54], [60]-[61], [122]-[129], Mulligan v Coffs Harbour City Council (2005) 223 CLR 486 at [50], and Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330 at [65]. The duty alleged was framed by reference to the particular breach that was alleged and thus by reference to the course of the events that had happened. Because the breach assigned was not framed prospectively the duty, too, was framed retrospectively, by too specific reference to what had happened. These are reasons enough to reject the formulation of duty advanced in argument in this Court.

38    This provides a useful analogy, which I consider in detail later in these reasons, in analysing how ASIC particularises the content of the duty, supported by the extensive expert evidence it relies on. Returning to the structural aspects of the provisions in issue, the controlling mechanism for the content of the duty is the unsuitability conclusion, where s 131 is determinative of the outcome if either subparagraph (2)(a) or (b) applies, and the prohibition that a licensee must not enter into a credit contract with a consumer who will be a debtor if the contract is unsuitable for the consumer: s 133. Of course, the difficulty with these provisions is that they turn on a (necessarily evaluative) assessment as to the future: Westpac at [36], Middleton J. Predicting the future is notoriously difficult and often inaccurate. These provisions do not require the licensee to accurately predict the ultimate outcome. That a consumer is subsequently unable to comply with his or her financial obligations under the contract or is only able to do so with substantial hardship is beside the point. So much is clear from s 131(2) which speaks to likelihood at the time of the assessment.

39    There is however a notable difference in the drafting. Section 131(2) requires an unsuitability conclusion (the result of the assessment required by s 131(1)) “if…it is likely that”, (a) or (b) apply: in short, an inability to comply with future contractual obligations or the contract will not meet the consumer’s requirements or objectives. In contrast, the prohibition at s 133 that a licensee must not enter a credit contract with a consumer who will be the debtor if unsuitable under subsection (2) confines likelihood to subparagraph (a): the consumer’s inability to comply with the contractual obligations. Subparagraph (b) is expressed definitively: the contract does not meet the consumer’s requirements or objectives. In Australian Securities and Investments Commission v Channic Pty Ltd (No 4) [2016] FCA 1174, Greenwood J identified the reason for textual difference between “s 131(1) and s 131(2) on the one hand and s 133(1) and s 133(2) on the other hand” as “the temporal element of the time of the assessment in the first case and the time of entry into the contract in the second case” (at [1817]). The prohibition does not apply if the licensee has undertaken the unsuitability assessment required by s 128(c), conformably with s 129, and if the outcome is that the credit contract is not unsuitable having passed by the mandatory assessment outcome required by s 131.

40    I next address the particular construction issues identified by the parties.

2.3 Construction issues

2.3.1 Section 129

41    ASIC contends that guidance on what makes an assessment “compliant” for the purposes of s 129 is found in the consolidated Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth) at [3.133]-[3.134]:

3.133 In order to make a compliant assessment for the purposes of section 128, the credit provider must specify the period that the assessment covers (which is to be a period which includes the critical day)…

3.134 A compliant assessment must also assess whether the credit contract will be unsuitable for the consumer if the contract is entered or the credit limit is increased in that specified period…

42    In reliance, ASIC submits that Money3 must specify “in the documents it holds out as constituting its ‘assessment’ for the purposes of s 129, the period covered by the assessment for each of the consumers, as well as assessing whether the credit contract would be unsuitable in that specified period.” ASIC accepts, as it must conformably with Westpac, that s 129 is not prescriptive as to how the assessment must be undertaken or requires that all information acquired by the licensee must be used in the assessment.

43    Money3 submits that ASIC’s first proposition is not supported by the statutory language of s 129, nor the extract of the Explanatory Memorandum relied on. Further, the legislation does not prescribe how an assessment is to be carried out or how it is to be recorded: Westpac at [167] and [171], Lee J.

44    I am unable to accept ASIC’s submission that the assessment must be documented in the broad manner contended. Middleton J explained why in Westpac at [67]:

Section 129 gives content of that assessment by referring back to s 128(c). Whilst the reference in s 129(a) to specifying the period the assessment covered may indicate some sort of written specification, I do not consider in light of its text or context, it has this meaning. Section 129 relates to “making” an assessment, and is an evaluative exercise involving the criteria in s 129(a) (period of time) and s 129(b) (unsuitability). Then s 132 is another separate and discrete provision which clearly refers to a document being provided to the consumer. It creates a separate civil penalty provision, and refers to the written assessment in fact created by the credit provider after carrying out the assessment required under s 128(c).

45    I agree, and would add that the requirement to give the consumer a written copy of the assessment at s 132(1) only arises if the consumer requests it.

46    Although his Honour dissented as to one aspect of the appeal, I do not read the reasons of Gleeson J or Lee J as expressing a contrary view to the effect that the licensee is obligated to specify in the documents it holds out as constituting the assessment, the period and the unsuitability conclusion.

47    Indeed, as explained by Lee J at [167] there are only two requirements at s 129:

There is no textual requirement specifying how the assessment is to be undertaken, and indeed ASIC accepted that “it remains open to a licensee to choose how it conducts the assessment required”. Section 129 spells out only two requirements for an assessment: first, specifying the period covered; and secondly, assessing whether the contract (or an increase in credit limit) will be unsuitable for the consumer.

48    See also his Honour at [171]: the manner of assessment is “left up to a fully informed licensee”.

49    That addresses further arguments of ASIC. It follows that s 129 does not prescribe how the period covered by the assessment must be specified. Nor does it preclude a licensee from engaging in oral communications with a consumer to obtain relevant information as a method of complying with the inquiry and verification obligations.

2.3.2 The process of assessment: ss 128(c), (d), 129 and 130(1)(a)-(c)

50    The submissions of ASIC and Money3 are consistent to a point.

51    ASIC does not submit that the requirements to make reasonable inquiries and to take reasonable steps to verify at s 130 must be completed before the assessment process begins, nor does it submit that the assessment cannot be a process over an extended period of time. Money3 agrees.

52    There is no disagreement that the process must be completed within 90 days of the date on which the licensee enters into the credit contract.

53    Unsurprisingly, there is no disagreement that the reasonable inquiry and verification steps must be completed before the unsuitability assessment is completed as that is the explicit requirement of s 130(1).

54    Something should be said about s 128(c) and s 129. The licensee must, within 90 days before the credit day, make an assessment which covers the period in which the credit day occurs and specifies the period the assessment covers. The drafting could be clearer, but in my opinion the meaning is revealed by commencing with the basal requirement that the assessment is forward looking: the likelihood of unsuitability is assessed as required by s 131(2). The assessment must also specify the period of currency: s 129(a). Although there is no maximum currency period, a credit contract must not be entered into unless there has been an assessment within 90 days before the credit day and it must cover the period in which the credit day occurs.

55    For the six consumers in issue, Money3 specified in each credit contract the date of its preparation (Disclosure Date) and the Settlement Date (when the funds were advanced). If the Settlement Date did not fall within 14 days of the Disclosure Date, Money3 could withdraw from the transaction (an example of the clause in issue is set out at [83]). By this method, Money3 complied with the obligation to make an assessment (putting aside the ASIC contention that it was insufficient) within 90 days of the credit day, that included the credit day and specified the period covered by it – 14 days from the Disclosure Date.

56    I turn to three issues that divide the parties.

2.3.3 Interrelationship of s 130 with s 128(c)

57    Does s 130 provide content to the obligation at s 128(c)? ASIC submits that “antecedent failures” by Money3 to make reasonable inquiries and to take reasonable steps to verify the financial situation of each consumer resulted in Money3 “failing to use (reasonably) accurate/reliable amounts for the consumers expenses in undertaking [the] purported unsuitability assessments”.

58    Money3 interprets this submission as a contention that an unsuitability assessment “that does not reflect, or follow, compliance with the obligations imposed by s 130(1) will not constitute an assessment (at all) for the purpose of s 129, and therefore s 128(c)”. Money3 submits it is only s 129(b) that provides the content to s 128(c), relying on Middleton J in Westpac at [51]. Further, Money3 contends that “whether and how the results of any inquiries and verifications are used to make an assessment are matters for the licensee to decide, provided the licensee assesses whether the contract will be relevantly unsuitable”. In Money3’s submission, ss 128(c) and 129 are not themselves concerned with the inquiries about, or steps taken to verify, a consumer’s financial situation, which is further supported “by the fact that an obligation to have ‘made the inquiries and verification in accordance with s 130’ is specifically and separately imposed by s 128(d)”.

59    I accept the construction submission of Money3. The making of an assessment is distinct from the inquiry and verification process. The prohibition at s 128 does not apply if the licensee, within 90 days before the credit date, has completed two tasks: the making of the assessment in accordance with s 129 and making the inquiries and undertaking the verifications in accordance with s 130. Textually, each requirement is a separate obligation that is only capable of satisfaction “in accordance with” the content requirements of respectively s 129 (the assessment) and s 130 (inquiries and verification). Although in Westpac Middleton J dissented in part, the majority did not express a different view as to the content requirement of s 128(c) that his Honour addressed at [50]-[51], where inter alia he said:

The nature of the assessment required by s 128(c) is as set out in s 129, and the content of the inquiries and verification required by s 128(d) is as set out in s 130. An assessment that does not meet the description in s 129 is not the assessment required to be performed under s 128(c) prior to entering into the relevant credit contract.

Section 129 provides that, for the purposes of s 128(c), the credit provider “must make an assessment that”, relevantly, “assesses whether the credit contract will be unsuitable for the consumer if the contract is entered”. Section 129(b) provides the content to s 128(c). Further, as the primary judge accepted, there must be an assessment which assesses whether the credit contract will be unsuitable for the consumer if the contract is entered into by the consumer and credit provider.

60    Further, once it is understood that the statutory scheme does not prescribe how the licensee is to apply the results of the inquiry and verification in making the assessment of unsuitability (Westpac at [141], Gleeson J; [171], Lee J), it does not follow that any failure (an antecedent failure on the case of ASIC) to comply with the obligation at s 130 has the consequence of failure to make the s 129 assessment.

2.3.4 Is s 130 prescriptive?

61    The second divisive issue is whether the assessments undertaken by Money3 for each consumer complied with s 130(1). That is a factual question, though one which on ASIC’s case is premised on a prescriptive construction of the statutory obligations.

62    ASIC places considerable emphasis on passages in the Explanatory Memorandum as providing “guidance” about the inquiries and verification steps required by s 130 (emphasis in ASIC written closing submissions):

3.138 Consideration of what is reasonable will depend on the circumstances. Generally, the minimum requirement for satisfying reasonable inquiries about the consumer’s requirements and objectives will be to understand the purpose for which the credit is sought and determine if the type, length, rate, terms, special conditions, charges and other aspects of the proposed contract meet this purpose or put forward credit contracts that do match the consumer’s purpose.

…

3.140 Reasonable inquiries about the consumer’s financial situation could ordinarily include inquiries about the amount and source of the consumer’s income, determining the extent of fixed expenses (such as rent or contracted expenses such as insurance, other credit contracts and associated information) and other variable expenses of the consumer (and drivers of variable expenses such as the number of dependants and the number of vehicles to run, particular or unusual circumstances). The extent of inquiries will however depend on the circumstances.

3.141 The possible range of factors that may need to be established in relation to a consumer’s capacity to repay credit could include:

•    the consumer’s current income and expenditure;

•    the maximum amount the consumer is likely to have to pay under the credit contract for the credit;

•    the extent to which any existing credit contracts are to be repaid, in full or in part, from the credit advanced;

•    the consumer’s credit history, including any existing or previous defaults by the consumer in making payments under a credit contract; and

•    the consumer’s future prospects, including any significant change in the consumer’s financial circumstances that is reasonably foreseeable (such as a change in repayments for an existing home loan, due to the ending of a honeymoon interest rate period).

…

3.146    In undertaking the assessment, credit providers are required to take into account information about the client’s financial situation and other matters required by the regulations that they either already possess, or which would be known to them if they made reasonable inquiries and took reasonable steps to verify it. This provision means that credit providers must ask the client about their financial situation and the other matters prescribed in the regulations, and must make such efforts to verify the information provided by the client as would normally be undertaken by a Reasonable and Prudent lender in those circumstances. Conducting a credit reference check is, for instance, likely to be an action that would be reasonable to undertake in most transactions. Credit providers are not expected to take action going beyond prudent business practice in verifying the information they receive.

63    From those statements, ASIC’s submission is:

Accordingly, Money3 must, as part of its obligations under s 130 understand the purpose for which the consumers seek the credit and determine whether the proposed credit contract meets that purpose. Money3 must also make reasonable inquiries about consumers’ variable expenses.

The emphasised passage from [3.146] of the consolidated Explanatory Memorandum also fixes the meaning of the use of the word ‘reasonable’ in s 130. Namely, the practices of ‘a reasonable and prudent lender in those circumstances’ (emphasis added)…

The ‘requirements and objectives’ inquiries forming part of s 130 of the Act extend to making reasonable inquiries into the consumer’s requirement to enter a credit contract which includes financing additional fees. The inquiry into ‘requirements and objectives’ also extends to raising with the consumer the interest rate that would or would be likely to apply to a loan they might take up: cf, in the context of the analogous provision in s 117(1) of the Act, Australian Securities and Investments Commission v Channic Pty Ltd (No 4) [2016] FCA 1174 at [1745], [1750]-[1751], and in the context of s 130 of the Act, at [1806]-[1807] (Greenwood J).

64    What is notable about the submission is how the guidance of the Explanatory Memorandum is transformed into mandatory obligations.

65    I am unable to accept the breadth of the submission. First, it departs from the statutory text, unsupported by context and purpose. There is no requirement to understand the purpose for which a consumer seeks credit. Rather, the obligation is to gather the information by making the s 130 inquiries and verification for the purpose of carrying out the unsuitability assessment: Westpac at [117], Gleeson J. In doing so, the purpose is to obtain information about the consumer’s requirements and objectives in relation to the credit contract and the consumer’s financial situation. There may well be an overlap with the consumer’s purpose in seeking credit, but that is not the statutory text.

66    Second, the Explanatory Memorandum, whilst recognising that what is reasonable is circumstance dependent, then departs therefrom by a prescriptive list of “minimum requirements” for the making of reasonable inquiries. Section 130 does not so provide, though Parliament made provision for it to have that effect by the making of prescriptive regulations in exercise of the power at subsection (1)(d) when read with subsection (2).

67    Third, ASIC’s reliance on the Explanatory Memorandum is inconsistent with Westpac in that it is up to the licensee to determine the scope of the inquiries that are made to satisfy s 130(1)(a) and (b): [141], Gleeson J; [167], Lee J.

68    Fourth, the submission in part mischaracterises the Explanatory Memorandum. At [3.140], the observation is made that reasonable inquiries about the consumer’s financial situation could ordinarily include inquiries about a range of matters including other variable expenses, concluding that the extent of inquiries depends on the circumstances. This does not support ASIC’s submission that Money3 must make reasonable inquiries about variable expenses. That submission puts aside the important element that what is reasonable is inevitably circumstance dependent.

69    Fifth, and relatedly, the variable expenses submission is inconsistent with the construction that ASIC accepted in Westpac, where at [113] Gleeson J noted:

The primary judge correctly noted (at [5] of his Honour’s reasons) that Div 3 of the Act does not contain an express statement that a credit provider must use the consumer’s declared living expenses in making the unsuitability assessment. Nor did ASIC suggest that, as a matter of construction, s 130 of the Act requires a licensee to obtain the information comprised in “declared living expenses” from a consumer in order to satisfy the requirement of s 130(1)(b) of making reasonable inquiries about the consumer’s financial information.

70    ASIC has not put a submission to me as to why it should not be held to that or why the circumstances are such that a contrary construction of the provision should be adopted in this proceeding.

71    Sixth, the Explanatory Memorandum is no substitute for the statutory text: “Notoriously explanatory memoranda sometimes get the law wrong”: Pearce DC, Statutory Interpretation in Australia (10th ed, LexisNexis, 2024) at [3.27]. Here, despite making provision for regulatory specification of minimum inquiries or verification steps of the type contemplated, none have been promulgated.

72    Seventh, whilst Greenwood J in Channic at [1747] considered on the facts of that case that an aspect of the credit offered necessarily included the payment of interest and: “A critical question would be the amount of interest payable on the borrowed funds and whether each consumer had “a requirement” or “an objective” for a certain rate of interest…”, it is not part of ASIC’s pleaded case that Money3 charged excessive interest or that the inquiries it was obliged to make included the consumer’s requirements and objectives as to the rate of interest to be charged.

73    In my view, Money3 is correct to submit that s 130 does not operate to require that reasonable inquiries must be exhaustive or that, because further inquiries could be made, any failure to do so is a breach of the obligation. That must follow from my earlier general analysis that reasonableness is not a counsel of perfection, does not require the elimination of all risks and does not require that all possible steps must be taken. Nor does s 130 require that all reasonable inquiries and steps must be taken. Justice Downes in Australian Securities and Investments Commission v Firstmac Ltd [2024] FCA 737, considered the obligation at s 994E of the Corporations Act 2001 (Cth) which is concerned with the distribution of financial products and the obligation to take reasonable steps to ensure consistency with target market determinations. Of course, the purpose and objectives of the Corporations Act provisions differs markedly from the promotion of responsible lending practices for consumers. Nonetheless, her Honour’s summary of reasonable steps obligations drawn from various provisions of the Corporations Act is useful by analogy. The summary at [50]-[51] is:

While there are no authorities considering s 994E(3), there are several other provisions in the Corporations Act which contain a “reasonable steps” obligation, some of which have been the subject of judicial consideration, such as ss 961L and 963F. Consistently with the statutory requirement to consider all relevant matters, these authorities indicate that the inquiry is not a narrow one. Some guidance is therefore provided by statements made in these authorities, which I accept would also apply to the obligation in s 994E(5). These are as follows:

(1) what is encompassed by taking all “reasonable steps” will differ depending on the entity, the complexity of the entity’s business and the procedures within the entity: see Australian Securities and Investments Commission v Healey (2011) 196 FCR 291; [2011] FCA 717 at [162] (Middleton J);

(2) it is necessary to undertake a holistic analysis, considering the full framework of the entity’s contracts, policies and procedures: see Australian Securities and Investments Commission v Diversa Trustees Limited [2023] FCA 1267 at [375] (Button J);

(3) the reasonable steps obligation does not require a person to “find and to take the optimal steps”: see Australian Securities and Investments Commission v RI Advice Group Pty Ltd (No 2) (2021) 156 ACSR 371; [2021] FCA 877 at [392] (Moshinsky J);

(4) the provision is not expressed as an obligation to take all reasonable steps, and nor does it require identification and performance of either the universe of possible reasonable steps, or the ‘one true path’ that must be followed: see Australian Securities and Investments Commission v R M Capital Pty Ltd [2024] FCA 151 at [73] (Jackson J);

(5) positing steps that could have been taken, but were not taken, can be helpful. It is an obvious way of testing the reasonableness of what was (and was not) done. But the focus of the inquiry must always be on whether the steps that were taken in their totality were reasonable: see R M Capital at [80].

Whether the requirement to take ‘reasonable steps’ has been met is to be determined objectively by reference to the standard of behaviour expected of a reasonable person in the regulated person’s position that is (or was) proposing to engage in the relevant retail product distribution conduct regarding the same product, and is (or was) subject to the same legal obligations.

74    Her Honour’s last observation is plainly applicable to the consumers in issue and about which ASIC and Money3 did not disagree. The inquiry in this case must focus on what a reasonable licensee in the position of, and informed by the known characteristics of, Money3 at the time would do in the circumstances: the Shirt calculus.

75    Evidence of acceptable industry practice in addressing that question is relevant and admissible, but not determinative. It is for the Court to determine the standard: Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479 at 487. As later explained by Gleeson CJ in Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at [7]:

[As] Rogers v Whitaker, makes clear, the relevance of professional practice and opinion was not denied; what was denied was its conclusiveness. In many cases, professional practice and opinion will be the primary, and in some cases it may be the only, basis upon which a court may reasonably act. But, in an action brought by a patient, the responsibility for deciding the content of the doctor's duty of care rests with the court, not with his or her professional colleagues.

76    In this proceeding ASIC repeatedly emphasises the practices of reasonable and prudent lenders as the touchstone for determining the standard of inquiry and verification required by s 130. Evidence of those practices on ASIC’s case is set out in the Expert Report of Mr Hartman. Despite the objections of Money3, I ruled the report to be admissible as meeting the thresholds at s 79 of the Evidence Act 1995 (Cth): Australian Securities and Investments Commission v Money3 Loans Pty Ltd (Expert Evidence Admissibility) [2025] FCA 75. However, as I noted at [69] of those reasons, whether I accept Mr Hartman’s opinions as correct or ultimately of assistance is a different question.

2.3.5    When does the unsuitability assessment conclude?

77    This is the third divisive issue. ASIC submits in writing that Money3 failed to make reasonable inquiries about and take reasonable steps to verify the financial situation of the consumers before making the unsuitability assessment. In written closing submissions, it relies on answers given by Ms Suzanne Costantini and Ms Daniela Cavar in cross-examination, which it characterises as concessions that the assessment process is complete once a settlement pack is sent to a broker and the settlements team is not responsible for the assessment function. Mr Senathirajah KC maintained that submission orally (T 8 L 21-34, T 517 L18).

78    Money3 submits in writing that by the time the settlements team receives the proposed contract signed by the consumer, a conditional assessment is complete. Money3’s contracts provided that if the circumstances changed or Money3 obtained more information prior to it executing the contract, it could review its offer and may determine not to proceed. In oral submissions, Mr Caleo KC stated that it is not part of his client’s case that the assessment proceeds to the point of the welcome call (T 80).

79    The result of the assessment is the determination of whether the credit contract will be unsuitable for the consumer, if it is entered into: s 129. When the assessment is complete is a mixed question of law and fact. The evidence relied on by ASIC commences with answers given by Ms Costantini in cross-examination (T 426). She was questioned about the Money3 generated application form for Consumer 3 (CB 3150-3154). Her attention was directed to the weekly expenses section which record $0.00 for food and entertainment, travel expenses and home utilities (CB 3151). Her evidence was:

MR SENATHIRAJAH: In the assessment process, the use to which this form is placed, is deployed, is to say, when Money3 is carrying out the assessment of suitability as to give this person a loan, “We are going to be relying on these expenses as being the expenses”; correct?---This was – so this is created after an assessment has been finished.

Afterwards? So you say that the suitability assessment has been finished by the time this document is sent to the consumer to sign?---This document goes out with the loan contracts as – yes. This goes out with the loan contract.

Yes. So it is your evidence that, by that stage, the suitability assessment is completed?---Yes.

Right. And then when this document comes back, is that used, to your knowledge, as a basis for verifying that the customer agrees that these are his or her expenses?---To my knowledge, yes.

80    Ms Cavar was questioned about the welcome call as the last stage of the settlement process (T 465), which she confirmed, and then:

Mr SENATHIRAJAH: Thank you. And within the Money3 Motor Department during the relevant period, that’s 8 May 2019 to February 2021, it was the credit analyst who had the responsibility for carrying out the unsuitability assessment of the loans, correct?---The questions in the system, correct.

Yes. But the analysis, the assessment, that’s done not by the settlement team, is it?---No, assessment is done by the settlements officer.

And I think you’ve said this before, but I just want to check. And it’s your evidence that the procedure that’s described in the settlement procedure document, that only starts after a signed copy from the customer is received by Money3. Correct?---Correct.

Yes, and that’s when the settlement team’s responsibility commences. Correct?---Correct.

81    Money3 submits that these answers responded to conclusionary statements and are not consistent with the business records. If the outcome of the APL capacity calculation is that the consumer has a weekly surplus sufficient to make the calculated repayments, the credit analyst will either generate a pre-approval or the proposed contract documents which are then provided to the broker. A pre-approval is generated if Money3 has not been advised as to the vehicle to be purchased or whether the consumer requires finance for the warranty insurance premium, which was the case for Consumer 1, Consumer 3 and Consumers 4 and 5. Following the finalisation of those details, the credit analyst would then generate the contract documents and deliver them to the broker by email.

82    The pre-approvals for Consumer 2 and Consumer 6 set out nominal amounts for the warranty insurance premium, calculated at 20% of the principal because at the time Money3 did not have information about the vehicle to be purchased and the warranty insurance premium.

83    The credit contracts are in standard form and include this clause (for example, CB 2840, Consumer 1):

We reserve the right to withdraw from this transaction if anything occurs which in our opinion, acting reasonably, makes settlement undesirable or if the Settlement Date does not occur within 14 days of the Disclosure Date our obligations under this Loan Agreement only arise if and when we lend you the loan amount.

84    As stated above, the Disclosure Date is the date the document is generated and the Settlement Date is when the funds are advanced.

85    Money3 also relies on evidence from Ms Cavar (affidavit from [30] CB 1730) to the effect that the settlements team becomes involved once the consumer has signed and the broker has returned the contract documentation, at which time the settlements officer runs through a pre-fund checklist including by regenerating the loan repayment schedule in the APL to check whether it matches with the repayment schedule in the credit contract. As part of this process the settlement officer compares the scheduled repayments in the APL against the total amount of repayments in the credit contract to confirm that the amount in the APL is less than or equal to the amount in the credit contract. If any issue is identified, the matter is returned to the credit analyst.

86    By reason of this procedure, and the standard term in the credit contracts, Money3 submits that by the time the settlement team “receives the proposed contract signed by the consumer, Money3 has completed a conditional assessment” which submission is explained as follows:

[I]n the case of each of the credit contracts in this proceeding, the assessment process was complete when Money3 sent to the broker (acting on behalf of the relevant consumer) the documents that required execution. However, each such assessment was also contingent; if the consumer did not return to Money3 the required list of documents executed without any relevant amendments, the loan application would either not proceed or would need to be sent back to the credit analyst. In either such event, Money3 would not execute the loan contract. The execution by the consumer of the various documents required by Money3 confirm the correctness of the details of those draft documents.

87    This proceeding does not require me to resolve the conditional assessment submission. What I am concerned with is when the unsuitability assessment commenced and was complete for the six consumers in issue. In Parts 5 to 9 of these reasons, I make detailed findings as to that issue for each of the consumers. In no case was any assessment undertaken after the Credit Contract was generated and delivered to the broker. Factually, Ms Costantini and Ms Cavar were correct in their evidence: the point in time at which the assessments in issue were complete was when the credit contracts were generated and delivered to the brokers. That aligns with how ASIC ultimately put the case for each of the consumers (CS at [55]).

2.3.6    Minimum necessary expenses, discretionary basics, absolute basics or something else?

88    This is the fourth divisive issue and a matter of great significance in the examination of the extent of the obligations to make reasonable inquiries and verification of the consumer’s financial situation.

89    I have rejected ASIC’s construction submission that s 130(1)(a), (b) or (c) requires a licensee in all cases to obtain declared living expenses from a consumer or to inquire about and verify actual or likely future living expenses. Consistently with Westpac, the inquiries and verifications are undertaken for the purpose of making the prospective assessment of risk of default and hence the unsuitability conclusion: Westpac at [140]-[141], Gleeson J. Nor is it a universal requirement to inquire about and verify the integers of declared living expenses: Westpac at [138]-[139]. The inquiry is about the consumer’s financial situation generally. However, that does not foreclose inquiries about integers of a consumer’s financial situation. The issue is whether in the circumstances of each consumer as they were known at the time, Money3 acting reasonably should have made those inquiries and verifications about the consumer’s declared living expenses?

90    Those steps precede how the information about a consumer’s declared living expenses are then used by a licensee in answering the s 131 questions, which is a matter for the licensee. That point was made, if I may say so, pellucidly and comprehensively by Perram J as the primary judge in Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 1244; (2019) 139 ACSR 25 (Westpac PJ) at [67]-[77]; particularly his Honour’s reference to “wagyu beef…washed down with the finest shiraz” [76].

91    For the six consumers, ASIC makes the submission that having received bank transaction data for the 90-day period to the lodgement of each application for finance, Money3 failed to make any inquiry into the quantum of the consumer’s declared living expenses by reference to the bank transactions. Similarly, it did not use the transaction data to verify the consumer’s declared living expenses. At a more granular level, ASIC in each case recalculates the average living expense of the consumers by adding and then dividing all of the bank debits to derive average expenses to then submit that Money3 failed to comply with the obligations at s 130(1)(b) and (c) because reasonable inquiries and verification required it to reconcile discrepancies between declared living expenses and the quantum and pattern of spending evidenced in the bank statements. For some of the consumers, ASIC steps further by contending that patterns of same day account clearing reasonably should have been considered as relevant to the consumer’s ability to meet future loan commitments.

92    Something must be said about the bank statements for the consumers. Most of the statements are third party compilations from a credit checking and reporting service provider called illion (sic). That entity does not employ the usual grammatical convention for proper nouns of capitalising the first letter. This has caused much confusion in the evidence and submissions where upper and lower case references abound. There is a further grammatical error in that the bank transaction data is described as BankStatements (sic), which plainly they are not and where illion commits the further error of uniting separate words. All of that aside, in these reasons I will refer to illion and interchangeably refer to bank data or bank statements where apposite.

93    Money3 objects to the recalculation as stepping outside the ASIC pleaded case, but in any event submits that interrogation of bank account debits does not reveal much, or indeed anything, about whether each debit is an average weekly expense or a necessary expense that a consumer is unable to forego to meet future loan commitments.

94    This is a large point of difference between the parties. ASIC in submissions variously contends that Money3 failed to inquire into and to verify “living expenses”, “minimum expenses”, “average weekly expenses” and “reasonably necessary expenses”. Very often in submissions, those expressions are used interchangeably, which draws criticism from Money3 for lack of precision in what is meant. ASIC’s written closing submission at [65] – [66] commences with a reference to the “minimum expenses” of each consumer, which is then subdivided for each by reference to their “reasonably necessary expenses”. Of this analysis, Money3 makes the valid criticism:

At AS [65]-[67], ASIC contends that Money3 failed to make an assessment contemplated by s 129 because (it asserts) Money3 did not take into account each consumer’s “minimum expenses”, and then describes these as the consumers’ “reasonably necessary expenses” in AS [66.1] to [66.5]. The evidence that ASIC relies on at AS [66.1] to [66.5] is the same evidence that it lists in fn 28 and describes in the first sentence of AS [64] as ASIC’s calculation of “the Consumers’ average weekly expenses as disclosed from the illion extracts”. It would appear that, in closing submissions, ASIC has now undertaken an analysis (as set out in the schedule items listed in fn 28) that assumes that every debit identified in the illion bank statements is an “expense”, and has used all of the debits listed in the illion bank statements to calculate a purported “average weekly expense” figure for each of the consumers.

95    Money3 contends that this approach is erroneous on two bases. “Problematically” it assumes that every debit in the transaction record is necessarily a component of average weekly expenses. And, more importantly, the contention that it was required to consider all expenses was “categorically” rejected by the Full Court in Westpac at [139]-[140], Gleeson J and [172], Lee J.

96    In reply, ASIC maintains that the “reasonably necessary expenses” of each consumer are those which it identifies, which are the expenses it selects from the illion transaction data (by totalling and then averaging the three month data) to produce an average of weekly expenditure to which is then added the regular deductions from the Centrelink statements. Because each of the consumers were in a “precarious financial circumstance” ASIC then submits:

Those circumstances are such that few if any of the Consumers’ expenses can properly be characterised as relevantly discretionary, as opposed to reasonably necessary expenses. The salient analysis is to identify “reasonably necessary expenses”, not isolate only expenses that are consumer strictly could not live without.

(Emphasis in original).

97    The passage emphasised by Money3 from the decision of Lee J in Westpac at [172] is:

I respectfully agree with the primary judge (see J[71]) that it does not follow that the statutory purpose can only be achieved by taking into account all information collected, regardless of its relevance or materiality to the assessment of unsuitability. Simply labelling an expenditure as a Declared Living Expense, and the fact that the consumer incurs that expense on their current lifestyle, does not necessarily change its nature from being discretionary. It is plain that a consumer may choose to, and can be expected to, forgo particular living expenses in order to meet their financial obligations under a credit contract.

98    That passage must be read in the context that the Court was not concerned with the circumstances of any particular consumer; rather with an automated system which applied a 70% ratio rule, triggered if a consumer’s declared living expenses exceeded 70% of their verified monthly income. That point was made by his Honour at [173]: “this was an unusual case, being a case alleging a serious want of compliance with responsible lending norms, divorced from consideration of any facts about any specific consumers”.

99    It was also a factual finding in a case concerned with the automated assessment of 261,987 home loans between 12 December 2011 and March 2015, which applied a series of pre-determined rules to produce one of three outcomes: conditional approval, referral for manual assessment or “decline”. As part of the process the consumer was required to complete a form, including a section which addressed “My Monthly Expenses” with the subheading: “money you spend – do not include loan repayments” followed by a categorised list of expenses including: “Absolute Basic Expenses (e.g. groceries, transport, petrol, utilities, rates, clothing)”.

100    For these reasons, Westpac is not authority in support of the submission of Money3 that it was not obliged to inquire into or verify expense items in the illion transaction data. The question in this case is whether reasonable inquiries and verification steps should have been undertaken taken for each consumer? More precisely, what inquiries and verification steps would have been undertaken by a reasonable licensee in the position of Money3 at the time? Should those inquiries and verifications have extended to consideration of debits in bank transaction data as evidence of expenses?

101    What were reasonable inquiries and verification steps at the time is evidenced by some internal documents of Money3 and its practices at the time. In November 2017, Money3 published an Analyst’s Guide (CB 6081) “strictly as an internal document” and which “should only be used for guidance”. The purpose of the Guide is stated in the introduction: “To be consistent with the responsible lending practices”. It is also expressed to be read with the Secured Finance Matrix 2015 and the Micro Motor Matrix 2016. Part 3 is concerned with loan criteria, the consumer’s requirements and objectives and financial capacity. It commences with a list of loan criteria, including living expenses that: “Analysts must observe when approving loan applications”.

102    Clause 3.4 states that when a credit analyst assesses an application for a loan, “the following amounts are included as the minimum Money3 living expense”. Minimum living expenses for, amongst others, Micro Motor loans are set out, consistently with the Matrix. Paragraph 3.5.1 sets out a table which explains how the minimum weekly expense figure (albeit not for Micro Motor loans) is calculated by allocating separate amounts for general living expenses, vehicle travel costs, “lunch, beer, money in the pocket”, telecommunications expenses and utilities. There is a note which follows this table which reads:

If an applicant has disclosed that they spend a specific amount on a certain liability which is more than the amount we allocate, then we must amend our standard amount to show the amount that they have disclosed.

For example:

If the applicant has stated on the application that they spend $50 per week on their mobile phone and we generally allocate $30 per week for telco expenses. We will need to adjust the expenses to include the extra $20 in our capacity calculations.

103    Credit analysts are then instructed to either include or exclude specific categories of expenses for car loans. Included expenses extend to payday lenders and gambling but “only if this is a frequent occurrence”. The excluded categories of expense include gym memberships, Foxtel, charities, union fees and life insurance, health insurance, pet insurance and contents insurance. The justification for these exclusions is:

When working through an application, you should exclude the following expenses (as Money3 includes these items in the general living expenses).

104    Part 9 of the document deals with bank account conduct and commences with this sentence:

The conduct of the applicant’s account is crucial in the assessment of an application. Bank statements tell a story of the customer’s day-to-day spending and gives us a better understanding of how they manage their money.

105    That is followed by a list of matters to be taken into consideration, including dishonours of current loans (which are not acceptable), same day account clearing and bank overdrafts.

106    There is a further document, the National Consumer Credit Protection (NCCP) Awareness Training PowerPoint presentation of May 2018 (CB 6223). Its purpose is to train employees of Money3 to understand the Act, with an overview of the main obligations and “in particular look at your responsible lending responsibilities”. Two slides are particularly relevant. The need to inquire into the consumer’s financial situation is addressed, commencing with (CB 6236):

To ensure that the consumer can meet all the repayments, fees and charges and transaction costs of the credit product they are looking for, you will need to make inquiries into their financial situation. This includes making inquiries into their: income, fixed and variable expenses, credit history including any existing debts, circumstances and assets.

107    The next slide is concerned with verification (CB 6237). In part, the following is stated:

After you have inquired into the consumers financial situation, you will need to verify the provided information. The level of verification that you conduct will vary based on the individual circumstances and the product the consumer is requesting. View the table below for an overview of what you may need to review for different types of consumers.

108    The table is divided into three columns. The first applies to all consumers and contains three dot points: credit reports, bank account or credit card records and informational reports provided from other lenders.

109    Another policy document is the May 2020 Credit Policy (CB 6477). Although it post-dates four of the credit contracts in issue, if what is stated in it was good practice in May 2020, in the form of general guidance, I find that it also reflected good practice in 2019. It is directed to credit analysts for the purpose of providing guidance consistent with responsible lending practices. The guidance is general and applicable to each of the Money3 business entities. There is no carve out for Micro Motor loans. Living expenses are addressed in paragraph 9, where inter alia it is stated (CB 6484-6485):

Analysts require three months’ consecutive bank statements from the applicant in order to verify expenditure items such as rent, groceries, transport, utilities, insurance, entertainment and personal expenses. Bank statements are used by the analyst to confirm the customer’s declared amount of expenditure as well as identify any undisclosed expenses and any transactional behaviour that may raise concerns and further inquiry such as gambling.

…

The following is a list of expenses that Money3 enquires about when assessing an application. Money3 ensures that it makes reasonable enquiries into the following living expenses to ensure that the information it receives is verified as accurate and does not misrepresent the customer’s true position…

110    Next follows a dot point list of expense categories, including food, clothing, entertainment, petrol, memberships, gas, water, electricity and insurance.

111    Ms Costantini’s affidavit evidence about the utility of the illion bank statements was (at [77]):

Illion is a service provider that takes transaction data from a customer’s bank accounts and presents it in a way that assists credit analysts to undertake a review by for example, grouping transactions of a particular type. While this assists credit analysts, the way in which Illion analyses and groups the transaction data is often inaccurate, a credit analysts in the Micro Motor Department used that information with caution and relied much more on the chronologically ordered transaction data in the Illion bank statements.

112    What is of importance is her evidence that the transaction data was relied on as part of the usual practice of credit analysts. ASIC did not adduce specific evidence from Mr Steven McAuley who was the credit analyst for Consumers 1 and 2. However, in his compulsory examination, he was asked generic questions about the typical process and about the benchmark amounts in the Product Guides (from CB 4903). As part of his answers to questions about the provenance of the benchmark figures he said (CB 4905):

We were, we weren’t advised to review bank statements for expenses, we were reviewing bank statements solely for the purpose of conduct and also for looking out for any sort of undisclosed loans. So the system they had didn’t capture data from the bank statements to accurately represent where the expenses would sit. So that’s why we would be using the benchmark, because a lot of times the application would come through blank or name, address and phone number.

113    Ms Costantini’s evidence was of her understanding of general practice in the relevant period. This issue was pursued in the cross-examination of Ms Costantini, though not sequentially to expose what was done or not done for each consumer. Rather, the cross-examination touched on aspects of the inquiries and verification of the expenses by reference to bank transaction data of the various consumers in issue (T 420 L 20 - T 427 L40, T 432 L 41 - T 438 L 33, T 441 L18 - T 442 L 45). The effect of her evidence may be summarised, and in part reproduced, as follows.

114    With reference to various entries in the bank statements of Consumer 3, she could not notice any evidence in the files of any assessment of the cumulative effect of categories of debit transactions, in particular gambling or other matters which were described as “banking discrepancies”. When questioned about her general practice evidence as to how credit analysts applied the Matrix (paragraphs [40] – [53] of her affidavit), and by reference to the five credit contracts in issue, she disputed that no verification steps had been undertaken of the declared expenses when compared with entries in the bank statements. There was some ambiguity in the questions, which was successfully objected to, and her evidence then was (T 435 L 13):

Right. In relation to living expenses, do you say there was evidence that somebody had checked and analysed living expenses?---There was the amounts that were put into the APL application.

That’s different. I’m asking you whether anybody had gone behind the number given to check whether, in fact, the consumers were spending that amount on living expenses, for example?---No, I don’t believe outside of what we were given.

Yes. I’m not suggesting that there hadn’t been a check to make sure that what you had been told had been correctly entered into the APL system or whatever system. Do you understand that? I’m not making that suggestion, but I’m saying there was no independent, separate verification of living expenses; correct?---There was the – there would have been the – as – as general or best practice, we would have looked at the bank statements that were provided, to see if that married up with what was in the application form.

115    She was then questioned about the ability of a credit analyst to determine from entries in a bank statement whether a declared living expense was the amount actually spent by the consumer to which she answered: “we would analyse the bank statements when going through ourselves as part of the assessment process”, but then accepted that a credit analyst would not be able to determine what the money was actually spent on, in the case of cash withdrawals from an ATM. Her evidence continued:

Yes?---But there are certain expenses that you can see on the bank statements, such as food and groceries, if they shop at Coles and use a debit card, for an example.

Yes?---Takeaway, if it’s used again on a debit card. So we do take – you know, do take quite an extensive look at the bank statements that are provided.

Yes.

HIS HONOUR: Sorry, I don’t quite catch that answer. “We do take”?---We do take – we do look and examine the bank statements that are provided.

Thank you.

MR SENATHIRAJAH: But there was no evidence, was there, Ms Costantini, in the files that that had actually been undertaken for any of these five credit contracts?---I believe on the APL system, when I was reviewing them, that there were pre-approval notes that did say that banking was checked.

What was – but – sorry. So are you telling his Honour that there was an itemisation of the particular categories of expenses? Let’s take here living expenses. There was a note, you say, that that had been checked?---I believe on consumer 6.

That’s the one you did, yes?---That’s where my mind – that’s where my mind goes.

Yes?---There was a note that said banking checked okay. Rent – and so there was a categorisation of - - -

Right. I understand that. Banking is – what’s happening there is you’re looking for the bad banking behaviour, correct?---No. Not just solely the bad banking behaviour. We’re checking – when checking banking, it’s an overall view of the banking conduct and the expenditure and the liabilities and the income that’s going into that bank.

116    Ms Costantini accepted that this evidence was not contained in her affidavit. She again confirmed that by “simply looking at a bank statement” one cannot determine what a cash withdrawal is spent on. Her evidence continued:

Yes. And what I’m suggesting to you is that, in fact, apart from looking at the bank statements itself, there’s no other checking of expenses by way of either taking in – sorry. By – first of all, determining whether those amounts were reasonable, correct?---Correct.

And whether, in fact, those amounts were sufficient for these people to live without hardship, correct?---Correct.

And you would agree, would you, that reviewing bank accounts for financial defaults, gambling, dishonours or the existence of financial arrangements – you understand what those four things are, don’t you, Ms Costantini?---I do.

Yes. That’s not about verifying them. It’s about checking whether those amounts are on the statements, correct?---Correct.

Yes. So you would know, for example, if there were other such conduct unless it was shown on the bank statements themselves?---Correct.

117    At that point I clarified with Ms Costantini that she understood the questions were directed to the expenses of the consumer, which she confirmed. Her evidence continued:

MR SENATHIRAJAH: Yes. So the question I will ask you is the one I think you just answered – that is, in relation to other expenses, there is no way that that – sorry. Such verification did not take place by Money3, correct?---Correct.

And then what I’m now asking you is in relation to these matters of financial defaults – that is, they’ve defaulted on an existing financial arrangement of whatever nature and – well, sorry, pausing there. I will break it up. Unless they were shown in the bank statements, Money3 was not seeking them out and trying to identify them; correct?---In relation to defaults?

Yes?---Well, we would conduct a credit check prior to pre-approval.

118    The cross-examination was difficult to follow in that it did not sharply focus on what inquiries were made of the bank transaction data and what verification steps for declared living expenses were taken for each consumer, by reference to the bank data. I am, however, able to find in accordance with this evidence that the extent of the analysis of the transaction data in the bank statements is recorded in the pre-approval notes for each consumer and the review of income and expenses evidenced by debits and credits in the bank statements is limited to an analysis of defaults, gambling, dishonours and other financial arrangements (i.e. payments to other financiers). To the extent to which there was verification, it was limited to these matters by reference to credit checks. The verification of other categories of expenses did not occur.

119    There is other evidence. ASIC issued multiple notices to Money3 pursuant to ss 49 and 267. A response from Money3 of 7 October 2021 (CB 4430) answers a request concerning the process for complying with s 128(c) and (d) during the relevant period. In part the response was, commencing with the question and answer (errors in original):

Describe the licensee’s process for complying with s 128(c) and (d) of [the Act] including, in particular, the following:

…

b. Inquiries about the consumer’s financial situation;

Money3 makes inquiries about the following aspects of the customer’s financial situation:

•    salary, employment status, length of employment and any additional benefit income

•    residential status, mortgage, rent or boarding costs per week

•    weekly expenses including food & entertainment, travel, home & utility, personal, rentals, gambling, child-support, credit cards, insurance, other loans, dependent expenses;

•    bankruptcy;

•    marital status (to determine whether there are shared expenses)

•    number of dependents

•    circumstances which may affect the ability to meet repayments

•    if there are any long-term problems paying key items such as rent, what adjustments the customer will make to address this.

120    That is all very well as a generic answer, but these were provided in the context of the preceding question (the inquiries that Money3 makes about the consumer’s requirements and objectives) which was answered by reference to the collection of information in the Money3 loan application form, which is sent to the broker and signed as a returned and verified document before settlement. The section from that form, which is concerned with employment details, weekly expenses and “other financial issues” is reproduced in answer to the financial situation inquiries question.

121    Contrast this with the evidence of Ms Costantini, who said that Money3 required consumers at the time to provide bank account statements, which were then reviewed by credit analysts to confirm the receipt of income, to check for poor banking conduct and to identify any regular direct debits that may need to be included in the capacity calculation. Further, her evidence is that illion is a service provider that “takes transaction data from the customer’s bank account and presents it in a way that assists credit analysts to undertake a review”. That evidence begs the obvious question in the present circumstances: why require bank transaction data if it is not considered as a component of a reasonable inquiry and is not part of the taking of reasonable steps to verify the financial situation of the consumer who seeks finance for a Micro Motor loan?

122     Money3 also submits:

It would not be feasible or of assistance for bank account statements to be used to re-create [a consumers] expense amounts, including because it is not possible to identify from the bank statements whether every debit reflected an “expense” that was part of [the consumers] average weekly expenses.

123    That submission is inconsistent with the internal policy documents of Money3 and fails to explain why bank transaction data was not useful in inquiring into the declared amount for living expenses, even if one accepts that it may not have been feasible to reconstruct average expense amounts. Reasonable inquiries may not have required a reconstruction of expenses, but they at least required some comparison between declared expenses and the data that was available.

124    Money3 also submits that reasonable inquiries and verification must take account of the “modest size” of the loans and their purpose. That much may be accepted. Correspondingly, those inquiries must reflect the fact that Money3 was dealing with vulnerable economically disadvantaged consumers, dependent on Centrelink benefits for all (or practically all) of their income. Money3 submits that ASIC has not established that the circumstances required “extensive inquiries and verification … let alone the multiple rounds of inquiries and verifications that [ASIC] submits may be required”. Further, Mr Hartman accepted in cross-examination that it was not the practice at the time for bank statements to be used in that way. That overstates the extent of the reasonable steps obligation and takes Mr Hartman’s evidence out of context. His evidence was (T 343-344):

And Mr Hartman, I suggest to you that in 2019 it wasn’t the common practice of lenders who were entertaining applications for a loan of approximately $10,000 to use bank statements in order to attempt to create a picture of the applicant’s expenses for a period of 90 days? --- No, I would – I would say they don’t use it to create that picture. They use it to interrogate that picture, which they’ve created other ways.

Would you agree that even when, or if, a bank statement enables one to ascertain a specific item of expenditure, it may not allow you to determine whether that expenditure is, in HEM terms, an absolute basic or a discretionary basic? --- Would it allow you to distinguish between the two? A level of detail that is in a bank statement transaction, it – it – it might, or might not. It would depend on – it – it would depend on – not definitively, I would say. That’s probably the better way to answer that. Not definitively.

And indeed, that’s what your own use of the bank statements in this case revealed for you. That on occasions, one can’t identify what the particular amount in question was used for at all? --- You – you can – you can discern from the transaction information, things that would make it reasonable for you to conclude how money was spent, generally by the nature of the merchant the money went to, if the merchant is most likely to be in a particular and categorical type of business, as opposed to a – a broad general store or something where you could have gone in and bought anything, then it would be more difficult to work out what was the money actually spent on.

125    For the living expenses in this proceeding, the issue is not that the credit analysts failed to recreate the transaction data to determine absolute basic or discretionary basic expenditure. Rather, it is whether any inquiry into the expenditure of the consumers was made, save for determining whether there was evidence of poor banking conduct. Moreover, the point made by Mr Hartman about being able to discern how money was spent, is readily illustrated by the transaction data that Money3 had. As I illustrate when considering the case of each consumer, the transaction data identifies categories of basic living expenses such as Coles and Woolworths for groceries and the names of well-known petroleum retailers for transport costs.

126    Whether expenses in the transaction data were minimum necessary expenses relevant to a forward-looking assessment of the future ability of the consumer to comply with the terms of the credit contract or were of a discretionary character that might be reduced or forgone in order to comply with future financial obligations, is not to the point. Money3 did not request, was not provided with and did not analyse information to that level of detail. The distinctions now drawn do not align with what was done in the case of each consumer. In each case. the consumers declared an amount of either weekly or monthly “living expenses”, “declared weekly living expenses”, “home expenses (food, utilities etc)” or in one case provided no such information.

127    Whether in each individual case a reasonable licensee in the position of Money3 at the time, cognisant of the obligations at s 130(1)(b) and (c), would have inquired into the bank transaction data for the purpose of inquiring into the expenses of a consumer as a component of their financial situation and/or would have used that data as a verification tool is a fact specific inquiry that I address in detail for each of the consumers. The present point is that I do not accept that the outcome in each case turns on inquiries into “minimum necessary expenses”, “absolute or discretionary basics” or related terms that are employed in submissions by ASIC and Money3.

2.3.7    Sections 131 and 133

128    Section 131 operates as a default mechanism. A licensee is obliged to conclude that the credit contract will be unsuitable where any of the likelihood thresholds at subsection (2) apply. Correspondingly, s 133 prohibits a licensee from entering into a credit contract assessed as unsuitable for the consumer.

129    ASIC submits that an objective standard should be applied in determining whether a credit contract is unsuitable pursuant to s 131. Further, the Court should not consider Money3’s internal standards when considering whether the credit contracts were unsuitable for each consumer because those standards were “a reflection of its tolerances for risk exposures”, including to the extent that they are reflected in the Product Guides. ASIC again relies on the Explanatory Memorandum for guidance, which relevantly provides at [3.153] (emphasis in ASIC submissions):

3.153 The standard for the consumer being likely to meet the financial obligations in the contract is an objective one. It is not directly linked to the credit provider’s own internal standards and guidelines regarding assessing a capacity to repay. Such internal standards and guidelines would be expected to factor in the credit provider’s own policies on risk exposures and may vary from time to time, in line with changes to the risk appetite of the credit provider, and the commercial and economic environment. Accordingly, the fact that an application for credit satisfied a credit provider’s own policies for affordability does not necessarily mean that it met the standard in the legislation. However, it is expected that the types of inquiries made and assessments conducted for the purposes of the credit provider’s internal standards and guidelines on affordability would, in most cases, be very similar to those that are required in order to assess the likelihood that a consumer can meet the financial obligations under the proposed contract.

130    As to s 131(4), ASIC relies on Middleton J in Westpac at [59], where his Honour noted that it “proceeds on the assumption that the consumer’s financial situation is able to be assessed and that the statutory assessment of unsuitability will be made by reference to the financial situation of the particular consumer, and on the basis of information which will be reasonably reliable”.

131    The submissions continue to the effect that s 131(4) has two elements as identified in the Explanatory Memorandum at [3.158] - [3.159]:

3.158 The first is information that the credit provider had reason to believe to be true. That would include, for example, information that has been provided by the consumer about their financial circumstances that has been verified by the credit provider or is otherwise reasonably believed to be true.

3.159 The second is information that the licensee would have had reason to believe if the required reasonable steps to verify had in fact occurred, the intent of this part of the proposed provision is to ensure that credit providers, in making their assessments regarding unsuitability, are required to take into consideration information that they should have become aware of if the reasonable steps to verify had been taken. Information that does not satisfy these requirements (that is, information that is not reasonably believed to be true) must not be taken into account.

132    As to the prohibition on entering unsuitable contracts and the likelihood that a contract will be unsuitable for a consumer at the time of the assessment (s 133(2)(a)), ASIC again relies on the Explanatory Memorandum at [3.167]:

3.167 For it to be likely that the consumer will be able to comply with the financial obligations under the contract, the credit provider must take a future view of the reasonable foreseeability of that compliance, given the financial obligations will arise into the future.

133    The submission is then that Money3 must look forward to things that are reasonably foreseeable if the contract is entered: “that would include, in this case, the cost of running and maintaining the vehicles the subject of the credit contracts.”

134    Money3 does not dispute that the s 131 inquiry is objective, which clearly follows from the objective inquiry and verification required by s 130, which information is then used as the basis for the unsuitability assessment: s 131(4). Whether, however, the internal standards applied by Money3 for each consumer assessment were sufficient is a significant factual question in this proceeding.

135    Money3 makes two submissions, the first of which is not disputed by ASIC: there is no obligation for all of the information obtained pursuant to s 130 to be used in the assessment. Section 131(4) restricts the use of the gathered information to the categories in subparagraphs (a) and (b): Westpac at [121], Gleeson J.

136    The second submission is contentious: the likelihood assessment at s 131(2) does not require the licensee “to hypothesise about potential or theoretical events that may occur subsequent to the entry into the credit contract. It requires consideration of the circumstances that include the credit contract being entered into, but otherwise it does not require or prescribe any other potential events or circumstances that ought to be envisaged.”

137    In my view, Money3’s construction is correct. The focus of s 131(2) is whether “the contract will be unsuitable” if, at the assessment time, one or more of three future events is likely. Only the first two are relevant as there are no prescribing regulations. The legislative scheme does not operate to reduce the risk that a consumer may acquire, in this proceeding, a motor vehicle that has high running costs, requires frequent maintenance or in the vernacular is a “lemon”.

138    The first assessment of likely future compliance is concerned with the consumer’s ability to comply with the financial obligations of the contract, or if the consumer could only comply with substantial hardship. ‘Financial obligations’ is not a defined term in the Act, though plainly in the context of this provision it means the consumer’s contractual obligation to make the principal and interest repayments (and any additional fees) as and when required. Or, as put by Perram J in Westpac PJ at [70] and approved by Gleeson J in Westpac at [94]:

[T]he s 131(2)(a) questions are “precise questions: is it possible for the consumer to service the loan at all and, if it is, can it nevertheless only be serviced by the making of repayments which would put the consumer in circumstances of substantial hardship?”

139    In the circumstances of particular cases this may require an assessment of the consumer’s likely future income, less likely future expenses extending to the cost of transport. However, what I do not accept is the breadth of ASIC’s submission that the assessment as to future likelihood must include all the costs of running and maintaining the acquired vehicles. That a vehicle may turn out to be a lemon and then require extensive maintenance is beyond the scope of reasonably foreseeable likelihood that, the occurrence of that event, will then cause the consumer to default in his or her financial obligations under the credit contract. ASIC’s submission taken to its logical conclusion requires a licensee in the position of Money3 to investigate the roadworthiness of the vehicle to be acquired by the consumer. That is beyond the obligation of the licensee.

140    Similarly, an assessment that it is likely that the contract will not meet the consumer’s requirements or objectives is confined to the credit contract and does not require the licensee to hypothesise about whether the vehicle is a suitable acquisition for the consumer.

2.4 General conduct obligations

141    ASIC’s submissions begin with the contention that the legislative context, read with certain paragraphs of the Explanatory Memorandum, reveal that the “legislative permission” to engage in a credit activity is conditional on a licensee meeting the standards of conduct in s 47. That follows, so the submission goes, because ASIC must not grant a licence if it has reason to believe that the person is likely to contravene s 47 (s 37(1)(b)) and may suspend a licence if there is a contravention of it or where it has reason to believe that a licensee is likely to contravene the conduct obligations (s 55(1)(a) and (b)).

142    The Explanatory Memorandum at [2.3] and [2.107] - [2.111] does not support the conditional submission. The submission overlooks that s 47 is not prescriptively drafted, save for the obligation to comply with the conditions of the licence and with the credit legislation (noting that there are no prescriptive regulations made in exercise of the power at s 47(1)(m)). For the particular obligations in issue, s 47(1)(e) and (g), the respective requirements are to take reasonable care to ensure that the representatives of Money3 comply with the credit legislation and to ensure that the representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence.

143    The obligation at subparagraph (e), for the reasons that I have given when considering s 130, requires a fact specific inquiry and whether what was done, or not done, was reasonable in the circumstances: see by analogy the comparable provision of s 912A(1)(ca) of the Corporations Act considered in Australian Securities and Investments Commission v Westpac Banking Corporation [2022] FCA 515; (2022) 407 ALR 1 at [76], Beach J.

144    As to the obligation at subparagraph (g), it is to be noted that subsection (2) provides that in considering whether a matter “is adequate, the nature, scale and complexity of the credit activities engaged in by the licensee must be taken into account”. Thus, the question of whether training was adequate is also fact specific.

145    ASIC cannot exercise the power at s 55 to suspend or cancel a licence for actual or reasonably suspected contravention of the general conduct obligations without affording the licensee an opportunity to be heard: s 55(4).

146    Thus, whilst it is correct that the authority to engage in particular credit activities, conferred by the grant of an Australian credit licence (s 35) is conditional upon compliance with the licence conditions (s 45 and s 47(1)(c)), it goes too far to conclude as a general proposition that permission to engage in a credit activity is conditional upon compliance with the other requirements of s 47. Rather, the position is that a licensee may face revocation or suspension of a licence if it is established by examination of the particular circumstances of an alleged contravention that an identified conduct obligation has not been met, and if so, that it is then appropriate (having regard to all relevant factors) to exercise the permissive suspension or cancellation power at s 55(1).

3.    THE ISSUES AND THE EVIDENCE

3.1 Agreed list of issues

147    The apparent simplicity of ASIC’s Concise Statement (of 8 pages) was later undermined by five letters containing particulars of various allegations, comprising in total 29 pages. Fortunately, the parties mostly agreed on a List of Issues for determination and a Statement of Agreed Facts for the purpose of s 191 of the Evidence Act. It should be noted that the agreed facts are anodyne and not comprehensive.

148    The agreed List of Issues identifies seven primary issues within which there is further subdivision. Issue 2 as numbered by the parties is logically the first matter to be determined. The issues (as reordered by me) are:

1. In the case of each of the six Consumers, whether Money3:

1.1. made reasonable inquiries about the Consumer's requirements and objectives in relation to the Credit Contract;

1.2. made reasonable inquiries about the Consumer's financial situation; and

1.3. took reasonable steps to verify the Consumer's financial situation,

before making an assessment as to whether the Credit Contract would be unsuitable for the Consumer, and so contravened sections 128(d) and 130(1)(a)-(c) of the Act.

2.    Whether Money3 failed to make an assessment, for each of the six Consumers, within 90 days before the credit day, that:

2.1. specified the period the assessment covered; or

2.2. assessed whether the Credit Contract would be unsuitable for the Consumer, and so contravened sections 128(c) and 129 of the Act.

3.    In the case of each of the six Consumers, whether:

3.1. section 130(1)(a) of the Act required Money3 to inquire as to whether the Consumers wished to obtain finance for an application fee, a broker fee, and extended warranty insurance, in addition to the price of a vehicle;

3.2. Money3 did inquire as to the matters in 3.1;

3.3. section 130(1)(b) of the Act required Money3 to obtain a signed and/or completed statement from the Consumer that set out their financial situation, including their likely expenses; and

3.4. Money3 did obtain a statement of the kind described in 3.3.

4.    Whether Money3 failed to assess the Credit Contracts as unsuitable for each of the six Consumers because:

4.1. it was likely that each Consumer would be unable to comply with their financial obligations under the contract, or could only comply with substantial hardship; and/or

4.2. the Credit Contract would not meet the Consumer's requirements or objectives because the amount financed under the Credit Contract included the Add-on Fees, and so contravened s 131 (1) of the Act.

5.    Whether Money3 contravened s 133(1) of the Act by entering into the Credit Contracts with the six Consumers in circumstances where the Credit Contracts were unsuitable for those Consumers.

149    The parties propose different wording for the following issues:

150    ASIC formulates the issues as follows:

6.    Whether Money3's representatives were adequately trained, and were competent, to engage in the credit activities authorised by the credit licence, as required by section 47(1)(g) of the Act, including whether Money3:

6.1. provided or arranged adequate training, professional development or other instructional assistance to its representatives;

6.2. provided adequate templates, forms, checklists and guides to its representatives; and

6.3. assessed the skill and competency of its representatives.

7.    Whether Money3 took reasonable steps to ensure that its representatives complied with sections 128, 130(1), 131(1) and 133(1) of the Act, as required by section 47(1)(e) of the Act.

151    Money3 formulates the issues as follows:

6.    In respect of Money3's dealings with the six Consumers, whether Money3's representatives were adequately trained, and were competent, to engage in the credit activities authorised by the credit licence, as required by section 47(1)(g) of the Act.

7.    Whether Money3 took reasonable steps to ensure that its representatives complied with sections 128, 130(1), 131(1) and 133(1) of the Act in respect of the Credit Contracts for each of the six Consumers, as required by section 47(1)(e) of the Act.

152    Having identified a List of Issues for determination, it is perplexing and somewhat confusing, that ASIC’s closing submissions do not proceed in an orderly manner for each of the six consumers seriatim in accordance with the list. Rather, the submissions proceed by adopting generalised headings: Money3 failed to make inquiries and take steps to verify; Money3 failed to make an unsuitability assessment; and Money3 failed to assess the credit contracts as unsuitable. This is followed by separate submissions for each consumer with further subheadings described as contraventions, but there is no direct engagement with the agreed issues. In consequence, the submissions are difficult to analyse and require significant additional comprehension time in judgment writing. ASIC should understand that when a procedural order is made that requires the parties to attend a confidential conference before a registrar to, inter alia, discuss and agree on a list of issues for the determination at the trial, the Court expects the case to be presented and argued by reference to the identified issues. Proceeding in the manner that ASIC has without explanation is not consistent with the obligation to conduct this proceeding consistently with the overarching purpose: s 37N FCA Act.

153    In contrast, Money3 logically structures its submissions for each consumer in accordance with the agreed issues. The consequence is that ASIC will be held to determination of the agreed issues.

3.2 Witness overview

154    ASIC filed five affidavits from Consumers 1, 2, 3, 4 and 6. At the time, Consumers 4 and 5 were married and Consumer 4 made an affidavit comprising their joint evidence. Consumer 4 died on 11 March 2024. On 6 February 2025, I ruled ex tempore that the affidavit would be received pursuant to ss 63(2) and 67 of the Evidence Act, despite the objections of Money3 pursuant to s 135.

155    Consumer 2 made an affidavit on 9 May 2023, but did not appear to give evidence orally despite being served with a subpoena on the application of ASIC to compel her attendance. On 13 February 2025, I ruled ex tempore that her affidavit would not be received in evidence because I was not satisfied that ASIC had taken all reasonable steps to secure her attendance: s 63(1) and Dictionary, Part 2, cl 4 (definition of ‘unavailable’) Evidence Act: Australian Securities and Investments Commission v Money3 Loans Pty Ltd (No 2) [2025] FCA 110.

156    Consumers 1, 3 and 6 appeared either in person or remotely. Each of their affidavits were taken as their evidence-in-chief and each was cross-examined.

157    Each of the consumers answered questions in a straightforward manner. Understandably, each found it difficult to recall with precision events that occurred in the relevant period. I do not doubt the honesty of any of the consumers in their genuine desire to provide relevant evidence to assist in my fact finding.

158    ASIC also adduced transcript evidence from persons who were examined in the exercise of the powers at Part 6-2 of the Act to give evidence conformably with the procedure at s 306. Money3 gave written notice pursuant to s 306(3) requiring some of the witnesses to appear, and raised various objections. ASIC ultimately called Carly Crowe. Portions of the transcripts for Mr McAuley, Mr Julian Marchesin and Ms Lauren Palazzolo are relied on by ASIC. In some respects Money3 objected. Ultimately, the objections were resolved on the basis that I would determine the ultimate relevance and weight of the evidence, though some objections were upheld (T 106, Ms Palazzolo; T 155-156, Mr Marchesin; T 207-210, Ms Crowe; T 242, Mr McAuley and T 393-394; the balance of the transcript extracts). Ms Crowe gave evidence on 7 February 2025. She was briefly cross-examined by Ms van Proctor and there is no matter that detracts from her honesty.

159    ASIC relies on expert evidence from Mr Hartman in the form of the Expert Report. He gave evidence and was cross-examined. In some respects, Money3 submits that he acted as an advocate for ASIC. It is unnecessary that I make that finding because, as I explain, he did not expose for scrutiny his reasoning process in material respects and I am not therefore able to make findings of fact in accordance with the Expert Report. To the extent that he gave evidence elicited in cross-examination, I have concluded it does assist in some findings of fact.

160    Money3 relies on affidavits made by Ms Cavar dated 9 May 2024 and Ms Costantini dated 10 May 2024. Each appeared and was cross-examined. Ms Cavar’s evidence concerned the settlement procedures and related training. She gave her evidence directly in a straightforward manner. I do not doubt her honesty. Ms Costantini’s evidence was more extensive in that it concerned the assessment procedures, the usual internal practices of Money3 credit analysts, training and policies and she addressed directly the assessment process for each of the six consumers by reference to the business records of Money3. She was extensively cross-examined. She impressed me as a careful credible witness who can be relied on.

161    Save for some objected material, there is an agreed Court Book of documents that was tendered as a single exhibit. It comprises business records of Money3, the affidavits of the parties to be relied on, statutory notices issued by ASIC and the responses thereto, and transcripts of examinations of various individuals conducted pursuant to Part 6-2 of the Act. It comprises 8474 pages. Unfortunately, there is much documentation in the Court Book that is not germane to the issues and the vice of multiple reproduction of documents detracts from its utility. It is also the case that documents are often not chronologically ordered: in some cases documents with the same or successive date are separated by hundreds and sometimes thousands of pages, which makes navigation challenging.

162    In the balance of my reasons, I make findings of fact in accordance with the agreed documents, evidence-in-chief that is uncontroversial and evidence as tested in cross-examination save for Consumer 4 where I approach my findings of fact keenly aware of the disadvantage that Money3 suffers in not being able to challenge his evidence directly by cross-examination. Where I reference the evidence of a witness without qualification, I find according to the effect recorded.

4.    THE REASONABLE AND PRUDENT LENDER

163    The resolution of Issue 1 and Issue 3 first requires determination of what a “reasonable and prudent lender” would have done in the circumstances as they were when Money3 considered each loan application? Pausing there, Mr Hartman capitalises this phrase (as well as many others) in the Expert Report. I choose not to, save where I quote from his evidence.

4.1 ASIC’s contention: The reasonable and prudent lender

164    Central to ASIC’s case is the contention that Money3 failed to do that which a reasonable and prudent lender (licensee is used interchangeably) in its position would have done in the circumstances, which aligns with the Shirt calculus. Money3 does not submit otherwise. However, the case then becomes conceptually dense by the particularisation of what it is said should have been done. ASIC delivered very detailed particulars in letter form on 31 July 2023. The particulars first address the reasonable inquiries that should have been undertaken about the consumer’s requirements and objectives (s 130(1)(a)). The particulars are extensive and prescriptive. They provide:

Reasonable inquiries

The reasonable inquiries a licensee should make about a Consumer’s requirements and objectives in relation to the Credit Contract listed below are not exhaustive and are based on acceptable industry practice.

What constitutes ‘reasonable inquiries’ is not simply a list of standard questions to be asked of each Consumer. Based on acceptable industry practice, making reasonable inquiries is a dynamic process that involves gathering information over the course of a credit assessment period sufficient to make decisions – including interim decisions – on the way to making a final decision to approve or decline the Consumer’s application.

A licensee should give proper consideration to the requirements and objectives and affordability of the Consumer as part of making reasonable inquiries.

The reasonable inquiries that a licensee should make, involve:

a. Content – breadth of questions:

i. Guidance to help the Consumer understand what is being asked. Such guidelines should deal with matters regarding elements that have the potential to impact:

1. the amount the Consumer wishes to finance;

2. what the Consumer is buying – especially any ‘add-on’ items to be financed;

3. interest rate;

4. loan term – the duration of the loan;

5. frequency of repayments;

6. potential of a residual due at the end of the loan (i.e., a balloon payment); and

7. other features or options, especially those that have a financial implication, such as optional repayment holidays.

b. Consequence Disclosure:

i. If there are options that have financial implications if they are included as part of the loan, simple, clear disclosure (in particular the cost implications on the repayment and overall).

ii. This is necessary so that the Consumer can make an informed choice as to the priority of these items including whether or not the Consumer wishes to include them given the consequences.

c. Prioritisation:

i. The ability for the Consumer to indicate what is most important to them – especially if the affordability of the loan is dependent on having to make changes to their financial situation (increase income or decrease other expenses).

Initial inquiries

A licensee in the car finance industry that provides credit to a Consumer where the purpose of the loan is to purchase a vehicle, should go beyond that basic purpose to consider the requirements and objectives of the Consumer to include aspects of:

a. Add-ons, including whether or not the Consumer wishes to finance other “things” in addition to the vehicle, such as:

i. insurance – and if so what type/s;

i. fees – e.g. application or brokerage fees;

ii. extended warrantees.

b. Features of the credit, such as the:

i. term (duration) of the loan;

ii. repayment frequency (e.g. aligned with the Consumer’s income frequency);

iii. interest rate; and

iv. maximum repayment.

c. Other matters that may affect the amount of each repayment, the total amount financed and its associated costs or other matters that are likely to impact the Consumer’s financial situation over the duration of the loan.

In the car finance industry, where the Consumers are those with higher levels of vulnerability, which could be readily determined by a low credit score and/or income solely made up of government assistance/Centrelink benefits, they may not be able to understand the relevant question/s in terms of potential answers and the implications of the repayments or overall cost of the car loan.

A licensee that does not take steps to ask the Consumer additional questions about their requirements and objectives in respect of the loan, particularly Consumers with higher levels of vulnerability, is unreasonable based on industry practice.

A licensee that does not include questions about features that may not be offered on a loan but are commonly offered by other lenders, is unreasonable based on industry practice, as this precludes understanding what the Consumer wants or may reasonably want if they are made aware of those features. These elements are all part of reasonable inquiries, and they should be addressed, which requires gathering information about the Consumer to reach a reasonable understanding of the Consumer’s requirements and objectives.

Additional/subsequent inquiries including key context

Based on acceptable industry practice, throughout the credit assessment process it is possible for information to come to light that generates the need to inquire further regarding the Consumer’s requirements and objectives.

For example, in the event that the cashflow of the Consumer is insufficient to meet the full cost of the loan, and that loan includes finance for ‘add-ons’, it may be necessary to have information about the priority of those items and whether or not one or more could be removed and whether that would be acceptable to the Consumer. Such information need not be gathered initially, and only if such a scenario arises, but would be reasonable to expect if such an instance arose.

Further context needed for the assessment of unsuitability

The assessment of unsuitability involves consideration of requirements and objectives, the Consumer’s financial situation and whether the loan is affordable. Whilst these matters are different, they are closely intertwined.

It is not uncommon for a Consumer to want something (for it to be included (if asked) in their requirements and objectives), but their finances are not able to cover everything they want.

In such cases, potential trade-offs could be made to reduce the borrowed amount so long as consideration is given to the consequence of those trade-offs and doing so remains acceptable to the Consumer with regard to their fundamental requirements and objectives.

Acceptable industry practice suggests that by a licensee understanding and considering the extent of the Consumer’s vulnerability, it plays a part in the decision process when making any trade-off requirements and objectives – in particular if a required item helps to mitigate the vulnerability of the Consumer.

165    ASIC then particularises reasonable inquiries about, or taking reasonable steps to verify, the consumer’s financial situation including by obtaining a signed and/or completed statement from the consumer setting out their financial situation (including likely expenses) (s 130(1)(b)):

Reasonable inquiries

ASIC repeats the above matters.

The reasonable inquiries a licensee should make about a Consumer’s financial situation listed below are not exhaustive and the sources of information may vary.

The inquiries about a Consumer’s income and expenses should include:

a. the amounts;

b. the frequency;

c. the source/s, duration, nature and extent (for income);

d. type/category (for expense) – sufficient to enable validation by comparison to a viable benchmark;

e. elements that may impact the likely continuity of income or expenses over the full term of the loan (e.g. the ages of dependant children if that impacts on certain government benefits);

f. matters that are likely to result in expenses that are unique or rare (such as dependant adult children living at home);

g. foreseeable changes to income or expenses over the term of the loan; and

h. matters that may impact the potential for the Consumer to change (increase income and/or decrease expenses).

It is reasonable to obtain some of the information and documentation about a Consumer’s financial situation from them directly and some from third parties, subject to compliance with privacy requirements.

A licensee should verify the accuracy of information obtained from third parties with the Consumer.

Based on acceptable industry practice a licensee should not:

a. use a benchmark value as a substitute for, or in the event of, missing information from the inquiry process; or

b. substitute a benchmark value that is lower than the comparable disclosed value obtained from inquiries.

Reasonable steps

The reasonable steps that a licensee should take are dependent on the particular personal financial situation and objectives of the Consumer and will vary for each person.

Based on acceptable industry practice, it is expected that a licensee should have a properly designed, faithfully implemented and consistently executed framework deliberately put in place.

The framework will ensure that activities are undertaken consistently and deliver the intended outcome. It will detect if they are not and analyse it with recommendations for corrective action. This includes making the decision to implement those changes and ensure they are delivered in a reasonable timeframe based on the severity of the consequences – primarily to the Consumers impacted.

Inquiries regarding the Consumer’s financial situation can reasonably be made at several points in the credit assessment process. For example, information about their income or expenses may be re-gathered at a later stage of the process based on the outcomes of a preliminary assessment of affordability if changes are required to enable loan repayments to be met.

The information gathered about the Consumer’s expenses should be at a sufficiently granular level so that it can be compared with what is included in a benchmark.

Ultimately the steps taken should involve a consideration of the Consumer’s financial situation to determine whether they can meet the proposed loan repayments on time and without substantial hardship.

The Household Expenditure Measure (HEM) index is a publicly available index. licensees within the industry could use a benchmark such as this to identify examples of the types of expenses to include.

Based on acceptable industry practice the reasonable steps that a licensee should perform include:

a. Collecting two types of information about the Consumer’s financial situation:

i. values – the numeric inputs to the calculation; and

ii. context – other factors that relate to those values or other matters and need to be collected to facilitate verification, effective assessment, and decision making.

b. Conducting an assessment of:

i. the vulnerability of the Consumer, as this influences a variety of decisions in the credit assessment process including the extent of verification; and

ii. the reasonableness of the disclosed information, such as key expense categories. These include items such as family structure, number of dependants, income, residential location – which are necessary to utilise benchmarks such as HEM.

c. Verifying:

i. the information that goes into assessing the Consumer’s vulnerability assessment;

ii. the Consumer’s income;

iii. the validity of the expenses, by comparing categories of expenses against a valid benchmark (such as HEM or one developed using a similarly robust methodology), as long as the benchmark is reviewed with ongoing updates; and

iv. the information to ensure that the values can be sustained over the full term of the loan and are not likely unsustainable over the duration of the loan term.

d. Substituting a benchmark figure for expenses which is higher than what was disclosed by the Consumer, if it is reasonable to do so.

e. If the Consumer is vulnerable, having an approach that requires the licensee to take additional steps to ensure that the information is both accurate and likely to be representative of the Consumer’s circumstances over the full period of the loan given their specific situation.

f. Once all information about the Consumer’s financial situation has been gathered, performing a calculation similar to the following to determine if the loan is unsuitable:

i. Income;

ii. Less Debts;

iii. Less HEM Comparable Expenses;

iv. Less Non-HEM Comparable Expenses;

v. Equals Potential Funds Available for Repayments;

vi. Less Proposed Loan Repayment;

vii. Equals Cash Flow Post Proposed Loan;

viii. Less Reliably Derived Associated Expenses;

ix. Less a ‘risk based’ buffer;

x. Equals Final Cashflow position Post Loan – a value that must be >=$0;

xi. If the result is < $0, consideration can be given to the Consumer’s potential to increase income and/or reduce expenses sufficient to make up the shortfall, or to reduce the inclusion of some or all of any add-ons to reduce the principal of the loan.

166    Next, ASIC particularises why Money3 applied expense amounts which were not based on the consumer’s individual financial circumstances and were substantially lower than those expenses. It does so by reference to reconstructed data for each consumer. As an example, for Consumer 1 the particulars (as corrected on 20 December 2023) are:

The HEM Comparison value for expenses is $504 per week for a single parent with three dependant children, with an annual gross income of $42,212.12 who lives in Maffra, Victoria.

It is acceptable industry practice to rely on the greater of HEM or the disclosed expenses. ASIC relies on Consumer 1’s disclosed expenses of $1,409.12 as the reasonably necessary expenses.

Consumer 1’s cashflow calculation was:

167    The initial difficulty faced by ASIC is that the evidence of Consumer 1 did not make out all of the expenses in the tables. In closing submissions ASIC sets out a new retrospective calculation partly from the illion bank statements, which Money3 objects to and which I resolve later in these reasons. ASIC faces the same difficulty for each of the other consumers. However, presently I am concerned with a more important anterior issue.

168    In my view the threshold issue is whether, by proceeding in this way, ASIC has committed the vice of retrospectivity that Hayne J identified in CAL No 14 (at [68])? This is a regulatory proceeding where civil penalties are sought for multiple contraventions. ASIC proceeds by detailed particularisation of what Money3 should have done in the circumstances which can only mean that Money3 failed to do that which an ordinary and reasonable lender would have done. On ASIC’s case it is the practices and procedures of the reasonable and prudent lender against which the alleged failures of Money3 are to be judged, which brings me to ASIC’s evidence.

4.2 Mr Hartman’s Expert Report

169    What is to be noticed from the particulars is the reliance on “acceptable industry practice” (noting there is later elision with “industry practice” without adjectival qualification) but which is “not exhaustive”. ASIC has not adduced evidence in the form of finance industry codes, published good practice documents, seminar papers, reputable articles or industry standards. Nor has it called evidence from representatives of comparable lenders with actual data as to what was done at the time to comply with the obligations at s 130(1)(a) or (b). Ordinarily that is the type of evidence one expects to be adduced to give content to the standard of reasonable conduct.

170    Instead, ASIC relies on expert evidence from Mr Hartman. Many years ago, Young J succinctly set out how evidence of that type may assist in determining the standard of reasonable conduct: Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735. Although his Honour was dealing with a negligence action against legal practitioners, what he said at 737 about the utility of expert evidence is of general application to recognised disciplines, specialised industries and professions:

The attitude I have taken in this type of case is, I believe, vindicated by the authorities and that is: (a) to reject evidence in which an expert says that in his or her view a solicitor was negligent in doing or not doing a certain thing. This is the question for the court to decide; (b) to admit evidence of an “industry-wide” good practice; (c) to admit, subject to relevance, evidence as to what is common practice amongst solicitors of good repute; (d) not to admit evidence as to what the expert witness solicitor himself would have done if the purpose for which that evidence is tended is to have me infer that all good solicitors would have done things that way….

171    Evidence of that type is relevant “in determining the standard of care, but not decisive”: Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291 at [182], Middleton J. Very recently, Shariff J in Australian Securities and Investments Commission v Green County Pty Ltd [2025] FCA 367 at [471], having referenced that statement of Middleton J observed:

Even accepting that expert evidence as to “industry-wide” practice may be relevant and admissible, in the present case it must be directed at establishing the relevant standard of care in view of the regulatory context.

172    Coincidentally, in that case ASIC also relied on expert evidence from Mr Hartman, which his Honour determined to be of limited weight: [465].

173    With that introduction I turn to the evidence of Mr Hartman, limited at this stage to the standard of conduct issue. His Expert Report is extensive and comprehensive, comprising 232 pages (without annexures) and 963 paragraphs. As I have noted, during the trial I ruled against the admissibility objection of Money3 to the entire report. What is readily apparent is that ASIC’s particulars are drawn from the Expert Report. That Mr Hartman’s opinions frame the content of the duty was unequivocally expressed by Mr Senathirajah in opening submissions in answer to a question from me:

Are you saying that they were obliged to do everything that your expert says, for such small loans?

Everything – yes, your Honour. Everything that Mr Hartman says that a reasonable, prudent lender – that he is aware of – undertakes. There are some things where he does indicate above and beyond the call. But those where he specifically says, these are the minimum requirements…

174    It is not difficult to reconcile most of ASIC’s particulars with the precise, or substantially the same, wording in the Expert Report. Without being exhaustive and adopting the headline items in the particulars, the correspondence with paragraphs is: Content – breadth of questions [758]; add-ons [144], [511], [772 – 773], [758]; features of credit – duration [758], [833], [960]; features of credit – repayment frequency [504], [532] [758]; features of credit – interest rate [504], [758]; total amount financed and associated costs [504], [533]; new information and further inquiries [217], [547]; inquiries about income and expenses – the amounts [504], [758]; the frequency [504], [532], [758]; foreseeable changes to income or expenses [111], [180], [339], [344], [377], [446], [480]; potential of the consumer to increase income or to reduce expenses (multiple references but particularly) [449 – 450], [455], [585]. As to the contentions concerning a failure to obtain information about the consumers, the references in the Expert Report are too numerous to list.

175    That said, there are some stand-alone particulars not derived from the Expert Report; notably the credit features (maximum repayment), vulnerability, removal of add-ons where insufficient cash flow, further context for the unsuitability assessment and unique expenses.

176    The issue is whether Mr Hartman has exposed the rational basis for his opinions to enable an evaluation of their cogency, so that the probative value relevant to the facts in issue may be assessed: Lang v R [2023] HCA 29; (2023) 278 CLR 323 at [6], [15], Kiefel CJ and Gageler J; [227], Gordon and Edelman JJ; Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [59] – [61], [68], [71], [79], [82] and [87], Heydon JA and Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [92], Heydon J.

177    What then is Mr Hartman’s evidence about the standard of conduct in the relevant period by which the conduct of Money3 is to be assessed as meeting or falling short of the dual requirements at s 130(1)(a) and (b)?

178    The Expert Report is arranged into 44 sections. Mr Hartman’s qualifications and experience are addressed in sections 5 and 44.1. He has worked in the credit industry since 1990 and in Australia since 1996, which he describes as including numerous senior management roles responsible and accountable for developing and overseeing the operation of credit practices relating to credit risk and compliance within a range of lending products; including motor vehicle lending. He has provided expert submissions to regulatory bodies concerned with credit risk assessment and compliance. He has designed and implemented that which he describes as “execution frameworks”, including the assessment of applications, the verification of information and the assessment of unsuitability. He has designed and implemented credit assessment tools and systems including process controls, credit reporting, credit scoring, database design and credit staff training.

179    He has acted as an independent consultant and expert in areas of credit risk management and compliance including pursuant to the Act. He was the remediation program leader at BMW Motor Finance where he designed, implemented and ran a remediation program the subject of an enforceable undertaking which required review of more than 100,000 automobile finance loans to determine whether the assessments “were likely to be faulty”.

180    He has drafted, implemented, reviewed and analysed numerous framework documents across a broad spectrum of credit providers including major and second-tier banks, mutuals, large and small non-bank finance companies and start-up service providers including providers of consumer credit. He has advised on both credit risk and compliance matters including the determination of unsuitability. He has been involved in drafting regulatory instruments including the Credit Reporting Code of Conduct and its supporting elements. A significant portion of his work has concerned the use of data and automated systems to make credit decisions. His experience extends to credit staff training, managing credit assessment staff in promoting and maintaining awareness of regulatory requirements.

181    In his employment/consulting history he discloses that: between 1997 and 2001 he was employed as the head of credit and risk management for credit cards at NAB; from 2001 to 2002 he was employed as the head of credit policy and decision infrastructure for credit cards at NAB; between 2002 and 2005 he was the national credit risk manager for ME Bank. Between 2005 and 2016 he was a principal consultant for risk and compliance when his clients included GE Money, ANZ, Goodyear and ME Bank amongst others. He was the remediation program leader for BMW financial services between October 2016 and August 2018, the compliance operations consultant for Toyota financial services between September 2018 and September 2019 and the principal consultant for risk and compliance to Insync between September 2019 and June 2022. Insync is a consulting business concerned with employee surveys. Finally, from September 2022 to the present time he has acted as a consultant for risk and compliance at Kadre (what that business is concerned with was not explained).

182    Money3 does not submit that Mr Hartman lacks the necessary qualifications and experience to express opinions about the relevant standard of conduct. Rather, the submission is that Mr Hartman proceeds on the basis of unstated assumptions and purported facts and his Expert Report fails to expose his reasoning process. On that basis, it submits that I should not give the opinions any weight.

183    Staying with Mr Hartman’s qualifications and experience for the moment, in cross-examination the following emerged. When employed at NAB between 1997 and 2001, he was not primarily responsible for the making decisions upon applications for loans, although “from time to time” he was involved in individual applications; an exceptional occurrence. He was however responsible for setting “the rule set” for assessment purposes. When acting as a consultant between 2005 and 2016, he was not responsible for the making of decisions on loan applications; rather, his function was to undertake retrospective reviews from time to time. When engaged as a consultant for BMW finance, his primary responsibility was to undertake retrospective reviews and analysis of compliance; he was not responsible for making loan application assessments and decisions. In his capacity as a consultant with Insync, it was not part of his primary responsibilities to make decisions on loan applications as it was not a lending institution.

184    It is to be noticed, that Mr Hartman does not expose, in disclosing his qualifications experience, any particular loan assessments for unsuitability, any category of such assessments or the granular details of relevant assessments that might be used as comparators for determining good industry practice within the relevant period.

185    He does not attach to his Expert Report any relevant external documents, save for three documents: the LIXI Data Standards as at 17 February 2020 (CB 2132), the ANZ Core Logic Housing Affordability Report of May 2023 (CB 2137) and the Australian Automobile Association Transport Affordability Index, July 2019 (CB 2151). None of those documents are relevant to the standard of conduct inquiry under s 130.

186    The Expert Report commences with a glossary in section 2, where various terms are defined. The execution framework is stated to consist “of a set of eight integrated elements that together provide a holistic means of consistently delivering an outcome – in this case, compliance with [the Act] obligations”. The elements as listed are: (1) accountability; (2) policy; (3) process; (4) procedure; (5) training; (6) monitoring; (7) reporting & analysis; and (8) governance. Of these elements Mr Hartman provides this qualification:

Whilst not stipulated in regulations, as a matter of practicality, documentation and implementation of all eight elements are considered a Minimum Expectation of Reasonable and Prudent lender practices to consistently deliver compliant lending outcomes.

IMPORTANT NOTE:

The Minimum Expectations are not to be taken as the only means by which an element can effectively be delivered. However, for an alternative means to be reasonable it would need to deliver the same (or very similar) result relative to the detection of credit that would be unsuitable.

187    Mr Hartman’s emphasis on ‘minimum expectations’ and ‘reasonable and prudent’ lender practices should be noted as informing the balance of his opinions. It is essential therefore to understand what Mr Hartman means by these defined terms. minimum expectations are listed for each “effective” element of the execution framework. What Mr Hartman means by minimum expectations is defined in this way (CB 1851):

The [Act] is generally principle based, rather than prescriptive in how the obligations are to be met by lenders.

Part of what I have been asked to assess in this report is whether or not the outcomes and practices of Money3 were reasonable.

To do so I have used as means of illustrating what is reasonable, descriptions of practices (Minimum Expectations) I know to have been relatively common (Reasonable) and, in my view, compliant (Prudent) during the Relevant Period. I have included in the descriptions some explanation of what the practice achieves as part of the description.

Throughout this report there are tables that compare the Minimum Expectations to the observed practices of Money3 as well as commentary regarding any gaps, and what I see as the likely consequence of those gaps on the intended outcome of avoiding granting credit that is unsuitable.

To be clear:

The Minimum Expectations listed are not exhaustive (they are not a list of everything that Reasonable and Prudent lenders do). Nor are the Minimum Expectations list exclusive (they are not the only approach used by Reasonable and Prudent lenders).

The Minimum Expectations listed are not industry best practices or a description of what is necessary to achieve a ‘perfect’ result.

To the extent that Money3 utilised a different approach to that listed as a Minimum Expectation, I have considered the likely result of Money3’s alternative practices relative to the result of the Minimum Expectation practice on the basis of its ability to identify instances of unsuitable credit, including identifying reasonable values to use in the financial assessments – part of the assessment of unsuitability.

To the extent that the result was the same (or very similar), to the extent there is an objective means of outcome comparison I assess Money3’s practice as meeting the Minimum Expectation.

Alternatively, to the extent that I find no objective means of comparison, I have noted that and applied my judgement as an expert in the area to form a view about the likely consequence of the difference between the Minimum Expectation practice and Money3’s practice on the ability to identify and prevent the granting of credit that is unsuitable, as defined under [the Act].

188    Dealing next with reasonable and prudent, the glossary provides (CB 1852):

This refers to my experience with and knowledge of the practices of lenders (including those providing new and used vehicle loans) that I knew to be at least relatively common (Reasonable) and, in my view, compliant (Prudent) at the time – i.e. during the relevant period.

Where Money3 took an alternative approach; i.e. where the means of how Money3 operationalised a regulatory requirement differs to those I have listed as Minimum Expectations, I have assessed that alternative based on the likelihood of the alternative achieving the same (or very similar) outcome to the practices in terms of its ability to prevent unsuitable loans from being granted. This includes developing values that are reasonable and appropriate for use in the financial assessments involved in the assessment of Unsuitability.

This term is important to the understanding of what I have described as a Minimum Expectations for Money3, as the Minimum Expectations listed, reflect the practices of Reasonable and Prudent lenders.

189    Returning to the execution framework, in section 3 Mr Hartman sets out a summary of the eight elements commencing with this (CB 1855):

It has been my experience over more than 30 years that Reasonable and Prudent lenders utilise and maintain a well-documented Execution Framework in some form to achieve consistency in performance including compliance.

Though they may not be as distinctively labelled, evidence of all eight of these elements are present and prevalent and documented practices of Reasonable and Prudent lenders.

The extent that these elements are missing or otherwise ineffective (such as due to missing or poor controls), correlates strongly to the level of inconsistency in execution resulting in breaches of the regulatory requirements; and consequently, a characteristic of what is not Reasonable and Prudent lender practice.

In my experience, material reliance on informal decision making and communication without an effective structure, i.e. an Execution Framework, is an extremely common characteristic of lenders that do not achieve consistent performance including compliance with regulation. On that basis, I do not consider such an approach to be consistent with the practices of Reasonable and Prudent lenders.

As a consequence, I have utilised the set of eight elements that make up an Execution Framework, as a key structure against with I have assessed Money3s practices.

190    Next follows a description of the eight elements followed with a statement of purpose and importance. As an example, the third element is process. The description is (CB 1856):

The means, most often a system, by which the policy requirements are to be actioned. It includes controls to ensure that what is intended is more likely to be what happens. These can be manual or systemic/computerised.

191    The corresponding purpose and importance is described as:

An effective process is key to delivering consistency, by providing a repeatable means of undertaking an activity. Key processes need to include control mechanisms to help ensure that the activities are consistently undertaken correctly.

Likely consequences if missing or ineffective:

Missing process elements, similar to missing policy elements generally result in things not being done or if done, done with little consistency based on an ad-hoc approach.

192    In section 3.3, Mr Hartman addresses the “footprints” of an effective execution framework, which includes the following (CB 1859):

An effectively functioning Execution Framework generates the artifacts that make it identifiable.

Credit providers do not all utilise the same terms for the eight elements as those listed above in documenting their Execution Frameworks and some combine several elements within documents.

Whilst my experience and observation are that there is discernible performance level achievement related to clearly delineating between these elements to help make clear how they work together as a ‘Framework’, that is not as important a determinant of performance as ensuring that the substance of each element is clearly documented, fully implemented (enabled) and consistently executed as evidenced by reporting of both activities, decisions and outcomes, to sustain compliance to be the most likely outcome.

193    In section 3.4, Mr Hartman explains that an execution framework “is necessary in practice as a Minimum Expectation” because, amongst other reasons (CB 1859-1860):

Whilst having a documented framework as to how the [Act] obligations are to be implemented by credit provider is not a specific prescribed regulatory requirement, all eight elements of an effective Execution Framework are never-the-less necessary from a practical perspective to enable a credit provider to effectively meet the obligations that are the subject of this report in a way that is consistent with the practices of Reasonable and Prudent lenders that are likely to deliver consistent compliant outcomes.

…

Given the breadth of applicability and seriousness of the potential outcomes to both applicants and credit providers, large, small, simple or complex, Reasonable and Prudent lenders have an appropriately sophisticated and documented Framework in place.

For this reason I consider having such a structure in place, as a Minimum Expectation.

In my experience, to the extent that elements are missing, or deficient compliance is compromised, and there is a strong correlation between the extent to which elements are either missing or improperly designed or implemented (compromised) and the extent (degree and scale) of compliance issues – the weaker the Framework the greater the inconsistency in achieving consistently compliant outcomes.

194    Mr Hartman then makes it clear that the eight elements of his execution framework are necessary integers to achieving compliance with the statutory requirements, which he expresses in this way (CB 1860):

In summary, each of the eight elements is necessary because of what each element delivers, as well as what they prevent. This is why Reasonable and Prudent lenders develop and maintain effective Execution Frameworks. It is not enough to just have the eight elements; they need to be complete, fully functional, and operating effectively…

195    Relevantly, Mr Hartman next addresses whether his execution framework is based on his observations of the actual practices of relevant lenders, which includes these assertions (CB 1862):

I believe using the eight-element Execution Framework that depicts the actual practices of Reasonable and Prudent lenders as a structure against which to assess Money3’s practices is a fair and consistent way to evaluate both the design, implementation and performance of Money3’s practices and the controls they use to deliver compliance with regard to the assessment of credit applications.

Additionally, over 30+ years of observation I have come to understand the likely extent and nature of issues likely to occur when one or more of the Execution Framework elements is missing or deficient either in design or execution.

196    However, there is a qualification in section 3.5, depending on the scale and nature of the lending. Mr Hartman says (CB 1860-1861):

Working for and with a broad set of credit providers, monitoring and analysing their performance relative to compliance has regularly shown that the level of detail in design and sophistication of the means of implementation of a Framework can vary based on the scale and nature of the lending entity. However, I have found it essential in achieving sustain compliance that all eight elements be present across design, implementation and ongoing execution.

Irrespective of the scale or complexity of a lender’s activities or depth or breadth of product range, it is not Reasonable and Prudent to simply articulate expectations (what might be considered design) without effectively enabling them with the necessary tools and systems to make compliant execution possible (effective implementation) and to administer them continuously (disciplined execution and evolution).

197    Mr Hartman accepts that because the methodology for the assessment of a credit application is not prescriptive, “there is no simple bright line test of compliance”. Nonetheless, the methodology that he applied is then described as (CB 1869):

As a means of enabling comparison and assessment, I have described as a Minimum Expectation a set of practices that I know to be used by Reasonable and Prudent lenders and which I believe meet the requirements of the regulation – i.e. I consider them to be compliant. These form the basis for a practical comparison to an assessment of Money3’s practices.

I believe I am well suited to make such assessments having worked for a broad range of Reasonable and Prudent lenders whose specific practices differ, yet still demonstrably meet the requirements of the regulations.

198    To undertake an assessment, Mr Hartman has devised an assessment grading scale: green represents practices that are “largely common” of reasonable and prudent lenders or are likely to deliver the same or very similar outcomes and black represents practices that do not meet minimum expectations, considered “demonstrably deficient and not representative of the practices of a Reasonable and Prudent lender”.

199    The Expert Report is replete with statements that describe practices that are “necessary” or “essential” to meet the regulatory threshold measured against the practices of reasonable and prudent lenders, which is difficult to reconcile with a statement that Mr Hartman makes in section 10, where he focuses his attention on the obligation to make reasonable inquiries and to verify (CB 1892):

There is no regulatory prescribed or industry agreed and approved standard as to how to identify what is reasonable under the circumstances. This creates a challenge for lenders who, as a matter of operational practicality, must create practices that are internally consistent and effectively controllable.

200    This leads to a further concept which Mr Hartman describes as “scalability”. Returning to the glossary, Mr Hartman provides this definition (CB 1853):

An undefined term used in ASIC’s Regulatory Guidance RG 209, understood to mean that the extent of inquiries and degree of Verification undertaken can vary based on the risk of the harm the proposed credit may cause the applicant.

The risk to the applicant is considered to comprise both the likelihood of their inability to repay the debt under the terms of the contract and the severity of such a situation relative to their financial situation.

Whilst not stipulated in regulation, the finance industry (including those who provide new and used vehicle finance) has widely adopted this concept, as a means of meeting the stipulated requirement of reasonableness. As a result, it is considered as part of what constitutes the Minimum Expected practices of a Reasonable and Prudent lender.

201    Returning to section 10, Mr Hartman explains that scalability refers to the extent of inquiries and the degree of verification, reflective of the risk of harm the credit may cause the applicant. In his opinion, reasonable and prudent lenders apply scalability, but not in a way that limits the information that can be obtained to undertake the verification task. Mr Hartman continues (CB 1893):

As a consequence of the term not being defined, nor an approach specified in regulation or the existence of an adopted industry standard, whilst there are common practices across the credit industry, there is no single consistently applied approach.

It would be impractical for this report to seek to assess the practices of Money3 against every permutation of industry practices that is used. On that basis, I have chosen those practices of Reasonable and Prudent lenders that I consider most common, as the appropriate means of comparison.

To be clear, the practices I have chosen are not what might be classified as best practice, or the most efficient or effective practices, but rather the practices represent those taken by Reasonable and Prudent lenders. Put simply, they are practices that are commonly used and considered sufficient to achieve a consistently compliant outcome. They are not those I necessarily considered to be the best or what should be done in theory (i.e., could be applied but are not commonly applied).

…

The approaches of Reasonable and Prudent lenders have also evolved since 2010 when the [Act] regulation was initially implemented. Whilst lenders’ practices have changed, those changes have not been completely uniform resulting in some variance of practices continuing over time.

The most material of those changes resulted from the decisions handed down in several court cases (in particular) the decision in [Westpac PJ].

202    What is notable from these aspects of the Expert Report (many other examples can be given) is that Mr Hartman does not give any example which illustrates or demonstrates that use of his execution framework achieves compliance with s 130. In cross-examination, it was put to Mr Hartman that the execution framework is his own “creation” to which he responded (T 298):

Not – not uniquely my own, it’s the culmination of how I would describe the learnings that I’ve – I’ve developed over more than 30 years in the industry. It’s how I articulate things, but it’s not a construct that I’ve developed all on my own. It actually reflects largely the practices of the lenders that I’ve either worked for, or consulted with.

203    The difficulty with that evidence is that Mr Hartman has not identified any of the lenders that he consistently refers to as within his class of reasonable and prudent lenders, he does not give evidence of any identified practice of any identified lender in the assessment of comparable loans in the relevant period, there is no evidence of any industry codes or standards, no identification of any practice that Mr Hartman says was common and therefore compliant or reasonable and when questioned in cross-examination about his selection of a subset of reasonable and prudent lenders and their practices as “most common” in section 10, he accepted that his report does not identify those lenders, how they were selected or why by his application of evaluating judgment, he determined that they were common practices and therefore may be taken to be those of reasonable and prudent lenders.

204    Similarly, when cross-examined about scalability, Mr Hartman accepted that he has not identified any particular comparable lender within the relevant period who deployed the scalability methodology which he uses to describe an aspect of the assessment conduct which in his view reflected the practices of reasonable and prudent lenders. Ultimately, he accepted that his scalability analysis was his own creation, at least to the extent of the terms employed in his report.

205    Ultimately, Mr Hartman gave as the reason for his reticence to disclose the material he considered in formulating his minimum expectations, the practices of reasonable and prudent lenders and the necessity to implement scalability, that he is bound by non-disclosure agreements the effect of which was put by him in this way (T 304):

I’m familiar with the data that has been used by a number of credit providers in this way, but for reasons under NDA requirements, I can’t specifically disclose any one of them. I wouldn’t be able to articulate what others have done, based on contractual non-disclosure agreement things I’ve signed.

206    I have taken some time to set out examples from the Expert Report, when read with the evidence of Mr Hartman, to illustrate why I have concluded that in fundamental respects he failed to expose the basis for his opinions. Having defined minimum expectations and reasonable and prudent lenders, the structure of Mr Hartman’s opinion is then to combine these terms so that they become the minimum expectations of reasonable and prudent lenders which are then necessary to achieve compliance with the reasonable inquiries and reasonable verification requirements of s 130. On that foundation, Mr Hartman then proceeds to construct his execution framework, comprising eight elements, which whilst not a mandatory requirement of the Act, becomes essential to his analysis as the minimum expectation of reasonable and prudent lenders, being practices “essential” to consistently deliver compliance, despite acknowledging that the minimum expectations are not to be taken as the only means of achieving compliance.

207    Mr Hartman’s opinions are impenetrable. The reasons are based on multiple assertions that the minimum expectations are those of reasonable and prudent lenders without disclosure of who is being referred to, with respect to what categories of finance as regulated by the Act and just what were the practices applied to undertake the s 130 inquiries and verification steps and with what effect. The execution framework is contended to be a minimum expectation of reasonable and prudent lenders, essential to consistently deliver compliant outcomes, where the source is the minimum expectations of an unidentified group of lenders. Self-evidently, the reasoning is circular.

208    Mr Hartman consistently references practices that he knew to be “common”. His opinions are taken a step further when, in defining reasonable and prudent , he equates his knowledge of the practices of lenders, including the unidentified sub-set of those financing the purchase of new and used motor vehicles, as common which he then determines as reasonable and therefore compliant. The basis for that central construct is undisclosed, but it is the springboard for two evaluative judgments: common practice is reasonable practice; and in his view compliant which then equates to standard reasonable and prudent practices of lenders. One cannot evaluate the validity of those central conclusionary opinions because of the failure to expose for consideration their basis and the reasoning process that supports the opinions.

209    Returning to the judgment of Heydon JA in Makita, Mr Hartman fails to reveal the criteria supporting his opinions to enable their quality to be tested ([61]), it is not possible to undertake an “independent assessment of the opinions and their value” ([68]), “essential integers” which underlie the opinions are not exposed ([71]) and there is no revelation of the “whole manner” that forms the basis for the opinions. Or, to put it as Dixon J did speaking extrajudicially: “Courts cannot be expected to act on opinions the basis of which is unexplained” (quoted in Makita at [60]).

210    It follows, that although I have admitted the Expert Report as satisfying the minimum requirements at s 79 of the Evidence Act, I am unable to make findings of fact in accordance with it as to the content of the standard of the three obligations at s 130(1)(a), (b) and (c), by reference to “industry-wide” good practice during the relevant period: Boulton at 737.

211    It further follows, that ASIC’s particularised content of those obligations to the extent that they reproduce or rely on the minimum expectations or practices of reasonable and prudent lenders from the Expert Report are not made out.

212    However, it does not follow that evidence Mr Hartman gave in cross-examination which was reasoned or amounted to concessions cannot form the basis of fact findings. Where relevant, I address that evidence in determining the individual issues.

4.3 Reasonable and prudent conduct is a matter for the Court to determine

213    These conclusions do not require ASIC’s case to fail at this point on the s 128(d) and 130(1) issues. Money3 did not submit that rejection of the opinions of Mr Hartman has that consequence. What does fall away is the prescriptive over-specificity of the content of the statutory duties of which Hayne J spoke in CAL No 14.

214    It is ultimately for the Court to determine whether what was done by Money3 for each of the consumer loans complies with the inquiry and verification obligations. Evidence of good industry practice is not essential; it is relevant but not decisive: Healy at [182]. At the risk of overgeneralisation, the standard of care (here, what a reasonable lender would have done) is a question of fact. Expert evidence about ordinary practice within the industry in the relevant period may assist in resolving the fact in issue. Its absence is not fatal where the statutory obligation is expressed in very familiar language and the obligations are not technical. This is not a patent case.

215    The content of the statutory obligation is not difficult to understand when viewed conceptually by reference to the statutory object of the provisions in issue: the provisions are aimed at better informing consumers and preventing them from being in unsuitable credit contracts: s 125. There are obvious failures that can be discerned by examination of the evidence and without evidence of industry good practice in assessing loan applications for economically disadvantaged consumers who seek finance in modest sums to purchase used vehicles.

216    If, for example, Money3 made no inquiry about the financial situation of any of the six consumers, failed to inquire why no information was provided by the consumer as to their expenses, failed to notice an obvious material difference between a consumer’s declared income and their Centrelink records, took no verification steps, or having done so, relied on demonstrably unreliable material, then one may readily conclude that the reasonableness standard was not met.

217    Further, there is within the Court Book internal policies, procedures and training material which identifies the inquiries and verification steps that Money3 considered compliant with the legislative scheme in the relevant period. If Money3 failed to comply with its own policies and procedures, that is certainly evidence in support of the contention that it failed to make reasonable inquiries and take reasonable verification steps for the six consumers in issue.

218    Accordingly, I turn to what was done in the case of each consumer.

5. CONSUMER 1

5.1 Essential facts

219    Consumer 1 made an affidavit on 15 November 2023 and appeared remotely on 7 February 2025. She was cross-examined.

220    At the time of the loan application, Consumer 1 was a single mother with 3 dependant children aged under 8 years old. Her sole source of income was Centrelink benefits and child support payments.

221    She has been a Centrelink benefits recipient for considerable period. Her affidavit says twenty years. Her loan application form says eight years. The discrepancy is immaterial to the issues. She is separated from her partner and as part of the financial adjustments received from him $10,000 in December 2018. In January 2019 she owned a Honda motor vehicle. She was attracted to an advertisement on her Facebook newsfeed from Automax Clearance, an automotive dealer, from which she understood that she could purchase a motor vehicle despite her status as a Centrelink benefits recipient. Eventually, she was put in contact with an individual from the dealership. Upon disclosing her economic circumstances, she was provided electronically with some documents to sign which she did not read and did not comprehend. Despite that, she electronically signed the documents and returned them. Some of those documents included authorisations in relation to providing her consent to financiers, including privacy disclosure statements and associated consents. She did not understand what these documents were at the time.

222    Later, she received documents from National Loans in the form of an authority to appoint it as her finance broker for a fee of $990. She did not read these documents but electronically signed and returned them. Her state of mind was, however, that she was not aware that the brokerage fee would be added to any loan principal.

223    The National Loans document as signed by Consumer 1 is dated 16 April 2019 (CB 2233). It provides that for a fee of $990 (including GST) the company “will attempt to obtain finance as requested by you”, and in that event upon settlement of the credit contract “you must pay us a fee for our services” and “you may be liable to pay fees and/or charges to the financier”.

224    On 24 April 2019, National Loans applied for finance to Money3 on her behalf (CB 2312). The application material included a standard form National Loans document which disclosed that she was in receipt of Centrelink benefits and had been in receipt of such benefits for eight years, did not disclose that she had a spouse or partner, did not disclose any current or previous employment, recorded that her total assets and liabilities were each zero, recorded her monthly Centrelink income as $5,600 and that her monthly living expenses were $1,000 plus rent of $840 (CB 2225). The information for monthly income and expenditure appears underneath the section: “as supplied by the client” (CB 2227). Various sections of that form were left blank such as: other income, child support, proposed new commitment and surplus. Extrapolating from that data, it appeared from the limited information provided that Consumer 1 had a monthly surplus of $3,760: a remarkable amount for a Centrelink recipient!

225    The next page of the National Loans document is titled: Enquiry Data Verification Summary. There are various questions directed to the broker which required a yes/no answer. None of the questions were answered. The questions include: Is surplus evident in the capacity information supplied by the client?; Has income been verified?; Have commitments been verified?; and, Do you believe that all information is true?

226    Money3 also received from National Loans an illion bank statement for the 90-day period up to 24 April 2019 (CB 2243). This disclosed receipt by Consumer 1 of a monthly average family benefit of $1,015.83, a monthly average Centrelink pension of $1,146.89 and a monthly average child support payment of $750.49, which totals $2,912.81 – a significant discrepancy from the figure of $5,600 per month for Centrelink benefits as disclosed on the National Loans form. I accept the evidence of Consumer 1 that she did not complete the information in the National Loans form and was not asked to review it before it was submitted. I infer that the figure of $5,600 per month was written into the form by someone from National Loans, but the basis for it is unexplained.

227    Ms Costantini’s evidence, which I accept, is that the illion bank statements often inaccurately analyse and group transactions. In consequence, credit analysts would in practice treat that data with caution. However, Ms Costantini’s evidence was that the listed transaction data in the illion statements was relied on. The chronological list of all transactions for the preceding 90-day period for Consumer 1 begins at CB 2245 and proceeds in reverse order to CB 2252. Ms Costantini’s evidence is that the usual practice of credit analysts at the time was to review the bank statements and compare them with the poor banking conduct criteria in the Matrix. I accept that was done for Consumer 1 as there is a file note made on 26 April 2019 at 12.48 pm, which includes: “41 single 3 dep banking ok veda ok…” (CB N 234 row 7).

228    Ms Costantini reviewed the illion statements for Consumer 1 and gave evidence that they do not disclose any regular debits that may need to be separately included in the APL capacity calculation.

229    Accurate information was received by Money3 for the monthly income of Consumer 1 as contained in the Centrelink statement dated 24 April 2019 (CB 2257). The total weekly income was $786.49 or $3,145.96 per month. In addition, she was entitled to an annual maintenance payment of $8,114.79 or notionally $156.05 weekly, increasing the total weekly income to $942.54. The Centrelink document record average weekly deductions of $287.02, comprising $220 for rent, $10 for electricity and gas (Origin Energy) and $57.02 for repayment of a lump sum Centrelink advance. After those deductions, Consumer 1 was left with approximately $655.52 per week for other living expenses.

230    An Equifax Credit Check dated 24 April 2019 (CB 2260), rated Consumer 1 with a ‘comprehensive score’ of 799 which was towards the “reduced risk” end of the scale with a predicted 2% chance “of adverse recorded at Equifax” within the next 12 months.

Mr McAuley from the Money3 Micro Motor Department was the credit analyst assigned to assess the application. On 26 April 2019, he ran a further credit check with ARM Consumer Plus for an inquiry amount of $8,000. It disclosed a low relative risk of default and no outstanding defaults. Mr McAuley then prepared the APL capacity calculator (CB 2646):

231    It will be noticed that he erroneously recorded weekly Centrelink income of $939.04 (which difference is not material). The recorded weekly expenses of $257.02 is from the fortnightly lump sum advance repayment amounts, described in the APL as personal expense amounts, of $85.54 and $28.50 which total $57.02 per week, plus the minimum weekly expense amount from the Matrix of $200.

232    At the time the Matrix (CB 6245) applied to loan amounts of $2,000 to $8,000 for a term of 24 to 36 months at an interest rate of 24.95% per annum, an application fee of 11% of the principal and a maximum broker fee of 9% plus GST (capped at $720 plus GST). It then provided in part:

233    The Matrix required credit analysts to apply the higher of the declared expenses of the consumer or Matrix figures for expense calculations. As noted above, how the living expenses amounts in the Matrix were derived was not extensively addressed in the evidence, which is one criticism that ASIC makes. I return to this matter when considering the reasonable inquiries and verification issues.

234    The dependants figure of $150 per week in the above capacity calculation is an amount in the Matrix, being “$50 per dependant”. The rent figure of $220 per week is the amount in the Centrelink statement.

235    ASIC submits that the expense calculations failed to include $10 per week paid to Origin Energy as disclosed in the Centrelink statement. Money3 accepts it has not been separately included because “the usual practice” is that the Matrix amount of $200 per week includes such amounts and it relies on the evidence of Ms Costantini. In her affidavit she said:

The Centrelink income statement records, under the heading "Deduction Details", "Electricity" and "Gas" deductions paid to "ORIGIN ENERGY HOLDINGS PTY LTD". A credit analyst following the usual practice would not include these in the capacity calculation because Money3 treats utility expenses as being covered by the living expense amount that I refer to in paragraph 91(b) above [the $200 weekly expense amount].

236    Ms Costantini was not challenged on this in cross-examination, and I accept her evidence.

237    The result of the APL capacity calculation was a weekly surplus of $312.02, not including repayments that would be required pursuant to the credit contract if entered into (CB 2646).

238    The next step is for the credit analyst to calculate the required weekly repayments if the application is approved and a loan is entered into, a component of which (according to the usual practice) is the preparation of an Excel capacity spreadsheet. It is Ms Costantini’s evidence that a loan application does not proceed unless the weekly repayment amount is less than or equal to the calculated surplus.

239    In her affidavit, Ms Costantini states that she cannot locate a copy of the Excel capacity calculator for Consumer 1 in Money3’s business records. However, within the vast quantity of documentation in the Court Book there is an Excel document with the description: Consumer 1 Money3 capacity calculator (CB N 240). It records a determined weekly repayment of $107.45 over 156 repayments over 36 months on an advance of $11,085. The components of the advance are recorded as: principal $8,000, insurance $1,485, application fee $1,050 and brokerage $550. The interest rate was 24.95%.

240    Neither Money3 nor ASIC reference this document in their submissions. Each refers to the pre-approval document (CB 2642) that Mr McAuley emailed to Rachel Dart of National Loans at 12.49 pm on 26 April 2019. It calculates the total amount to be financed at $11,200 comprising $8,000 principal, $1,600 for insurance, $1,050 for the application fee and $550 for brokerage. The specified interest rate is 24.95%, there is a monthly annual account fee of $28 and the repayment period of 36 months with payments required to be made fortnightly. The calculated fortnightly amount is $217.32 or, without insurance, $188.12 (or converting to weekly amounts, $108.66 and $94.06). It should be noted that there is a document titled “Final Assessment” for Consumer 1 that appears to be a continuation of pages of the pre-approval document (CB 2643-2645), but Money3 disavows that it formed part of the assessment process. Ms Costantini has not seen this document before and to her knowledge no document of this type was ever used by credit analysts in the Micro Motor Department during the relevant period.

241    Returning to the steps taken by Mr McAuley, shortly before he sent the email to Ms Dart, he conducted a further credit check through the APL at 12:34 pm. There is a note on the client file of Consumer 1 made at 12:48 pm. Ms Costantini’s evidence is that credit analysts “following the usual practice” were required to record in the APL “at the time that they had determined whether the loan application should be pre-approved or declined, a summary of their assessment”. If the credit analyst determines that the application meets the requirements for pre-approval, the pre-approval documentation is then sent to the broker. This occurred as evidenced by the note made at 12.48 pm on 26 April 2019, set out above.

242    Later that day, Consumer 1 was contacted by a representative from the car dealership and shown some photos of a vehicle that may be suitable. Eventually, she agreed to purchase a 2006 Subaru Tribeca for a price of $10,000 which, after trading in her Honda vehicle for $2,000, left $8,000 to be financed. It could not be a matter of pure coincidence that the dealer struck an ultimate price which matched the pre-approved principal.

243    On 7 May 2019, Ms Dart emailed Mr McAuley, advised that a motor vehicle had been identified for Consumer 1 and requested that the insurance amount be included in the proposed finance (CB 2406). As explained by Ms Costantini, this is a common practice in that Money3 does not include any amount for insurance in the draft credit contract unless requested by the consumer. The application form she signed specified the cost of the insurance at $1,485, to be financed by Money3. In cross-examination she could not recall making that application but confirmed her signature on the document. She agreed that she was not intending to finance the insurance cost from her our own resources and confirmed that she understood that the cost would be added to the amount advanced by Money3.

244    The credit analysts of Money3 were assisted by credit support officers, and Ms Charlie Rieger was at the time employed in that capacity. She is no longer employed by Money3. Credit support officers were responsible for preparing credit contracts. The contracts are automatically generated within the APL. There is a control mechanism in that system, which Ms Costantini described as:

If the surplus in the capacity calculator was less than the loan repayment amount in the loan contract, a pop-up message in the APL would notify the credit support officer and require them to confirm that they wanted to proceed. If that occurred, the credit support officer, following the usual practice, would not proceed any further and would refer the loan application back to the credit analyst for the issue to be resolved (including an updated capacity calculation, if required).

245    She was not challenged on this evidence. The contract generated for Consumer 1, on 7 May 2019, is at CB 2393. It is styled: Secured Loan Contract. It is in the form of an offer to make a loan on the terms set out. The Disclosure Date is 7 May 2019 and there is a note that the information in the schedule “may change before or after the date we first lend money to you (the Settlement Date).” The loan schedule records the amount of credit as $11,085, the interest rate of 24.95% per annum, the total amount of interest to be repaid of $4,710.03, the repayment period of 78 fortnightly repayments each in the amount of $215.22 and with a final payment of $231.09 amounting to a total of $16,803.03 over the loan term. There is separate disclosure of the credit fees and charges comprising $1,050 for the loan application fee, $28 for the monthly servicing fee in advance of the settlement date and $28 monthly thereafter, together with a list of other fees and charges in the event of default or a request for variation. The total fees and charges, assuming the entire loan term, is disclosed at $6,768.03. There is separately disclosed the amount of $8,000 to be paid to the motor vehicle dealer, $1,485 to Integrity Car Care and $550 to National Loans. The document required Consumer 1 to make various declarations, including that she had “carefully read” the document and each of its terms and conditions, that the information she had provided was accurate and not misleading and that she had not relied on “any promise or representation by anybody when deciding to enter this transaction”. The standard reservation to withdraw if settlement does not occur within 14 days of the Disclosure Date is included

246    The contract was emailed to National Loans on 7 May 2019 at 12.08 pm.

247    ASIC emphasised other documents then provided by Money3 to National Loans. One is the Money3 finance application form at CB 2636. The second page records $0.00 for each of food and entertainment, travel, home and utility, insurance, personal expenses and small loan weekly expenses. In submissions, this was put as evidence of a failure by Money3 to make reasonable inquiries and to verify. It will be recalled that National Loans had earlier provided to Money3 a generic finance application form which recorded Consumer 1’s monthly living expenses at $1,000 and rent at $840.

248    There is an explanation for why the finance application form recorded nil amounts for these expenses. ASIC tendered without objection or any requirement to present for cross-examination, extracts of the s 306 examination of Mr Craig Harris conducted on 14 July 2022 (CB 4990). He was questioned about this document. He explained that there was “a glitch in the system” (CB 5135) which, despite the entering of amounts for these expenses in the APL system, they were not then populated into the application form. As the underlying data was in the APL, the error did not affect the assessment for Consumer 1.

249    Consumer 1 attended the dealership on 8 May 2019 believing that the purpose was to inspect and test drive the vehicle. She arrived at approximately 6 pm. In her affidavit, she said documents were presented to her and she was requested to sign them. She did not understand the documents, felt pressured and simply affixed her signature where highlighted. She did not read the documents, giving as her reason that she was not given time to do so. Nor were the documents explained to her. She was unaware that she was seeking finance from Money3.

250    Consumer 1 in cross examination was questioned about the signed loan application form (complete with expense glitches CB 540) and the signed secured credit contract (CB 574). She accepted that she was at home when she received them electronically, contrary to her evidence-in-chief. In the next series of questions, she confirmed that whilst at home, she was not pressured to sign the documents and did have an opportunity to read them if she had chosen to do so. She qualified her evidence by stating that she had “problems understanding things” in direct reference to the documents. She gave somewhat unsatisfactory evidence as to whether she recollected reading the documents before they were signed but nonetheless understood that by affixing her signature she was agreeing to the terms of the documents.

251    She also claimed in her evidence-in-chief that she did not believe that the loan terms and conditions were provided to her at the time of signing. That evidence is clearly incorrect. When pressed to explain how that could be so when she received the documents and signed them electronically, she could not provide a satisfactory answer. She accepted, at least, that she was aware that National Loans were making a loan application on her behalf because she wanted to borrow money to finance the purchase of the motor vehicle and she was aware that she signed legal documents related to the offer to lend funds.

252    On 9 May 2019, Money3 received the signed documents from National Loans and they were saved to the APL. Internally, Money3 refers to this as the “settlement pack”. The documentation includes a broker checklist which included a declaration signed by Ms Courtney Johnson from National Loans dated 8 May 2019 that the applicant “has received or has been advised of”, four matters including: “They may gain (sic) independent financial advice before signing the proposed credit contract” (CB 2423).

253    At this point responsibility for the application passes to the Money3 settlements team. Ms Cavar is the Money3 settlements manager. In her affidavit, she explained the settlements team and its function in some detail. There was in the relevant period a Settlement Procedure Document. It is updated over time. Although Ms Cavar was not able to locate a copy of the document in force throughout the relevant period, she produced one that was saved to the APL system on 19 March 2020, which recorded the procedures that were employed up to March 2019 (CB 8459). Save for one matter, Ms Cavar is confident that it accurately records the settlement procedure used throughout the relevant period, the exception being the implementation of a requirement to undertake a Net Promoter Score survey which began in January 2020. The purpose of this is to track customer satisfaction through the loan application process.

254    Although the Settlement Procedure Document speaks for itself, Ms Cavar explained it. In summary, once a settlement pack arrives in the settlements team email inbox, it is assigned to a settlement officer. That fact is noted in the APL. The settlement officer then performs initial checks, including that the assessment of the consumers income and expenses as recorded in the APL demonstrates that the income exceeds the expenses by an amount that is more than the repayment amount under the credit contract.

255    By reference to the settlement checklist for Consumer 1 (CB 2647), Ms Cavar explained the steps undertaken. The settlements officer first worked through and ticked off each requirement in a standard checklist. In order that: (1) all settlement documents had been attached and renamed (sic); (2) an email allocation had been sent to the broker and the credit analyst; (3) the broker declaration had been signed and dated; and (4) there is an authority to complete.

256    Next, the settlements officer cross-checks several matters conformably with the credit contract tab of the pre-fund checklist. This involves a number of steps. Ms Cavar’s evidence includes as the first step that the settlement officer regenerates the loan repayment schedule in the APL and checks that it matches with the repayment schedule in the credit contract. The officer compares the scheduled repayments in the APL against the total repayments in the credit contract to confirm that the amount in the APL is less than or equal to the amount in the credit contract. If these requirements are not met, the settlement officer refers the application back to the credit analyst. The officer confirms that the credit contract has been signed and witnessed together with the required broker declaration. There is a check that the loan purpose referred to in the contract is consistent with the purpose recorded in the APL. A number of other checks are undertaken that are not material to resolution of the issues in this case, save for the requirement to provide the customer with a welcome call.

257    Ms Cavar’s evidence is that the welcome call is a mandatory component of the settlement procedure. Money3 does not fund a loan until the welcome call has occurred and has proceeded satisfactorily. There is a script for the settlements officer to follow in the APL. The consumer’s answers are then recorded. Where the consumer is in receipt of Centrelink benefits, no questions are asked about employment, employment duration or income.

258    The welcome call record for Consumer 1 records the following when read with the evidence of Ms Cavar. Consumer 1 confirmed her personal details including her Centrelink pension status and that she had three dependants (CB 2472). If the consumer advises the settlement officer that they have more dependants than recorded in the APL, the matter is required to be returned to the credit analyst for further assessment. Conversely, if the consumer advises the settlement officer that they have less dependants than recorded in the APL, no further action is required because that does not adversely impact on the credit analyst’s assessment that the consumer can service the loan.

259    The next field is titled: loan suitability dialog (CB 2653). Consumer 1 was asked and responded as follows: what types of features are you looking for? To which she answered: “I don’t have a preference” and she answered “no” to the question whether she had ever been bankrupt or entered into a debt agreement. She was also asked: “can you see any circumstances coming up which may affect your ability to make repayments?” To which she answered: “no, none”. She also confirmed the principal amount of the loan (CB 2472), which she accepted in cross-examination. Finally, she was asked whether she was: “happy to proceed” to which she responded: “yes” (CB 2472).

260    Having satisfactorily answered those questions, on 10 May 2019 Money3 settled the loan and disbursed the loan funds, sent Consumer 1 a text message which read: “as discussed your fortnightly payments of $215.22 will start on 13/05/19 by direct debit” and sent her a welcome pack by email which included a welcome letter and a copy of the signed credit contract.

261    Consumer 1 met her monthly repayment obligations from 13 May 2019 until 12 February 2020, when she advised Money3 that she was experiencing financial hardship. Within that period, she requested that the weekly repayments be increased on 21 June 2019 to $110 per week from 8 July 2019, and then on 1 July 2019 she requested a further increase to $115 per week from 8 July 2019 so that she could pay the loan faster. Those changes were agreed to.

262    On or about 17 December 2019, Money3 received correspondence from Anglicare in relation to Consumer 1. In or about July 2020, Money3 received notice of the complaint against Money3 and National Loans that was lodged by the Consumer Action Law Centre (CALC) with the Australian Financial Complaints Authority. On 5 March 2021, National Loans reached a settlement with Consumer 1 to pay-off the amount owing under the credit contract, and the ownership of the vehicle was transferred to the car dealer.

263    Consumer 1 paid a total of $4,655.88 under the credit contract.

264    In the final section of her affidavit, Consumer 1 undertakes a reconstruction of her financial circumstances as at April and May 2019. The reconstruction discloses that it was prepared with the support of a solicitor from the CALC. The solicitor did not give evidence. Her evidence from [120] to [124.14] of her affidavit contains retrospective calculations of Centrelink income, regular entitlements and payments, a schedule of total income and particularised expenses for the period from 7 February 2019 to 8 May 2019 (90 days before entering into the credit contract), particularised weekly expenses and the fact that in December 2018, she received a payment of $10,000 from her former partner as a component of separating from him. The conclusion from that analysis is that her total weekly expenses at the time were $1,409.12, which exceeded her weekly income by $466.58 per week.

265    I am unable to make findings of fact in accordance with this evidence. In cross-examination, it became clear that Consumer 1 was not able to explain how the reconstruction was undertaken and accepted that it was the solicitor who did the work. Amongst other things, the solicitor looked at documents and asked questions of Consumer 1. Despite apparently giving the answers as recorded in her affidavit, Consumer 1 was unable to explain how a number of the individual expense items had been derived. Rather than challenge Consumer 1 as to each of the expense items, counsel eventually put it to her that if she reviewed her bank statements for that period, she would not be able to explain how the figures were calculated, which she accepted. She did accept, however, that upon receipt of the $10,000 in December 2018, her expenses in the following period were higher.

266    Accordingly, I am not satisfied that the reconstruction is reliable, accurate or is the evidence of Consumer 1.

5.2    Issue 1 and Issue 3: ss 128(d) and 130(1)(a)-(c)

267    These issues are related and considered together. I address seriatim the contended failures set out in ASIC’s closing submissions.

5.2.1: The add-on fees contention

268    ASIC contends Money3 was obliged but failed to inquire whether Consumer 1 wanted finance for the add-on fees which the Concise Statement defines as the Money3 application fee, a broker fee and the premium for extended warranty insurance. For Consumer 1, those amounts were $1,050, $550 and $1,485 respectively as disclosed on the credit contract that the consumer signed on 8 May 2019.

269    As developed, the contention is that a reasonable inquiry about a consumer’s requirements and objectives in relation to a credit contract must include inquiries about how much finance the consumer was seeking from Money3. That inquiry is fundamental to one purpose of Part 3-2 in that it is “aimed at better informing consumers and preventing them from being in unsuitable credit contracts”: s 125.

270    ASIC continues that the obligation at s 130(1)(a) requires inquiries about the consumer’s requirements. In the context of a finance application, the amount of finance is both a need and a want. Without finance, the vehicle cannot be acquired by the consumer. Unless finance is sufficient to cover each monetary component of the putative transaction with the vehicle dealer, the consumer’s objective will not be met.

271    Money3 in submissions accepts that much, but continues to the effect that the add-ons were included in each credit contract sent to the broker. At that point each consumer had a choice: he or she could fund the add-ons from their own resources or choose the financing option. Invariably, each chose the financing option when they signed the credit contracts. Further, ASIC did not lead any evidence that any consumer wanted to fund the add-ons from their own resources and contrary evidence was given by the consumers who were cross-examined.

272    Money3 develops that submission in the case of Consumer 1 by noting that she engaged a broker to act as her agent to gather information and apply for finance to Money3. It relies on the evidence summarised at [244]. In short, Consumer 1 made an informed choice to request finance for the add-on amounts.

273    Finally, Money3 submits that ASIC has not established that acting reasonably, it was required to do anything else to confirm whether Consumer 1 wanted finance for the add-on fees. It has not established why it was not reasonable for Money3 to rely on the documents signed by Consumer 1 as truly stating her intention and believing that that her agent had acted correctly in seeking finance for the add-ons on her behalf. In reply, ASIC submits that a signature on a document, after the suitability assessment is complete, does not address the statutory obligation to make inquiries and to verify.

274    Section 128 requires that a credit contract must not be entered into unless within 90 days before the credit day the licensee has made an assessment in accordance with s 129: s 128(c). Section 129 requires an assessment about the future; whether the contract will be unsuitable for the consumer if it is entered into. Section 130 requires the undertaking of reasonable inquiries and verification before making the assessment. In Westpac at [170], Lee J identified a three stage inquiry commencing with “the initial duty” of undertaking inquiries before the second stage, which is conducting the assessment.

275    The pre-approval for Consumer 1 assumed that she wanted or needed finance for “maximum insurance based on 20% of principal lend” at a cost of $1,600, an application fee of $1,050 and the broker fee of $550 (CB 2642). To that point, Money3 had made no inquiry about whether the requirements of the consumer included finance for these amounts, in addition to the price of a vehicle.

276    In submissions Money3 addresses the issue as follows:

The relevant “requirements and objectives” should be construed as relating to the issue of the provision of finance, not (for example, the issue of whether the consumer seeks to purchase some item or product. Accordingly, in relation to the issue of warranty insurance, the obligation imposed on the credit provider is not to make inquiries about whether the consumer wants such insurance cover, but whether his or her objective is to seek finance for that product.

In relation to the question of the application fee and broker fee, Money3 submits that such fees associated with the provision of finance for the motor vehicle are not properly characterised as separate requirements or objectives for the purpose of s 130(1)(a); the fees are part of the “price” of the services provided by the credit provider and broker respectively and will be included in the finance. The “assessment” is undertaken on that basis.

277    I accept as correct the first paragraph of that submission: s 130(1) is concerned with inquiries about the consumer’s requirements and objectives in relation to the credit contract. It does not cast onto the licensee the obligation to inquire into other contracts that give rise to a need to obtain finance.

278    The broker application did not request finance for the add-ons, nor did it specify a finance amount for the vehicle. The National Loans quote stated that Consumer 1 may be liable for other fees and charges in addition to the broker fee. Similar statements are made in the National Loans Credit Guide (CB 2241). That is evidence available to Money3 when the APL calculation was undertaken that the requirements of Consumer 1 included payment of a broker and application fee if the finance application was successful. It was not, however, evidence as at 26 April 2019, that her requirements extended to financing these amounts with Money3.

279    There is no mention in the application documents that Money3 had, prior to 26 April 2019, of any requirement of Consumer 1 for warranty insurance let alone finance for the premium. The amount of $1,600 in the pre-approval is taken from the Matrix that: “insurances funded cannot exceed 20% of the amount funded for the asset” (CB 6246). Money3 did not make any inquiry of her as to her requirement for finance for the insurance premium before it issued the pre-approval.

280    Doubtless with the comfort of the pre-approval, the automotive dealer on 26 April 2019, suggested to Consumer 1 a vehicle that may be suitable. It was not. Consumer 1 insisted that she wished to purchase a different vehicle. She entered into a contract of purchase on 7 May 2019 (CB 2410), for a vehicle at a cost of $10,000, which after allowance for her trade in reduced the balance owing to $8,000. The broker informed Money3 of that fact by email sent at 11:17 am on 7 May 2019 and requested inclusion of an amount of $1,485 for the warranty premium. Mr McAuley caused the records of Money3 to be updated to reflect these details. He did not undertake any further capacity calculation in the APL.

281    The standard form credit contract and Money3 application documents were then generated and sent to the broker at 12:08 pm on 7 May 2019. The application form (CB 2636) only refers to a loan amount of $8,000. The credit contract refers to a credit amount of $11,085, inclusive of the application fee, the brokerage and the premium (CB 2393-2394).

282    Consumer 1 signed the credit contract and the application form on 8 May 2019 (CB 2428, 2436). They were lodged with Money3 (according to the agreed facts) on or about 9 May 2019.

283    Although there is evidence from Ms Cavar that the settlements officer went through the settlements checklist and confirmed that the amounts scheduled in the APL for repayments matched the credit contract and that the amount in the APL was less than or equal to the amount in the credit contract that was not, nor was it suggested to be by Ms Cavar, an unsuitability assessment.

284    Money3 never made a direct inquiry of Consumer 1 about whether her requirements included applying for finance to fund the cost of the broker fee, the application fee or the warranty insurance. There is no evidence that Mr McAuley revisited the unsuitability question when he caused the standard form credit contract and Money3 application form to be generated and sent to the broker on 7 May 2019. Indeed, the inference I draw is that he did not because he made an a priori assumption at the time of the pre-approval that the finance amount would include the application fee, the broker fee and the warranty insurance premium up to the maximum allowable amount of $1,600.

285    I find on those facts that the unsuitability assessment was complete by no later than 12.08 pm on 7 May 2019, when the credit contract was sent to the broker.

286    Money3 submits that by the time the broker informed it on 7 May 2019 to include the cost of warranty insurance, it had been informed that Consumer 1:

(a)    was seeking finance in relation to the purchase of a motor vehicle;

(b)    had agreed that the broker would seek finance on her behalf;

(c)    had agreed to pay a broker fee that would also be financed by the loan if the application was successful;

(d)    knew that she may be liable to pay fees and/or charges to a financier; and

(e)    had agreed that the finance was also to include warranty insurance in the amount of $1,485.

287    Accordingly, Money3 submits that it had every reason to believe that this information was true.

288    Propositions (a) – (c) are correct and accepted. Proposition (d), whilst literally true does not address whether it was a requirement of Consumer 1 that she also sought finance for fees or charges that may be payable to a financier that was yet to be identified. The extent of the acknowledgement made by Consumer 1 in the National Loans quote form is that she understood that she may be liable to pay fees and/or charges to a financier. Money3 made no inquiry before making the unsuitability assessment as to whether her requirements included finance for the application fee.

289    From that finding, would a reasonable licensee in the position of Money3 at the time have made that inquiry of Consumer 1? It would not have been a difficult inquiry to make: a simple email to the broker would have been sufficient. In terms of the Shirt calculus, there was a foreseeable and significant consequence of not making the inquiry. But the reasonable licensee must be placed into the all the circumstances as they were then known. Mr McAuley communicated his assumption that the application fee was to be included in the finance amount when he delivered the pre-approval to the broker. The document clearly and unambiguously included the application fee of $1,050 in the total amount to be financed. Consumer 1 did not, through the broker, advise that she did not agree to that component of the proposal.

290    ASIC in submissions contends that Money3 contravened s 130(1)(a) by not making the inquiry. The evidence relied on is Part 22 of Mr Hartman’s Expert Report. The difficulty is that this turns on his assertions as to what were the undisclosed practices of reasonable and prudent lenders at the time, which as explained does not permit me to make findings of fact conformably with that evidence.

291    Thus, I am left without evidence about what would have been a reasonable inquiry to make of Consumer 1 as to her requirement to finance the application fee. A reasonable licensee may have taken the view that having specified that finance would be provided for the application fee in a pre-approval document, and not having received any objection thereto, that no further inquiry was warranted. A reasonable licensee at the time may have taken the view that the proposed finance package would be communicated by the broker to the consumer and that if the consumer did not want finance for the application fee, it would have been advised of that fact. ASIC fails in this contention because the evidence does not permit me to make the finding of fact that it contends should be made in a civil penalty proceeding.

292    As to proposition (e), Money 3 was requested by the broker on 7 May 2019, and before the standard documents were generated, to include an amount of $1,485 as the premium cost for warranty insurance. In that circumstance, no further inquiry was reasonably required in that Money3 was aware that the broker was acting as the agent of Consumer 1 and it was entitled to rely on the information communicated to it by the broker.

293    For these reasons, the add-on fees contention fails.

5.2.2: The expenses contentions

294    In Part 2.3 of these reasons, I have rejected ASIC’s construction submission that s 130(1)(a), (b) or (c) requires a licensee in all cases to obtain declared living expenses from a consumer or to inquire about and verify actual or likely future living expenses. Nor is it a universal requirement to inquire about and verify the integers of declared living expenses: Still the issue is whether in the circumstances of Consumer 1, as they were known at the time, Money3 acting reasonably should have made those inquiries and verifications. ASIC relies on the following circumstances to make good that case:

(a)    Money3 did not obtain a signed and/or completed statement from her that set out her financial situation, including her likely living expenses;

(b)    In circumstances where the National Loans application form did not break down the living expenses, and the illion bank statements indicated average expenses of $1,719.42 per week, a reasonable inquiry required reconciliation of that disparity to better understand the financial situation of Consumer 1;

(c)    In circumstances where the illion bank statements disclosed same day account clearing, a reasonable inquiry ought to have been made about that behaviour as likely impacting her future capacity to meet the loan repayments;

(d)    In circumstances where Consumer 1 had spent her one-off cash injection of $10,000 over a period of 4 months, a reasonable inquiry that ought to have been made was how she proposed to meet her future expenses without relying on that money;

(e)    The Centrelink statements disclosed lump sum advance repayments. A reasonable inquiry ought to have been made about the likely duration of that repayment;

(f)    Her credit records disclosed a score drop of 77 points. A reasonable inquiry ought to have been made as to the reason for that; and

(g)    The declared living expenses in the National Loans application form of $1,000 per month ought to have been reconciled/considered against the primary documents, being the bank statements which disclosed a greater average figure of $1,719 per week.

295    Money3 takes exception to parts of this submission as amounting to a new case, first identified by ASIC in closing submissions.

296    The first complaint is to (b) and relatedly (g). Money3 submits that ASIC did not plead or particularise that it ought to have used the illion bank statements for Consumer 1 (indeed, for any consumer) to re-construct average weekly expenses, contending that this was first raised in closing submissions and that in consequence this claim should not be permitted. Further, that ASIC for the first time in closing submissions purported to retrospectively calculate average weekly expenses for Consumer 1 from the illion bank statements which it now characterises as the “minimum expenses” for each consumer. That case is not pleaded or particularised.

297    I reject in part the submission that it is not part of ASIC’s case that reasonable inquiries that should have been undertaken extended to a consideration of the expenses of Consumer 1 as disclosed in the illion statements. The Concise Statement at [12] contends that the serviceability assessment understated the reasonably necessary expenses and did not include any weekly expenses (save for rent). The further and better particulars of 31 July 2023 contend at [17] (generically with respect to each of the consumers) that inquiries about income and expenses should include the amounts, frequency, source, the type and category of expense and elements that may impact the likely continuity of income or expenses. Further, at [31], ASIC reconstructed the income and reasonably necessary expenses in the period 17 January – 8 May 2019 for Consumer 1, by category, totalling $1,409.12 per week. That calculation was subsequently updated in amended particulars of 20 December 2023. One obvious source of inquiry and verification of a consumer’s expenses is the transaction data in the bank statements which Money3 had.

298    However, I accept that part of the Money3 submission which contends that ASIC now seeks to make out a new case by retrospectively calculating the minimum expenses for Consumer 1 in the average amount of $1,719 per week, based on a reconstruction of the illion bank statements. That departs from the pleaded case. This is not simply a difference in the mathematical outcome. In the particulars ASIC set out a calculation of income and expenses matching the anticipated evidence of Consumer 1 in her affidavit, which was not an average of bank account debits. Rather she reconstructed her expenses in tabular form to the best of her recollection divided by categories of expense. In a civil penalty proceeding, absent a successful application to amend, a regulator must be held to the pleaded case: Australian Building and Construction Commissioner v Hall [2018] FCAFC 83; (2018) 261 FCR 347 at [50], Tracey, Reeves and Bromwich JJ; Australian Securities and Investments Commission v National Australia Bank Ltd (No 2) [2023] FCA 1118 at [14]-[18], Derrington J.

299    So understood, the distinction is between the pleaded case that reasonable inquiries and verification required some analysis of the transaction data in the illion bank statements about living expenses and the case that is not pleaded, that reasonable inquiries and verification required a retrospective calculation to determine the amount of average living expenses of $1,719 per week or thereabouts.

300    Contentions (a) and (c) and the narrowed contentions (b) and (g) are related and conveniently considered together.

301    Whether s 130(1)(a), (b) or (c) required Money3 to make the inquiries and undertake the remaining verification steps contended by ASIC requires a granular examination of what was done in the circumstances.

302    On 24 April 2019, Money3 received from National Loans an email to its “Micro Admin” email inbox which attached a PDF file comprising a number of documents. The documents included a National Loans pro forma commencing with the personal details of Consumer 1, her status as a Centrelink benefits recipient and a rudimentary table of monthly income/expenditure “as supplied by the client”. As I have noted, this stated round figures for living expenses of $1,000, for rent of $840 and a net government income allowance of $5,600. That document was plainly inadequate on its face. The document was unsigned and provided very little detail about her financial situation. Apart from rounded amounts for monthly income and expenditure, no assets or liabilities were recorded, three dependants aged under 10 years are recorded (but nothing is said about their cost) and the banking details and credit experience sections are each blank. Objectively, that document was deficient in the provision of information about the financial situation of Consumer 1. However, it was not the only information provided to Money3.

303    It will be recalled that the PDF documents received on 24 April 2019 included an illion bank statement for the period 24 January 2019 to 24 April 2019 (CB 2243). The document begins by grouping the Centrelink payments by amount and date. Next follows grouped expense and revenue amounts, in order: bank fees, direct debits, other credits, and then the chronological transaction data. The issue is whether there was any analysis of that data?

304    In Part 2.3.6 I referenced that on 7 October 2021, Money3 provided a written response to ASIC concerning its processes to comply with s 128(c) and (d) between 1 January 2019 and 30 June 2021 (CB 4430), including the following:

Money3 makes inquiries about the following aspects of the consumer’s financial situation:

…

Weekly expenses including food & entertainment, travel, home & utility, personal, rentals, gambling, child support, credit cards, insurance, other loans, dependant expenses.

305    In the same response, in answer to the question whether benchmarks were used to assess information about general living expenses, the answer was (CB 4435):

Money3 uses the general living expense figure declared by the customer which is verified against the bank statements. General living expressly excludes rent.

Furthermore, we apply a minimum expense amount in the following circumstances

Vehicle loans

•    where a single applicant is purchasing a vehicle for $8,000 or less, Money3 allocates a minimum general living expenditure amount of $325 per week even where declared and verified living expenses are below $325 per week.

•    where a customer is purchasing a car for more than $8,000 Money3 allocates a minimum general living expenditure amount of $460 per week, even if the declared and verified expenses are less than $460 per week.

*Please note general living expenses for cars $2,000 to $8,000 were increased for a single applicant from $300 to $325 per week and reduced from $380 to $360 per week for joint applicants in the same category from 1 August 2019.

An additional allowance of $50 per dependent per week is applied on all loans over and above the declared expenses.

306    In another answer to a benchmark question, Money3 stated (CB 4436):

Money3 does not rely on benchmarks other than to increase general living expenses which fall below the above thresholds. Assessment is primarily conducted on declared and verified expenses.

307    Money3 also confirmed in that response that if the consumer’s declared living expense is less than a benchmark, it applies the minimum amount outlined in its Product Guide and, conversely, if the consumers general living expenses are greater than the Product Guide, it applies the declared living expenses.

308    On 31 January 2023, Money3 responded to a s 267 notice (CB 4471). This notice required it to provide information for particular consumers, including the inquiries made and the verification steps that were undertaken. Answers were provided in Excel spreadsheet form (CB N 635). For Consumer 1, Money3 stated in part:

The following steps were taken during the review and assessment of [Consumer 1’s] loan application:

•    On 24 March 2019, Money3 received the application from the broker.

•    On 26 March 2019, a Money3 credit analyst reviewed the Application and bank statements for income, expenses and banking conduct, analysed the credit check and reviewed the [Centrelink Income Statement]. Pre-approval was sent to the broker the same day.

309    The obvious error in the reference to the March dates was not addressed in evidence or submissions.

310    Ms Costantini’s evidence is that following the conduct and review of a credit check (CB 2260), (which confirmed that Consumer 1 was not bankrupt or an undischarged bankrupt, was not the subject of a debt repayment agreement and was not recorded as having relevant credit defaults), the credit analyst next performed the capacity calculation, commencing with the income of Consumer 1 by reference to her Centrelink statement (CB 2257) which income was correctly entered into the APL. There was some uncertainty within Money3 in early to mid-2019, relating to maintenance income, concerning whether credit analysts should consider only the Centrelink statement or conduct an analysis of the bank statements to confirm the receipt of the Centrelink benefits, the rationale being that in some cases a Centrelink recipient did not have deposited to his or her bank statement the entitlement amount. That caused a change in practice from 31 July 2019, which required credit analysts to include maintenance income in the capacity calculation only where the payments were verified by reference to the bank statements. That was undertaken for Consumer 1, in that the amount of $2,026.31 from maintenance paid in the 90-day preceding period, was multiplied by 4 to give an annual amount of $8,105.24, which was included in the APL.

311    Ms Costantini’s affidavit evidence next addressed the determination of expense amounts for Consumer 1, by reference to the capacity calculator (CB 2646). The provenance of the amounts there recorded is:

(i)    dependants, $150 per week is the amount in the Matrix of $50 per child, for 3 dependants;

(ii)    living expenses, $200 per week is the amount in the Matrix;

(iii)    mortgage/rent of $220 per week is the automatic deduction recorded in the Centrelink statement;

(iv)    other expenses, $85.54 per fortnight is the recorded deduction in the Centrelink statement;

(v)    other expenses, $28.50 per fortnight is the recorded deduction in the Centrelink statement.

312    Other regular deductions from the Centrelink statement were not included: as set out above at [236], the amounts for energy and gas paid to Origin Energy were excluded based on a usual practice, that these amounts were already included in the Matrix weekly living expense amount.

313    It is correct that Money3 did obtain a signed statement from Consumer 1 on 8 May 2019, once the unsuitability assessment was complete, whereby she declared all information in the form was true and correct. That form was generated by Money3 and sent to National Loans on 7 May 2019. In the section concerned with weekly expenses, nil amounts are shown for food and entertainment, travel expenses, home and utility, insurance, personal expenses, small loans and other loans. The fact that there was a computer error in the Money3 system whereby relevant expense amounts were not populated to the form, does not excuse the fact that Money3 failed to obtain a signed or completed statement from Consumer 1 which declared her weekly expenses before undertaking the unsuitability assessment. Further, even if the form had been correctly populated, some of the amounts in the APL calculator for dependants and living expenses were not derived from information supplied by Consumer 1.

314    Returning to the contentious issue, should Money3, acting reasonably, have obtained a signed or completed statement from Consumer 1 that correctly set out her financial situation, including her likely living expenses?

315    The illion bank statements (CB 2243) list in chronological order all withdrawals made by Consumer 1 with short descriptions such as: purchase United Petroleum, card purchase Woolworths, card purchase McDonald’s. Consumer 1 was not asked and did not say in the application form that her monthly living expenses of $1,000 were discretionary or absolute basics, minimum necessary expenses or some combination thereof. Money3 did not require that level of discrimination. No questions were asked whether all debits in the illion transaction data were each components of her average weekly expenses. She did not say and was not asked whether any expenses included in the $1,000 of monthly living expenses may be forgone in order to meet her repayments under a future credit contract.

316    Thus, it is artificial to draw the distinction that Money3 does: the debits were the actual debits. This was the evidence that Money3 received relevant to the expenses of Consumer 1. Whether the transaction data evidenced minimum, average or reasonably necessary expenses was a matter for Money3 to assess by inquiry and verification.

317    Despite having received those statements from National Loans on 24 April 2019, the only review that Mr McAuley undertook occurred on 26 April 2019 for the purpose of determining whether there was evidence of poor banking conduct that met the knockout criteria in the Matrix. No inquiry was undertaken in an effort to ascertain the pattern of expenditure, the categories, the quantum or to make some comparison between the transaction data and the application statement that living expenses were $1,000 per month.

318    A simple comparison of the transaction data to the claimed monthly expense was not undertaken: if it had been, a glaring inconsistency would have been noticed. For example, in the seven day period from 8 to 14 April 2019, the debits total $1,152.24. In the seven day period from 15 to 21 April 2019, the debits total $961.04. Basic mental arithmetic would have revealed that (or if that skill has been lost, a smartphone calculator).

319    Instead of performing a relatively simple calculation to inquire into and verify the expenses of Consumer 1 from the transaction data, Mr McAuley chose to apply an amount of $200 per week being the living expense amount and $50 per dependant in the Matrix.

320    Money3 further submits that once the Matrix weekly cost of dependants is added to the weekly expenses, the total is $350 which is significantly greater than the weekly expense disclosed in the National Loans application form ($250), which was a reasonable inquiry and verification step at the time. I reject that submission. What it overlooks is that no step was taken to inquire into data that Money3 had. Nor was any step taken to verify the stated monthly expense of $1,000 in the National Loans application form. The submission also erroneously examines what was the outcome, rather than what should have been done at the time.

321    Further, Mr McAuley’s failure to examine the expenses of Consumer 1 as disclosed in the illion bank statements, was not consistent with the internal policies, procedures and training of Money3 that I referenced in Part 2.3.6: the 2017 Analysts Guide or the 2018 NCCP Awareness Training PowerPoint presentation. Although this application was received prior to publication of the May 2020 Credit Guide, as I have reasoned in Part 2.3.6, the statements of general practice therein, are good guides against which to assess what Mr McAuley did in May 2019 and his conduct was not consistent with it. That was a departure from what Money3 considered to be reasonable and responsible practice at the time.

322    Recall the evidence of Ms Costantini which I addressed in Part 2.3.6, who said that Money3 required consumers at the time to provide bank account statements, which were then reviewed by credit analysts to confirm the receipt of income, to check for poor banking conduct and to identify any regular direct debits that may need to be included in the capacity calculation. She also said that the bank transaction data is presented in a way that assists a review. Mr McAuley did not inquire into the transactions to form a view about the declared living expenses and nor did he use the data as a verification tool. The expenses of Consumer 1 were a component of her financial situation at the time. Mr McAuley had reliable data for the purpose of undertaking the required reasonable inquiry and verification, but he did not use it. No inquiry was made and no verification step was undertaken before $200 per week from the Matrix was applied for weekly expenses. One does not get to the point of considering what discretionary expenses may be reduced to comply with future financial obligations unless one understands what the expenses within the preceding 90-day period in fact are.

323    By analogy with the Shirt calculus, the reasonably foreseeable risk was non-compliance with the statutory inquiry and verification obligations. The magnitude of risk is measured by the consequences of non-compliance: civil penalty proceedings, injunctions and compensation orders pursuant to Part 4 and/or licence review steps under Part 2 of the Act. The degree of probability of non-compliance was not insignificant if a licensee did not consider the information that it required from a consumer in a broker-initiated application form that the consumer did not sign and verify as correct. It would not have been expensive or difficult for a credit analyst in the position of Mr McAuley at the time to do some arithmetic to determine if the declared amount was comparable with the transaction data and if so, that would have completed a reasonable verification step in this case. Each is separate from any inquiry to Consumer 1 (via the broker) as to which expenses may be able to be reduced in order to meet repayment obligations under a loan if approved. There were no other conflicting responsibilities: the purpose of the statutory scheme is to promote responsible lending conduct and to make the unsuitability assessment. In short, a reasonable licensee at the time would have taken steps to assist in the making of an informed decision about the financial situation of the consumer in order to verify it.

324    In my view, a reasonable licensee in the position of Money3 in April 2019, cognisant of the obligations at s 130(1)(b) and (c) in the circumstances of Consumer 1 at the time, would have at least considered the data as supplied with the broker application to ascertain, even on a rough calculation, whether the debits in the transaction data were broadly supportive of the stated monthly amount. The transaction data is reliable evidence of expenditure when it is known that the income of Consumer 1 from Centrelink and child support is paid into her bank account by direct credit. This is simply an exercise in using reliable data for the purpose for which it was acquired. It would also have used the transaction data as a verification tool. Taking those steps would then have informed the decision whether to apply the predetermined amounts for dependants and weekly expenses from the Matrix. This is not to say that reasonable steps required Money3 to make the more precise retrospective calculation that I have concluded sits outside of the pleaded ASIC case.

325    I find that Money3 by not inquiring into the transaction data in the illion bank statement of Consumer 1 and by not using that data as a verification tool, failed to act reasonably as required by s 130(1)(b) and (c). Accordingly, contentions (b), (c) and (g) are made out.

326    However, I do not consider that ASIC has established that the making of reasonable inquiries at the time required Money3 to take the additional step of obtaining a signed or completed statement from Consumer 1 as to her financial situation, including her weekly expenses. The likelihood is that if that question had been asked, Consumer 1 would have relied on her Centrelink deposits to her bank account as the evidence of her income and likewise the bank statements as the best evidence of her expenditure. Money3 had the bank data and the Centrelink statements from which it was quite capable of undertaking that exercise. The Centrelink statements were the best evidence of income. They were also the best evidence of some of the categories of expense, being rental and Centrelink repayments. The transaction data in the illion bank statements addressed the other categories, frequency and quantum of expenses. ASIC has not established why a reasonable further step required some form of signed as verified or completed statement from Consumer 1.

327    Thus, contention (a) is not made out.

328    Contention (d) is concerned with a deposit of $10,000 into the bank account of Consumer 1 in December 2018, which is outside the 90-day transaction period in the illion bank statements. Her evidence was that it was received as part of a separation payment from her former partner and was a one-off payment. She used the money for expenses, which meant that she spent more than average in the early part of 2019 until the money was exhausted by April 2019. ASIC submits that if Money3 had made reasonable inquiries at the time, it would have discovered that fact and adjusted her average weekly expenses accordingly.

329    I reject that submission. The $10,000 deposit is not a credit transaction disclosed in the illion statement. No other evidence was produced at the time that disclosed it, or that it impacted the spending pattern of Consumer 1. ASIC has not adduced evidence as to what steps a reasonable licensee would have taken to discover the fact of this payment outside of the 90-day period or how it is said that a reasonable licensee would have been alert to a unique increase in the spending pattern of Consumer 1 at the time.

330    Contention (e) draws on two recurring entries in the Centrelink statement of $85.54 and $28.50 per fortnight (which is then a total of $57.02 per week) each described as: lump sum advance repayment. ASIC submits that this deduction ought to have been inquired about in order to determine whether it was continuing and if so for what duration. That submission is made in a vacuum: ASIC has not adduced evidence as to why a reasonable licensee in the position of Money3 at the time would have made that inquiry. The fact is that these amounts reduced the net Centrelink payment that was recorded as the income of Consumer 1 and logically if the deductions ceased during the term of the putative consumer loan, the financial position would have improved. Mr McAuley applied this amount in the APL calculator and ASIC’s evidence does not address how a reasonable licensee would have treated it differently at the time. This contention is not made out.

331    Finally as to (f), Money3 submits that ASIC for the first time in closing submissions contends that inquiries ought to have been made about a decrease in the credit score for Consumer 1 from the report received on 24 April 2019 compared to the further credit check of 26 April 2019. That case was not pleaded or particularised. Moreover, as Money3 correctly submits, Ms Costantini in her affidavit at [79] – [83] addressed how credit checks were undertaken for Consumer 1. She was not cross-examined about any decrease in credit score. This failure is not part of ASIC’s case and it would be distinctly unfair to permit it to be relied on. I accept that submission.

5.3 Conclusion: Issue 1 and Issue 3

332    For these reasons I conclude that Money3 failed to make reasonable inquiries into and failed to take reasonable steps to verify the financial situation of Consumer 1 in that it failed to:

(a)    make reasonable inquiries about her living expenses; and

(b)    take reasonable steps to verify her living expenses

each of which were components of her financial situation in the 90-day period before the credit day, being 8 May 2019.

5.4 Issue 2: ss 128(c) and 129

333    ASIC makes a number of submissions. First, Money3 performed a serviceability assessment which applied arbitrary amounts for expenses from the Product Guides, which were not based on the individual consumer’s financial situation and bore no rational relationship to the minimum expenses of each consumer. For Consumer 1, the living expense from the Matrix and the dependant allowance were substantially lower than her reasonably necessary expenses. For that proposition, ASIC relies on its retrospective recalculation from the illion bank statements to derive an amount of $1,719 per week, which exceeded her regular Centrelink income of $942. Thus, there was no reasonable likelihood that she had the financial ability to incur a further weekly amount of $107.61 pursuant to the credit contract.

334    Second, ASIC relies on the antecedent failure to make reasonable inquiries and to verify the living expenses of Consumer 1 which resulted in it failing to use reasonably accurate or reliable amounts for her living expenses in conducting the unsuitability assessment.

335    Third, Money3 failed to make an assessment that specified the period covered by it.

336    Fourth, Money3 failed to identify in the credit contract any key aspects of the contract, including the total amount to be borrowed, the term and the interest rate.

337    Fifth, Money3 failed to identify in the assessment that the loan was not unsuitable, including by reference to the requirements and objectives of Consumer 1.

338    Sixth, Money3 failed to include any reference to the requirements or objectives of Consumer 1 in the serviceability assessment that was undertaken.

339    At the outset, some of these submissions cannot be accepted. The second submission is contrary to the construction of ss 128(c) and 129, that I resolved in Part 2.3.3. To reiterate, the content of the obligation to make an assessment required by s 128(c) is set out in s 129 and is not derived from s 130: Westpac at [51], Middleton J; [130]-[131], Gleeson J.

340    The fourth submission steps outside the pleaded and particularised case. It is not part of the case that Money3 breached the provisions in issue by failing to identify in the proposed credit contract the key terms including the amount to be borrowed, the term and the interest rate. In any event, these matters were clearly set out in the pre-approval offer (CB 2642).

341    I address the balance of the submissions seriatim. The first and most substantial submission of ASIC is that Money3 failed to undertake the unsuitability assessment as required by s 129 because it used arbitrary expense figures for dependants and weekly expenses from the Matrix. Much of ASIC’s submissions are founded on the use of Household Expenditure Measure (HEM) as a benchmark and the evidence of Mr Hartman, particularly that the “HEM was commonly used by Reasonable and Prudent lenders as a validation tool to test whether the value of a specified set of expenses was at least as much as the HEM for an applicant of comparable profile” (Expert Report [600]). ASIC places heavy reliance on Mr Hartman’s evidence that the Product Guides were inappropriate for use in conducting the unsuitability assessment and Money3 should have relied on HEM or another suitable benchmark.

342    ASIC also relies on the decision of Greenwood J in Channic at [1736], where his Honour was concerned with the analogous obligation at s 117, to make reasonable inquiries and steps to verify, which applies to credit assistance providers. In that case, the provider did not inquire into or verify the actual living expenses of a consumer and relied on a standardised expenses model. Of that reliance, his Honour observed:

Like all benchmarks, the model, in its application, presumably seeks to isolate the living expenses for a single person and a couple, adjusted by additional expenses referable to one or more children, as a smoothed out average of a typical basket of such expenses. Mr Hulbert did not simply use the Standardised Expenses model as a reference point for testing the reliability, on a consumer by consumer basis, of the properly identified or isolated actual expenses of that consumer for the purposes of accurately identifying classes of expenses in inquiring into that consumer’s financial circumstances so as to determine whether a loan might be unsuitable or not. Rather, Mr Hulbert accepted that the model was a perfectly proper substitute for any inquiry into or verification of a consumer’s actual expenses, as to living expenses. A question might arise about whether the adoption of a benchmark directed to particular categories of expenses of a consumer operates as the making of reasonable inquiries about that aspect of a consumer’s financial situation and whether adoption of such a benchmark operates as the taking of reasonable steps to verify that aspect of a consumer’s financial situation. A conclusion as to that matter in the absence of evidence of actual inquiries about actual expenses would require expert evidence about the formulation of the benchmark, the factors that inform the determination of the numbers derived from the model and the relevance and application of the model to consumers in the cohort of consumers upon which ASIC relies. 

343    Surprisingly, there is no reference to Channic in Westpac. Westpac does not, however, preclude the use of benchmarks: Middleton J considered the HEM benchmark as having “some utility when assessing serviceability” ([48]). Justice Lee expressed a similar view at [168].

344    Dealing first with Mr Hartman’s evidence, he addresses the use of general living expense benchmarks in section 25 of the Expert Report. As with his earlier expressed opinions, the immediate question for me is whether he exposes the basis for his benchmark opinions so that findings of fact may be made based on his evidence. The following paragraphs from the Expert Report are telling (from [594]):

The most common approach used in financial services (and based on my experience and substantial historical dialog (sic) with industry, including colleagues involved in processing vehicle loans) is comparing select categories of GLEs to those represented in the HEM for a similar family structure, number of dependents (sic), income band and geographic location (where they live).

…

HEM was commonly used by Reasonable and Prudent lenders as a Validation tool to test whether the value of a specified set of expenses was at least as much as the HEM for an applicant of a comparable profile.

This test is then used as part of the credit assessment to indicate the extent to which the values collected are ‘likely’ to be sustainable over the duration of a loan, based on being at least equal to the HEM value. They also used the outcome of that comparison to determine the extent of due diligence (Verification) necessary (i.e., reasonable).

In instances where the level of Vulnerability is low, it was still considered appropriate to substitute in the HEM values in instances where the comparable disclosed expense category value was lower than the corresponding HEM value – and do no more in terms of Verification of that information given the low level of Vulnerability.

In such instances, assuming there are no other issues identified that suggest that HEM would be inappropriate (E.g., carer responsibilities or adult dependent children living at home) this was considered a reasonable approach given this would be ensuring that the applicant had at least the level of contingency inherent in the HEM value given that value is based on the 25th percentile of expenses – i.e., ¼ of those surveyed spend less.

345    Once again, what is central to Mr Hartman’s opinions is his group of unidentified reasonable and prudent lenders and the particular practices of those lenders in the relevant period in undertaking unsuitability assessments for similar categories of lending. There is a further issue with his opinions about the use of the HEM benchmark. In cross-examination, he accepted that he used the HEM benchmarks effectively as a proxy for baseline expenses (T 318). But he then acknowledged that he failed to proceed in his opinions by distinguishing between absolute basic and discretionary basic expenditure, when the distinction between these types of expenditure is central to the HEM benchmarks (T 319-320).

346    Accordingly, I do not make findings based on Mr Hartman’s opinions concerning HEM because his reasoning process as to how and when it was applied is not exposed and, in any event, he did not draw the distinction that is central to its application.

347    However, there is other evidence which forms the basis for some relevant findings of fact. Multiple versions of the HEM benchmark for various quarters are in evidence, commencing with the December quarter 2018 and concluding with the December quarter 2020. The version for the quarter ended September 2019 (CB 7369) was the focus of submissions by Mr Caleo because most of the loans in question were made in 2019. HEM is a publication of the Melbourne Institute of Applied Economic & Social Research and is a joint publication of the University of Melbourne and the Melbourne Institute. The introductory pages include the following:

What is the Household Expenditure Measure?

The Household Expenditure Measure (HEM) is a measure that reflects a modest level of household expenditure for various types of families. It is a benchmark to which expenditures reported by loan applicants can be compared to assess whether the reported expenditures fall into the reasonable range of expenditures. It is not a replacement for information collected from applicants.

How the Household Expenditure Measures are Calculated

Starting from June 2018, the HEMs are based on expenditure data from the 2015/2016 ABS Household Expenditure Survey (HES). The HES contains in excess of 600 individual expenditure items which are grouped into some 90 CPI minor groups, and further aggregated into 11 CPI major groups. To adjust expenditures from the 2015/16 HES to September 2019 dollars each expenditure item is uprated with the State specific CPI for the relevant minor group using ABS 6401.0 - Consumer Price Index, Australia, Table 9.

Each of the more than 600 expenditure items is classified as an absolute basic, a discretionary basic, or a non-basic expenditure. To give an example, food purchased in supermarkets is considered an absolute basic whereas food consumed in restaurants is considered a discretionary basic. Overseas holidays are an example of non-basic expenditure, but domestic holidays are considered a discretionary basic. Very few expenditure items are considered non basic. As a result, the HEM can be described as being broad-based. A few expenditure types are excluded but are absolute basic expenditures and need to be collected from the loan applicant separately from any other expenditure to ensure the assessment of whether the applicant can service the requested loan takes these expenditures into account.

348    Next follows a list of excluded expenditures including household costs (rent and mortgage), private school fees, life insurance, sickness and personal accident insurance and superannuation. The method of computation is explained as:

After classifying each of the more than 600 expenditure items the total expenditure on absolute basics and the total expenditure on discretionary basics are computed for each household in the HES. Single and couple households without children, and single and couple households with 1, 2, or 3 children, result in eight different household types. Taking each of the eight different household types in turn, the HEM is then computed as the sum of the median expenditure on absolute basics and the 25th percentile of expenditures on discretionary basics. Note that the median and 25th percentile are calculated separately for each family type. Due to the small sample size, single parents with 3 children require a slightly different approach. The HEM for this group is set to the HEM for single parents with 2 children plus the increase in the HEM for single parents when going from 1 child to 2 children.

349    Table 1 sets out a list of household expenditure based on raw data for the September quarter 2019. The value per week is given, depending on the household type. For example, the weekly amount for a couple with three dependants is $989, for a single person it is $301 and for a single person with 3 dependants it is $578. By way of further explanation, these values are based on “the actual household type specific median and the 25th percentile of absolute and discretionary basic expenditures, respectively”.

350    Self-evidently as the HEM expenditure figures are median amounts it follows that 50% of the households considered have expenditure which is below the HEM weekly amounts.

351    I accept that HEM was an available measure, when the unsuitability assessment was carried out for Consumer 1, to reasonable lenders including those in the business of providing finance for the purchase of used motor vehicles. However, I do not have evidence that it would have been used by reasonable lenders for the purpose of assisting with or in undertaking the unsuitability assessment required by s 129 for the types of loans in issue; that is to Centrelink recipients who could not obtain finance for the purchase of used motor vehicles from larger financial institutions at the time. Further, the Act does not require that any particular verification measure must be used. That HEM may have been used does not preclude the use of alternative external benchmarks or different methodology. For those reasons, I reject ASIC’s submission that Money3 failed to undertake the unsuitability assessment for Consumer 1 because it did not rely on the HEM benchmark or another suitable benchmark.

352    That brings me to the internal Product Guide benchmarks that Money3 applied for dependants and weekly expenses. ASIC submits that the amounts of $50 per dependant and $200 for weekly expenses were arbitrary, not based on the financial situation of Consumer 1 and were “fundamentally inappropriate” for her.

353    That submission was developed from the evidence given by Mr Harris during his s 253 examination on 14 July 2022 (CB 5102-5105). Mr Harris is a CPA accountant and first commenced with Money3 as its chief financial officer, but in approximately 2015 was appointed as the Australian lending manager. In the latter capacity, he was responsible for overseeing the different credit departments in the business, including the Micro Motor Department. He reported to the chief executive officer. He is and was the responsible manager under the credit licence.

354    When questioned about the Product Guides, he gave evidence to the following effect. His attention was drawn to the minimum amounts for weekly expenses and rent and he was questioned as to the basis for those amounts. At an earlier (unspecified) time, Money3 was in the business of making small amount credit contract and medium amount credit contract loans (SACC and MACC). There was a projected earnings model for SACC loans. By an unspecified process, Money3 extrapolated from that data in order to determine that “roughly an average income would be $400” per week. Having derived that figure, 75% was allocated to total expenses. Some of the customers at that time were employed and others were not. A calculation was then performed by applying the 75% derivation to an (undisclosed) minimum income figure to produce an amount of $200 per week for expenses.

355    Pausing at that point, I infer by working backwards that the minimum income figure that was considered at the time was $266.

356    Continuing with the evidence of Mr Harris, he said that the minimum income figure for the calculation was decided by Money3, but he was not asked precise questions about how the amount was determined. Some questions were put to him as to whether the expense amount was ever reviewed against the HEM benchmark. Mr Harris said it was. To understand the next series of questions and answers (which failed to identify a date), it is necessary to consider the expense amounts in the Product Guides. In the July 2018 version, the living expense for a sole applicant was $200 per week plus $100 per week as a minimum for rent or board. The cost per dependant was $50 per week. In the August 2019 version, the minimum living expense was increased to $225 per week, with no adjustment to the other amounts. That remained the case through to and including the May 2021 version.

357    With that context, Mr Harris was asked whether the minimum weekly expense figure was reviewed against any publicly available benchmark, such as HEM. He answered:

A: When we increased it to 225 we did consider HEM at that stage. I think HEM was sitting at about 250 for that income bracket.

Q. So, in that instance, you did consider HEM?

A. Yes.

Q. But historically has HEM been part of the consideration other than that one instance?

A. Prior to that HEM wasn’t really a consideration as much as it is now.

Q. Why?

A. Different management regime back then. We had a change from the founder of management. He came from very much a SACC based business and cared more about that side of the business than the motor side. So it’s been a different change of tack probably over the last 7 years.

358    Pausing again, I add that I do not accept ASIC’s submission that “it is telling” that after it commenced its investigations, expense amounts in the Product Guides were compared against the HEM benchmark. That submission erroneously considers the conduct of Money3 in retrospect.

359    Mr Harris then explained how Money3 derived its minimum expense amounts:

We look at our losses on that product and we were quite comfortable where our losses were sitting at the product. So we, based on our losses we thought it was suitable for the clients we were looking after.

360    He was then asked to explain the relationship between bad debts and an objective determination of minimum weekly expenses. Mr Harris answered (CB 5105):

A. If we saw it in increasing in bad debts, so we have a product as we said, and how successful that product is based on how customers pay. And if we, I see a decline in the losses, so losses are getting worse, then you investigate, okay, are you giving too much money, are, expenses are not high enough. What’s the cause? When your losses are very consistent, were saying that we, the minimum expense allowance we’ve got there is probably sufficient for that cohort at this stage.

Q. So basically as long as, so you were satisfied that the default rate or the bad-debt rate, for want of a better term, the minimum expenses that you were using suggested suitability and serviceability because you weren’t having defaults and loans being written off?

A. It wasn’t suggesting there was an underlying problem.

361    Mr Harris was then taken to a document paginated as 4126, which is not easily located in the Court Book. With persistence one can identify it as a page from the May 2020 Credit Policy (CB 6477). Paragraph 9.3 of that document provides (CB 6486):

Minimum Living Expenses

Where the verified living expenses are below the minimum amount required by Money3 (outlined in the table below), then these minimum amounts are applied. The following minimum living expenses have been determined pursuant to a review of HEM benchmarks and an analysis of our customer profiles across our loan portfolio and are constructed predominantly of basic expenses. They are regularly reviewed to ensure they are realistic, adequate and appropriate. Where the loan amount exceeds $8,000, an additional buffer of at least $135 per week is added to the minimum amounts.

Single applicant $325 pw.

Joint applicants $510 pw.

Plus cost per dependant $50 pw.

362    It should be noted that these are the minimum amounts for loan types that are not in issue in this proceeding. Part of the above paragraph was read to Mr Harris, limited to the second sentence. He was asked whether he agreed with it and he answered: Yes. His evidence continued:

Q. Yep. Even the mention of the review of HEM benchmarks?

A. Yes.

Q. What are the basic expenses that are referred to there? Can you list them as best you can?

A. Its food and, food, entertainment, travel, utilities – I’m going to miss one here. I think there’s five. Yeh, I’ve probably missed one but…

Q. Yeah, okay. So all right, food, utilities. What about like your personal, your entertainment?

A. Yeah, it’s personal and entertainment and travel.

Q. Travel. What’s travel? What consists of travel expenses?

A. Insurances, rego, petrol and stuff like that.

Q. Yep. Is that for the possible new car or does that relate to existing expenses?

A. It relates to the existing expenses but you assume if they’re buying a new car they’re replacing the old car.

Q. Ah hmm. So that forms part of the total expenses. But then the loan repayment, potential loan repayment you said is taken out of the surplus at the end of the process?

A. Yes.

363    That evidence was not pursued with more detailed questioning. Mr Harris was not called as a witness. ASIC tendered these extracts from his examination. Money3 objected based on s 135 of the Evidence Act, but stated that it would not press the objection if his earlier contextual evidence was also admitted. That is the basis on which I have received the evidence of Mr Harris.

364    ASIC relies on documentary evidence as well, being responses by Money3 provided in answer to s 49 notices. Money3 stated (CB 4475-4476) with reference to the relevant period:

Money3 conducts reviews of the ‘living expense’ or ‘minimum living expense’ amounts from time to time, but not at fixed intervals. These reviews are reflected in changes to the ‘minimum living expense’ section in the Product Guides and Credit Guides, which are updated accordingly. The changes are then communicated both internally and externally, through the distribution of Product and Credit Guides and the dissemination of training material.

Prior to 2019, Money3 would consider minimum living expenses in the context of individual products. The review was undertaken by having regard to trends in spending observed and the proportion of loans with losses within the Money3 lending business.

….

In or around August 2019, General Manager – Money3 loans, Craig Harris, conducted a review of the minimum living expenses used by Money3. The review was undertaken by having regard to trends in spending observed and the proportion of loans with losses within the Money3 lending business. No written reports of the reviews were generated. Where changes are considered appropriate by the General Manager, changes were made to the minimum living expenses as recorded in the M3 Product Guide dated August 2019.

365    In July 2020, Mr Harris compared the living expense amounts against the HEM 2020 version. As a result, adjustments were made to the minimum living expenses as recorded in the Product Guide. In another response (CB 4436) Money3 stated that it does not rely on publicly available benchmarks “other than to increase general living expenses which fall below [the minimum expense amounts]. Assessment is primarily conducted on declared and verified expenses.”

366    Ms Costantini did not give evidence about how the minimum expense amounts in the Product Guides were determined, despite her extensive evidence-in-chief about how credit analysts were required to use the Product Guides in undertaking unsuitability assessments. Ms Crowe did not give evidence about how the expense amounts in the Product Guides were derived. ASIC criticises Money3 for not adducing such evidence, which criticism extends to the fact that Money3 did not call Mr Harris as a witness in its defence. I do not place weight on those criticisms for the reason that this is a civil penalty proceeding and ASIC carries the onus of proof.

367    When Money3 increased the minimum weekly expense amount from $200 to $225 per week in August 2019, the correlating HEM benchmark was for the June 2019 quarter (CB 7348). For a single person the HEM amount was $300 per week and for a single person with three dependants the amount was $576 per week. In the HEM September 2019 quarter (CB 7369), those amounts were respectively adjusted to $301 and $578.

368    Money3 submits that it conducted an assessment which covered the period inclusive of the credit day which it specified in the proposed contract document, being 14 days from the Disclosure Date of 7 May 2019. The assessment that it undertook did have regard to the circumstances of Consumer 1 and addressed the required statutory question: whether the credit contract will be unsuitable for her if entered into. It does not accept that the expense amounts in the Matrix were arbitrary, and in any event did not use the Matrix in the manner contended by ASIC, in that once the figure for dependants is added to the weekly amount of $200, the derived figure exceeded the amount of $1,000 per month as stated in the National Loans application form. Having regard to a higher derived amount was a component of an appropriate assessment.

369    Money3 further submits that the expense amounts in the Matrix that were applied to Consumer 1 were suitable for the demographic of its customers: from the evidence of Mr Harris, the figures were determined pursuant to a review of the HEM benchmarks and an analysis by Money3 of its customer profiles across its loan portfolio and were constructed predominantly of basic expenses. There was also a consideration, necessarily evaluative, that the derived figures formed an appropriate relationship with the default rate of comparable customers for Money3. Money3 further submits that properly understood the HEM benchmark is not a precise dataset, is a statistical median figure and is not reflective of the minimum or reasonably necessary expense figures for the Centrelink recipient consumers who sought finance from Money3 to purchase used motor vehicles. Overall, it was appropriate for Money3 to have regard to and to apply its derived weekly and dependant expenses because “as a general proposition” the consumers who sought the finance in issue “had lower incomes and were likely, relatively speaking, to have lower expenses”.

370    I am not satisfied that ASIC has established that in performing the unsuitability assessment, Money3 applied arbitrary expense amounts which bore no rational relationship to the minimum expenses of each of its consumers, and in particular for present purposes Consumer 1. Nor am I satisfied that Money3 should have used the HEM benchmark. There are several reasons for that conclusion.

371    First, ASIC did not adduce evidence as to how the HEM expense figures were relevant to the particular class of consumers in issue. Although HEM is described as a “measure that reflects a modest level of household expenditure for various types of families”, it is a statistical computation of “the median expenditure on absolute basics and the 25th percentile of expenditures on discretionary basics”. Thus, for absolute basics, 50% of the surveyed households have expenditure below the HEM amount. ASIC has not adduced evidence that the consumers in issue had weekly basic expenses at the median point. That omission assumes significance in the context of this qualification in the document (CB 7371) which explains the limitations of the Household Expenditure Survey (HES):

The HES sample is too small to provide HEMs by income class, geographical region, or both, using the same approach. It would require enough families in the HES for each specific family type one wants to compute the HEM for: e.g. single parents with 2 children in regional Tasmania with household income between $80,000 and $100,000.

372    In contrast in Westpac PJ, evidence was adduced from Mr Robert Love, the Head of Credit Risk Optimisation at Westpac who explained the origin of the HEM index and how the data is collected and analysed.

373    Thus, there is not an evidentiary basis to support a finding that a reasonable lender in the position of Money3 would have used the HEM benchmarks for the expense categories of weekly expenses and dependants and that by not employing it, Money3 failed to perform the required s 129 assessment for Consumer 1.

374    Second, I am unpersuaded that ASIC has established that the Matrix expenses that were used for Consumer 1 were arbitrary. They were greater than her declared weekly expenses (by extrapolation from the monthly figure). There is a basis in the evidence of Mr Harris that the amount of $200 per week from the July 2018 Product Guide was derived from the internal data of Money3 and the application of a percentage figure applied to an average income amount derived from other loan types. True it is that Mr Harris described it as an “rough” average income calculation, nevertheless ASIC has not adduced evidence as to why that methodology was less reliable than the HEM data where 50% of households have weekly expenditure less than the median amounts.

375    Third, obvious questions were not put to Mr Harris in his examination, if the purpose was to support a contention that the expense amounts in the Matrix were arbitrary and not based on valid data. For example, he was not asked questions about the determination of the weekly expenses amount: such as: what was the default rate that he referenced? Why was the default rate considered relevant to the determination of the weekly expenses amount? He was asked a discursive question (CB 5105) prefaced by the inquirer’s inability to understand the nexus between the default rate and objective minimum expenses, but the answer was likewise discursive and no probing follow-up questions were put.

376    Continuing with what was not asked, other obvious questions were: What was the basis for the concluded interrelationship? What was the average or median weekly expenses amount that was applied in the assessment of loan applications and which constituted the class of defaulting borrowers? What was the extent of default? Did the defaulting borrowers fall into any particular category? What was the extent of pre-approval assessment of weekly expenses for the defaulting borrowers?

377    What is known is that Money3 in 2018 entered into 10,408 Micro Motor contracts, 11,288 in 2019 and 9,287 in 2020 (CB 4461). In those years the default rate was 2,080 in 2018, 1,874 in 2019 and 1,358 in 2020 (CB 4462). This data was supplied in response to questions pursuant to a s 49 notice. The notice defined default as a default within the first 12 months, which ASIC defined as “a circumstance where one or more loan repayments is more than 30 days late” (CB 4322). Money3 clearly had available to it a large data set to assess in considering whether the minimum expense amounts were set too low. And ASIC has not explained why reference to a default rate on loans advanced to customers within the Micro Motor demographic, was an irrelevant or arbitrary matter to consider in assessing the minimum weekly expense amounts for the Product Guides.

378    This is not intended to be an exhaustive list, still questions of this type are clearly relevant to the arbitrary determinations submission that is now made. ASIC has not adduced evidence in this civil penalty proceeding which persuades me that the weekly expenses and dependants amounts in the Product Guides were arbitrary.

379    As to the third submission, did Money3 comply with the obligation at s 129(a) to make an assessment that specified the period it covers for Consumer 1? I find that it did. Conformably with my construction of the provision in Part 2.3.1, the Act does not require a specification to have any particular form or that it be in writing. It is an evaluative process. Section 128 requires that the assessment be made within 90 days before the credit day and must cover the period in which the credit day occurs. For Consumer 1, the credit day (the day the credit contract is entered into: s 132(2)) was 8 May 2019. When Money3 made a conditional offer to Consumer 1 on 7 May 2019, by sending the proposed credit contract to National Loans, it included the proposed Secured Loan Contract (CB 2393) which recorded 7 May 2019 as the Disclosure Date, and which included the standard reservation to withdraw if settlement did not occur within 14 days of the Disclosure Date.

380    The Settlement Date is defined as: “the date we first lend money to you.” I find that Money3 conducted an assessment which included the credit day and specified the period covered – 14 days from 7 May 2019.

381    The fifth submission, that Money3 failed to identify in any assessment that the loan was not unsuitable, substantially overlaps with ASIC’s submissions about the use of arbitrary expense amounts from the Matrix and then extends into the territory of the retrospective recalculation of the reasonably necessary expenses for Consumer 1 of $1,719.42 per week based on a combination of the average weekly debits from her illion bank statements of $1,432.40 plus Centrelink deductions of $287.02. As I have noted, this calculation departs from the particularised claim of the greater of HEM or disclosed expenses of $1,409.12 ($1,177.24 plus non-HEM comparable expenses of $231.88). The amount of $1,177.24 is taken from the recalculation evidence in the affidavit of Consumer 1 and is for the period 7 February 2019 to 8 May 2019. ASIC proceeds with this new contention, recognising that Consumer 1 was unable to confirm the retrospective calculation in her affidavit.

382    The difference in the calculations is significant of itself, but what is more fundamental is that ASIC did not plead and particularise that Money3 failed to undertake the unsuitability assessment by not determining the reasonably necessary weekly expenses for Consumer 1 in the period 17 January 2019 to 8 May 2019 (a new period) by totalling all debits in the illion bank statements of $18,416.58 to then derive an average “weekly spend” of $1,432.40 (a new calculation) to which is then added the Centrelink regular deductions.

383    That is a new case. When I raised this with Mr Senathirajah in closing submissions he acknowledged that is so, but then submitted that the recalculation corroborates the analysis of Mr Hartman, noting that his Expert Report was admitted into evidence. In part he submitted that he was not:

[S]hying away from the fact that if your Honour finds that we don’t establish the case based on Mr Hartman’s evidence about the way he conducted it, that is, the inquiries he made and the unsuitability assessment he undertook, we fail.

384    For Consumer 1 that is a reference to section 13, paragraphs [281]-[314] of the Expert Report. Mr Hartman calculated $1,177.24 as the greater of HEM or disclosed comparable expenses to which he added non-HEM comparable expenses of $231.88. I reject this evidence. The amount of $1,177.24 has not been established and his analysis then proceeds by reference to his scalability assessment and what a reasonable and prudent lender would have done in the circumstances, which evidence as I have explained fails to disclose his reasoning process. Thus, ASIC has not made good the fifth submission.

385    The sixth submission requires a finding that the assessment undertaken by Money3 failed to reference the amount of credit that Consumer 1 sought and the purpose of the loan. The evidence is to the contrary. The loan application received from National Loans on 24 April 2019 (CB 2224) is for a car loan to purchase a vehicle from Automax Cars. It attached an unsigned agreement to purchase a vehicle. It was not the one ultimately acquired; Consumer 1 did not make her final choice until 7 May 2019. For that reason when Money3 generated a pre-approval offer on 26 April 2019, it recorded the offer as “pending car particulars” (CB 2642). It recorded an amount of $8,000 to purchase a vehicle plus an estimate for warranty insurance of $1,600, the application fee of $1,050 and the broker fee of $550. In total an advance of $11,200.

386    When Consumer 1 selected a suitable vehicle, Mr McAuley generated the application form and proposed credit contract with finalised details for insurance on 7 May 2019 (CB 2393). It specifies the total amount of the loan of $11,085 and the purpose: “Purchase of a car and additional products”. Although this was generated after Mr McAuley undertook the capacity calculation and determined to pre-approve the loan on 26 April 2019, nonetheless the assessment to the time of the issue of the pre-approval offer was undertaken by reference to a specified amount of credit (and the component amounts) for the purpose of financing the purchase of a vehicle. The variation between the total advance identified in the pre-approval offer and the amount ultimately advanced ($115 less than the pre-approval) is inconsequential.

387    Accordingly, I am not satisfied that ASIC has established that Money3 failed to undertake the unsuitability assessment required by s 129.

5.5 Issue 4 and Issue 5: s 131(1)

388    These issues are also conveniently considered together.

389    It is important to recall that s 131(4) requires that for the purpose of determining whether a contract will be unsuitable, only information that satisfies two categories may be taken into account: information that is about the consumer’s financial situation, requirements or objectives; and which at the time of the assessment the licensee had reason to believe was true or would have had reason to believe was true, if it had made the inquiries or verification under s 130.

390    ASIC makes the following submissions. Money3 had access to the Centrelink statements, a credit check and the illion bank statements for Consumer 1. If Money3 had made reasonable inquiries and undertaken reasonable verification of her financial situation as required by s 130, it would have known that her weekly income was $942.54 and her reasonably necessary expenses were $1,719.42, which was impacted by a one-off cash injection of $10,000 in December 2018. Thus, Money3 should have adjusted her average expenses by reducing the amount by approximately $583.33 to $1,136.09 per week. The submission continues that this information demonstrates that:

(a)    the bank statements for the period 24 January 2019 to 24 April 2019 record same day account clearing, her debits exceeded her credits, recurring payments totalling $619 (or approximately $48 per week) to Uniting Care for day-care fees for one of her children, a payment of $202 for a fine and cash withdrawals totalling $2,280 being approximately 15% of her expenses;

(b)    rental payments, electricity and gas repayments and a lump sum advance repayment as recorded in her Centrelink statement; and

(c)    that her weekly income of $942.54 was exceeded by her weekly expenses of $1,719.42, which if account had been taken of the additional $10,000 received in December 2018, translates to an average weekly expense of $1,136.09 resulting in a weekly deficit of $193.55. On that calculation, Consumer 1 could not afford the weekly loan repayments of $107.61.

391    On that basis, ASIC submits that Consumer 1 “was in a very precarious financial position”, that Money3 has failed to adduce evidence that she could have increased income or reduced her expenses and that in consequence, Money3 failed to assess the credit contract as unsuitable.

392    Money3 submits that the assessment it undertook considered whether it was likely that Consumer 1 would be unable to comply with her financial obligations under the contract, or could only comply with substantial hardship, and whether the contract would not meet her requirements or objectives. For that submission, it relies on the assessment process which I have considered in addressing the preceding issues.

393    Money3 makes specific submissions as follows. ASIC has not established that, if further information had been sought or considered as contended, the assessment would have found the credit contract to be unsuitable. In elaboration, it is notable that Consumer 1 complied with her obligations under the credit contract until 19 March 2021 when the loan was discharged. The submission that the illion bank statements record same day account clearing is not established as a fact; the payment of the fine is a one-off and not a continuing expense and that each of the other listed expenses were taken into account by Money3 as part of its assessment. Consumer 1 gave evidence that her expenses were higher in the period prior to the contract because she received an amount of $10,000 in 2018, and on that basis it is likely that her expenses would be lower into the future. In any event, the assessment that Money3 undertook did not increase her income or reduce her expenses by forecasting into the future: the assessment was undertaken on the information as it was at the time.

394    I am not satisfied that ASIC has established these contraventions. First, regular same day account clearing is not established. What ASIC means by that expression is the identification of days when a credit is matched by a corresponding debit, so that the amount deposited is exhausted (or nearly so) by a withdrawal. ASIC does not identify in closing submissions what transactions it relies on.

395    The transaction data in the illion bank statements do not establish that fact. The opening balance on 25 January 2019 was $1,834.56. On that day there were 5 withdrawals, which reduced the balance to $810.24. A deposit on 29 January 2019 increased the balance to $1,310.24. This was then followed by 12 withdrawals on that day which reduced the balance to $413.84. There were further withdrawals on 30 January 2019 which reduced the balance to $130.04. The balance increased, on account of three deposits, to $1,495.22 on 4 February 2019. It is not necessary to undertake this interrogation for the entire period of the statement. Money3 is correct to submit that the balance fell below $100 on only three occasions during the period of the bank statements: 28 March, 3 and 17 April 2019. There is simply no pattern of same day account clearing.

396    For the same reason, the contention that the debits of Consumer 1 exceeded her credits is not made out. There are recurring debits described as “Bpay Unitingcar” in various amounts between 18 February and 23 April 2019, the minimum amount of which was $60 and the maximum payment was $134. Accepting that, the difficulty is that ASIC has not explained why the failure of Money3 to explicitly consider these debits supports the conclusion that it failed to assess the contract as unsuitable.

397    As to the amount of $202 paid on 18 February 2019 to Fines Victoria, that was not a recurring expense and therefore is not relevant to an assessment of the likelihood that Consumer 1 would be unable to comply with her financial obligations under the contract. That the cash withdrawals total $2,280 and mathematically were approximately 15% of the expenses of Consumer 1, cannot be viewed in isolation. ASIC’s evidence does not address how it is that cash withdrawals were not included in the weekly expense amount applied from the Matrix or whether cash withdrawals fall into the identified class of minimum necessary expenses that it relies on.

398    The rental payments, electricity and gas repayments and the lump sum repayments to Centrelink were each considered by Money3 in its assessment. The retrospective recalculation of weekly expenses sits outside of the pleaded and particularised case; as does the contention that adjustments should have been made by reason of the additional $10,000 that Consumer 1 received in December 2018 to produce a deficit of $193.55 per week.

399    Finally, I reject the submission that Money3 should have introduced evidence to the effect that Consumer 1 could have reduced her weekly expenses; and in particular that a proposition of that type was not put to her in cross-examination. Money3 does not carry the onus of proof in this proceeding. In any event, Consumer 1’s evidence was that her expenses were greater because of the receipt of this money between January and March 2019, until those funds were exhausted by April 2019. Money3 is therefore correct to submit that there is a basis to conclude that the weekly expenses of Consumer 1 would likely have been less from the contract date. Further, that is not the assessment that Money3 undertook in that did not assume a reduction in expenses over the life of the loan.

5.6 Conclusion: Issues 4 and Issue 5

400    For these reasons I am not satisfied that ASIC has established that Money3 contravened s 131 for Consumer 1.

6. CONSUMER 2

6.1 Essential chronology of facts

401    Consumer 2 did not give evidence at the hearing. I gave leave for the issue of a subpoena to compel her attendance on 28 October 2024. Consumer 2 did not obey the subpoena. On 12 February 2025, ASIC applied for leave to adduce evidence in the form of Consumer 2’s affidavit. I refused that application on 13 February 2025: Australian Securities and Investments Commission v Money3 Loans Pty Ltd (Trial Ruling No 2 - Witness Unavailability) [2025] FCA 110. For this consumer, I find the facts in accordance with the agreed documents, the evidence of Ms Costantini and the Statement of Agreed Facts.

402    At the time of the loan application, Consumer 2 was a single mother with three dependant children aged 5 and under. They resided in community housing. Her sole source of income was Centrelink payments, from which her rent was directly deducted. Consumer 2 sought finance to purchase a vehicle. On 16 September 2019, she signed an application form appointing a finance broker, Responsive Lending, for that purpose (CB 2731).

403    The application listed the loan purpose as ‘Car Loan’, requested a loan amount of $0 and disclosed personal and financial information about Consumer 2 (CB 2731-2736). It disclosed her personal circumstances, summarised at [403]. Her employment status was disclosed as ‘Pension/Centrelink Benefits’ with a net pay of $995. Under the heading ‘Financials’ there is listed declared weekly living expenses of $250 and housing expenses of $1,641. Under the heading ‘Proviso’ there is listed “Centrelink monthly” of $2,248.33 and “living expense monthly” of $1,172.88. A ‘once-off’ monthly loan payment of $50 is also disclosed. Neither the evidence nor the submissions addressed the meaning or significance of the contrasting figures under the “Proviso” heading, which as I explain leads to difficulty in accepting some contentions of ASIC.

404    On 20 September 2019, Responsive Lending, by email to the Money3 ‘Micro Admin’ email inbox, submitted the application form on behalf of Consumer 2 (CB 2780, 2731). The application was accompanied by three illion bank statements (each for a different bank account for the 90-day period from 18 June to 16 September 2019, a fourth illion summary statement dated 16 September 2019) and a Centrelink statement (CB 2768) dated 1 September 2019. The illion summary statement lists the total debits and credits for the three accounts, the number of “dishonours” as zero, the accounts were not overdrawn, the percentage of income spent on the day of deposit, excluding transfers at 38.15% and monthly living expenses of $1,172.88.

405    The Centrelink statement records deductions from Consumer 2’s payments of $390.30 for rent and $30 for debt repayment. The three illion bank statements are summarised below:

(a)    NAB account ending in 6664: This account bears the nickname ‘Savings’ and appears to have been used for that purpose, with funds flowing in and out of the account by way of internal transfers to other accounts which appear to be in Consumer 2’s name. There are no external transactions listed. The account was regularly drawn down to a $0 balance, including as at the date of the statement (CB 2710-2715).

(b)    NAB account ending in 0200: This account bears the nickname ‘Personal Account #0200’. There were no transactions found within the statement period and the account balance was $0 (CB 2716).

(c)    NAB account ending in 9352: This statement discloses the monthly Centrelink ‘Family Benefit’ of $1,451.38 and monthly average Centrelink pension of $901.84, which totals $2,353.22. The inflow and outflow from the account via ‘internal transfers’ largely cancel out at $5,494.44 and $5,474.42 respectively. These transfers are almost entirely to and from a ‘linked account’, likely the Savings account. When these debits are removed from the equation, and noting that the account balance at the date of the statement was $0.69, it is evident that expenditure out of this account over the 90-day period was $7,188.44 (approximately $2,396 per month) (CB 2717).

406    As noted above, the illion summary statement (CB 2737), which draws together data from the three account statements, lists Consumer 2’s monthly living expenses as $1,172.88. This is less than 50% of the expenditure demonstrated by the statement for the NAB account 9352. It is unexplained how this amount was derived.

407    The application was assigned to Mr McAuley. On 23 September 2019, he ran a credit check with ARM Consumer Plus for an amount of $8,000 (CB 3014, 2879). Mr McAuley reviewed the credit check and illion bank statements for Consumer 2 and on 23 September 2019, sought further information from the broker (CB 2779) in relation to: (1) a transaction listed on the illion bank statement on 13 September 2019 titled “loan” (CB 2723); and (2) a default in the amount of $777 to Rent4Keeps recorded on the ARM credit check (CB 3014). Later on 23 September 2019, the broker responded to Mr McAuley and informed him that the “loan” was to Consumer 2’s friend who paid her back in cash and that she was not aware of the default (CB tab 338). It is evident from the client notes that, having received this response from the broker, Mr McAuley concluded there was no poor banking conduct that met Money3's knockout criteria and he recorded the following under the subject heading ‘Pre approval MAX’: “28 single 3 dep banking ok veda ok cl hc max ok” (CB N tab 338). That note was made on 23 September 2019 at 5.16 pm. It is Ms Costantini’s evidence that, having reviewed the relevant documents and correspondence between Mr McAuley and the broker, the usual practice of credit analysts did not require Mr McAuley to take any further steps in light of the explanation of the default and ‘loan’ transaction (CB 1784 [127]).

408    On 23 September 2019, Mr McAuley prepared an APL capacity calculation (CB 3016). The recorded weekly income of $692.41 was derived from the fortnightly Centrelink income amounts for Family Tax Benefit Part A and B and Parenting Payment. The weekly amount for household general living expenses of $225 was derived from the Product Guide. The weekly amount for dependants of $150, being $50 per dependant, was derived from the Product Guide. The recorded weekly rent amount of $195.15 was derived from the ‘Rent Deduction Scheme’ entry of $390.30 fortnightly on the Centrelink statement.

409    The result of the APL capacity was a weekly surplus of $107.26, being weekly income of $692.41 minus weekly expenses of $390 (inclusive of $50 per dependant), not including the repayments that would be required if Consumer 2 entered into the loan with Money3.

410    Mr McAuley then prepared an Excel repayment calculator which resulted in a weekly repayment of $106.70 (or $213.76 fortnightly) including insurance (CB 2781, Tab 280). It records an interest rate of 24.95% over 78 payments in 36 months, and a monthly account fee of $28. It records the total amount to be financed as $11,005 comprising $8,000 principal, $1,350 insurance, $995 application fee and $660 brokerage fee.

411    On 23 September 2019, Mr McAuley generated a pre-approval document (CB 2777). On 23 September 2019, Mr McAuley sent the pre-approval documents by email to Responsive Lending (CB 2818-2819).

412    On 26 September 2019 at 1.38 pm, Responsive Lending emailed Money3 attaching a tax invoice from Chariot Motors for a vehicle and requested “a warranty with Integrity Car Care for $1,400 over 36 months” be included in the amount to be funded under the contract (CB 2818, 2821).

413    It is to be noticed that the invoice for warranty insurance is greater by $50 than the amount used in the capacity calculation. Ms Costantini in her evidence undertook a capacity calculation by using the correct figure and determined an adjusted weekly repayment amount of $107.15; still less than the initial calculated surplus of $107.26.

414    On 26 September 2019 at 4.41 pm, a credit support officer generated and provided to Responsive Lending a settlement pack that included an unsigned credit contract (CB 2838). The loan document is styled ‘Secured Loan Contract’ and is in the form of an offer to make Consumer 2 a loan on the conditions set out in the loan schedule and on the accompanying terms and conditions, together said to form the ‘Loan Agreement’. The Disclosure Date is 26 September 2019 and there is a note that the information in the Schedule “may change before or after the date we first lend money to you (the Settlement Date).”

415    The loan schedule records the amount of credit as $11,055, the interest rate of 24.95% per annum, the total amount of interest to be repaid of $4,697.28, the repayment period of 78 fortnightly repayments each in the amount of $214.67 with a final payment of $230.69, amounting to a total of $16,760.28 over the loan term. There is separate disclosure of the credit fees and charges of $995 for the loan application fee, $28 for the monthly servicing fee in advance of the settlement date and $28 monthly thereafter, together with a list of fees and charges in the event of default or a request for variation. The total fees and charges, assuming the entire loan term, is disclosed at $6,700.28. There is separately disclosed the amount of $8,000 to be paid to the motor vehicle dealer, $1,400 to the insurer, $995 to Money3 for credit fees and charges and $660 to Responsive Lending. The contract required Consumer 2 to make various declarations, including that she had “carefully read” the document and each of its terms and conditions, that the information she had provided was accurate and not misleading and that she had not relied on “any promise or representation by anybody when deciding to enter this transaction”. Under the heading ‘Special Conditions’, the loan purpose is stated to be for the purchase of car and additional products. The standard reservation to withdraw if settlement does not occur within 14 days of the Disclosure Date is included

416    On 26 September 2019, Consumer 2 electronically signed the documents including the credit contract and Money3 application form (CB 2656-2673). In doing so she declared all information in it to be true and correct including weekly income of $692.41 and nil expenses, aside from the amount of $390.30 for rent. As with Consumer 1, I accept the evidence of Mr Harris that a computer error omitted expenses items from this document, but they were included in the APL capacity calculation (CB 3016).

417    On 27 September 2019, by email Money3 received from Responsive Lending the settlement pack signed by Consumer 2. The documents were saved to the APL system on 30 September 2019 (2654-702). The settlement pack included the signed Money3 application form, signed secured credit contract, signed credit proposal document, signed comprehensive insurance disclosure and signed warranty policy schedule. I pause to observe a discrepancy that has not been noticed by ASIC or Money3. Ms Cavar’s evidence is that the settlements officers check that the contract has been signed and witnessed before funds are advanced. The credit contract was signed by Consumer 2 on 26 September 2019, but purportedly witnessed by a Michael Moras on 27 September 2019. Nonetheless, that is not part of ASIC’s cascading contravention submissions.

418    On or before 30 September 2019, the settlement officer performed the steps in the general pre-fund checklist in the APL including: (1) all settlement documents have been attached and renamed (2) an email allocation sent to broker and credit analyst (3) broker declaration signed and dated (4) there is authority to complete (CB 3018).

419    On 30 September 2019 at 11:34 am, the settlement officer conducted a welcome call to Consumer 2 (CB 3962). The welcome call record discloses the following, when read with the evidence of Ms Cavar. Consumer 2 confirmed her personal details including her Centrelink benefit status and that she had three dependants; the purpose of the loan was for the purchase of a car and additional products; the principal amount and term of the loan; and she was happy to proceed (CB 3020). She was not asked to confirm the total amount advanced or repayable.

420    On 30 September 2019, Money3 settled the loan and disbursed the funds to the dealer and warranty provider (CB tab 338 row 18). Money3 then sent a text message to Consumer 2 and emailed her a welcome pack which included a welcome letter and a copy of the signed credit contract (CB 2806, 2875). Money3 also sent the broker a settlement advice (CB 2871).

421    From November 2019, Consumer 2 defaulted on 16 fortnightly repayments and incurred dishonour fees. On 11 December 2019, Consumer 2 requested that Money3 increase her repayment amounts by approximately $10 per fortnight. Money3 agreed to that request. On 6 March 2020, Money3 sent a default notice to Consumer 2. On 14 July 2020, the Benevolent Society contacted Money3 in relation to the hardship of Consumer 2. Money3 placed the loan repayments on hold. Money3’s records include an email chain, a letter from Money3 dated 27 August 2020 declining the hardship application, and a financial assistance application form (CB 2893, 2889-2892). From October 2020 to February 2021, the Financial Rights Legal Centre (FRLC) corresponded with Money3 in relation to Consumer 2. On around 16 February 2021, Money3 and Consumer 2 agreed that Consumer 2 would repay the purchase price of the car only, being $8,000 less payments of $1,533.68 (i.e. $6,466.32) by instalments of $30 per week.

422    In March 2021, Consumer 2’s insurer, Integrity Car Care, agreed to refund the insurance amount of $1,400. On 9 March 2021, the refunded amount was applied to the balance of Consumer 2’s loan (CB 2941).

6.2 Issue 1 and Issue 3: ss 128(d) and 130(1)(a) – (c)

Submissions

423    ASIC’s contravention submissions are similar to those for Consumer 1. Money3 contravened s 130(1)(a)-(c) by failing to:

(a)    inquire whether Consumer 2 wanted finance for the add-on fees;

(b)    obtain a completed statement from her that set out her financial situation, including her likely expenses (note that ASIC does not for this consumer refer to a signed and/or completed statement) in circumstances where she had no interaction with Money3 before signing the credit contract on 26 September 2019;

(c)    make further inquiries in circumstances where the bank statements “strongly suggested” that the purported expenses in the application form were materially lower than actual expenses and likely future expenses;

(d)    make further inquiries into defaults on other loans (such as the default on Rent4Keeps), which “crucially” Money3 was made aware of but failed to obtain a sufficient explanation or documentation for, and defaults to Panthera Finance of $1,568 and $889 and the reduction in her credit score to 499;

(e)    inquire as to whether the deductions listed in the Centrelink statement were continuing and if so for what duration; and

(f)    verify and/or reconcile the purported and conflicting expenses in the broker application form (weekly expenses of $250 and housing expenses of $1,641, but “living expenses monthly” of $1,172.88) by considering them against primary documents such as bank statements and the Centrelink statements which would have indicated average expenses of $769.25 per week.

424    Money3 submits that what it did in the circumstances constituted reasonable inquiries and verification steps of the financial situation and the requirements and objectives of Consumer 2 in relation to the credit contract.

425    At a granular level, Money3 submits:

(a)    The illion bank statements were considered by Mr McAuley. Two matters were then raised with the broker: the recording of the transaction titled “loan” and a default on the credit check to Rent4Keeps in 2017. The credit analyst received a satisfactory response from the broker and then concluded, in accordance with the Product Guide, that there was no poor banking conduct which satisfied the knockout criteria;

(b)    The income and expense information was not inconsistent. For income and rent, Money3 used the amounts in the Centrelink statement. For weekly expenses, the amounts of $225 and $150 (three dependants) were applied from the Product Guide because they exceeded the illion summary of monthly living expenses of $1,172.88 (CB 2737) and the declared weekly expenses of $250 (CB 2733);

(c)    The Panthera Finance defaults dated to May 2016, more than three years before the loan application, and was not therefore a matter relevantly required to be assessed. The credit analyst received a satisfactory response from the broker concerning the two queries that were raised;

(d)    ASIC has not identified or alleged any connection between the fact that Money3 only communicated with the broker as the agent of the consumer. It was entitled to rely on the documents signed by Consumer 2 in undertaking its inquiries and verification steps;

(e)    It is not open to ASIC for the first time in closing submissions to retrospectively recalculate the average weekly expenses from the illion bank statements;

(f)    The add-on fees are not separate requirements and objectives of the consumer; her requirements and objectives were relevantly to obtain finance for a car with warranty insurance;

(g)    Money3 received from Consumer 2 a signed statement verifying her income and expenses. It was entitled to rely on this information, believing it to be true; and

(h)    ASIC has not established that the steps it contends Money3 was required to take would have resulted in it obtaining new or further information relevant to the unsuitability assessment and has not explained why the responses received from the broker were insufficient or why further inquiries into the Centrelink deductions were necessary.

Consideration

426    Before addressing the ASIC submissions, it is first necessary to make findings about when the unsuitability assessment commenced and when it completed. The broker application and supporting documents were saved to the APL system on 23 September 2019 at 10:03 am. The application was assigned to Mr McAuley later that day. He performed a capacity calculation and the Excel repayment calculation and determined to issue a pre-approval at 5:16 pm on 23 September 2019. In the Excel document, he allowed for a principal advance of $8,000, insurance of $1,350, the application fee of $995 and brokerage of $660. To that point in time, he had not received any information from the broker that Consumer 2 sought finance for the insurance premium, the application fee or the brokerage. Plainly, he made an assumption to that effect. When he issued the pre-approval, he calculated the insurance premium funding as the “maximum for insurances due to capacity”. The pre-approval calculated a fortnightly repayment amount of $213.76 or without insurance of $189.12. At that point, Consumer 2 had not identified a vehicle to purchase.

427    On 26 September 2019 at 1.38 pm, Responsive Lending emailed Mr McAuley and attached a tax invoice for the purchase of the vehicle and requested inclusion of a warranty with Integrity Car Care for $1,400 over 36 months (CB 2818-2819). The client notes record that the Money3 standard contract documents were generated at 4:39 pm that day. The credit contract sets out the total amount of finance of $11,055 being the purchase price for the vehicle plus $1,400 for Integrity Car Care, $995 for the application fee and $660 for brokerage. As previously stated, on 26 September 2019 at 4.41 pm, Mr McAuley provided to Responsive Lending a settlement pack that included the unsigned credit contract (CB 2838).

428    No other step was taken by Money3 to assess whether the credit contract would be unsuitable if entered into before Consumer 2 signed the credit contract on 26 September 2019. The settlements team made no such assessment.

429    I find that the unsuitability assessment commenced at 10:03 am on 23 September 2019 and concluded at 4:41 pm on 26 September 2019. That finding is consistent with ASIC’s general submission that the unsuitability assessments were complete by the time the settlement packs were sent to the brokers (CS [55]).

430    Dealing with the ASIC contentions seriatim, as to (a) I find that Money3 did not make an inquiry of Consumer 2 during the assessment period as to whether she sought finance for the warranty premium, the application fee or the brokerage. The next issue is whether ASIC has established that a reasonable licensee would have made those inquiries. As to the premium for warranty insurance, the broker acting for Consumer 2 requested its inclusion. ASIC has not established that a reasonable licensee would have made any further inquiry. Why, for example, was it unreasonable to accept as truthful information conveyed in writing by the agent of the consumer?

431    The brokerage and application fees are in a different category. Although Consumer 2 signed a credit proposal with the broker on 26 September 2019 (which included finance amounts for those charges (CB 2680)), that document was not provided to Money3 until it received the broker checklist and the documents signed by the consumer on 27 September 2019 (CB 2678-2679). No inquiry was made of Consumer 2, and no information was provided by the broker that her requirements included finance for the application fee and the brokerage. Mr McAuley assumed she did when he issued the pre-approval.

432    Has ASIC established that a reasonable licensee would have made these inquiries before completing the unsuitability assessment? The same issue as for Consumer 1 arises and I apply the same reasoning. ASIC does not have the benefit of the evidence of Mr Hartman. I am not satisfied that it was not open to a reasonable licensee to assume that if the consumer did not require finance for the brokerage and application fee, each of which were clearly disclosed on the pre-approval, then the broker acting as the agent of Consumer 2 would have communicated that fact to Money3.

433    Thus, contention (a) fails.

434    As to contention (b), it is not correct that Money3 failed to obtain a completed statement from Consumer 2 that set out her financial situation, including her likely expenses. Money3 did obtain a signed statement from Consumer 2 which set out her declared financial circumstances, including her expenses. With that application, Money3 had the Centrelink statement and the illion bank statements. Conformably with my reasoning for the same issue in addressing the case of Consumer 1, ASIC has not established that a reasonable licensee in the position of Money3 would have made further inquiry about the financial situation of Consumer 2 when it had two credible sources of information as to income and expenses.

435    ASIC’s contentions (c) and (f) are related. The Responsive Lending application form that Consumer 2 signed on 16 September 2019 does contain some inconsistent information (CB 2731). On the income side, “net pay” of $995 per fortnight (on page three) compared with “Centrelink monthly” of $2,248.33, which is $1,124.16 per fortnight, under the heading “Proviso” (on page four). In the APL calculation Mr McAuley, from the Centrelink statement, applied three types of benefits in fortnightly amounts: a Family Tax Benefit Part A of $432.18; a Family Tax Benefit Part B of $158.34; and a parenting benefit of $794.30, the total of which is $1,384.82.

436    ASIC did not address in evidence the meaning of “Proviso” in the application form and what meaning it bears is unable to be determined from the document. Nor did ASIC make any attempt to address its meaning in submissions. Whilst it is true that the application form on its face appears to be inconsistent as to the actual Centrelink income of Consumer 2, either on a fortnightly or monthly basis, Ms Costantini was not cross-examined as to that, despite her evidence that the income amounts were taken from the Centrelink statement. In any event, Money3 used the most reliable income information in undertaking the capacity assessment and on that basis I am not satisfied that ASIC has established that any other inquiry ought reasonably to have been made about the apparent inconsistency between the Centrelink statement and what Consumer 2 had declared in her application.

437    The same issue arises with respect to expenses. On page 3 of the application, “declared weekly living expenses” are recorded as $250 and “housing expenses” as $1,641, whereas on page 4, under the “Proviso” heading, “living expenses monthly” are recorded as $1,172.88. It is unclear from that data whether the housing expense amount is a weekly, fortnightly or monthly figure. The declared amount of $1,172.88 matches the illion summary statement amount (CB 2737). In the APL capacity calculator, Mr McAuley determined an amount of $225 for both “declared” and “verified” weekly household expenditure for general living and $150 per week for 3 dependant children.

438    On the materially lower contention, ASIC calculates that Consumer 2’s total transactions for the 90-day period total $12,662, less transfers to her savings account of $5,474 resulting in expenses of $7,188 or, translating to an average weekly spend of $559. When there is added to that calculation deductions from the Centrelink statement of $210, her weekly expenses were approximately $769 which is inconsistent with the application form and greater than her weekly Centrelink income of $692.

439    The difficulty with that submission is that it departs from the pleaded case. The case is that in undertaking the serviceability assessment, Money3 understated the reasonably necessary living expenses of Consumer 2. When providing particulars of that contention on 31 July 2023, ASIC calculated the anticipated expenses of Consumer 2 as a total of $762, including an amount of $564 per week for the greater of HEM or disclosed comparable expenses plus $198 per week for non-HEM comparable expenses. These calculations were taken from the expenses of Consumer 2 as set out in her affidavit. I accept the submission of Money3 that it is not open to ASIC to depart from this case, it having failed to secure her attendance at the trial with the consequence that her affidavit was not read.

440    Returning to what is established in the evidence, Money3 submits in writing that “in accordance with its general practice” Mr McAuley used the “figure that the consumer had advised was the amount of her weekly expenses” at CS [216], but then inconsistently on page 102 (fact [74]), submits that the amount was taken from the August 2019 Product Guide. Clearly, Mr McAuley did not use the weekly figure declared by Consumer 2 of $250. The amount of $225 was taken from the Product Guide, which is confirmed in Ms Costantini’s evidence. That may appear inconsistent with the requirement of Money3 to only use the Product Guide amount if greater than the consumer’s declared expense in the broker application. However, once it is understood that Mr McAuley also added an amount of $150 per week for three dependants (totalling $375) it is clear he correctly applied the Product Guide, as the weekly total exceeds each amount in the application form and the illion expense summary.

441    Ms Costantini did not give evidence that, on her review of the documentation, there is a record to the effect that Mr McAuley reviewed all of the transaction data in the illion bank statements save for noting a transaction on 13 September 2019 described as: “transfer debit Wayne S King W….Loan” in the amount of $50. That entry appears on page 7 of 14 of the illion bank statement, within the first section of the transaction data (CB 2723).

442    My findings on this aspect of the case for Consumer 1 apply mutatis mutandis. Mr McAuley did not adopt the practice of reviewing bank statements to determine expense amounts on a weekly or monthly basis; he only did so for the purpose of ascertaining whether there was evidence of poor banking conduct. Whilst there is evidence that he undertook some interrogation of the transaction data in the illion bank statements in order to note the $50 loan repayment on 13 September 2019, he failed to undertake the types of inquiry adumbrated in the November 2017 Analyst’s Guide, the May 2020 Credit Policy or the May 2018 NCCP Awareness Training PowerPoint documents. For the reasons I have given in determining the case of Consumer 1, a reasonable licensee in the position of Money3 at the time with the benefit of the illion transaction data would have undertaken an analysis to determine and verify the average weekly expenses for Consumer 2, before applying the minimum amounts in the Product Guide. Money3 failed to make that reasonable inquiry relevant to the financial situation of Consumer 2. It also follows that Money3 failed to take reasonable steps to verify the financial situation of Consumer 2 as declared by her in the broker application form.

443    It is not to the point, as submitted by Money3, that it is not possible to identify from the illion bank statements the debits which form part of the average weekly expenses of Consumer 2, and therefore an analysis of the statements is not a useful exercise. As I have explained when addressing the same issue in the case of Consumer 1, whether expenses in the transaction data were average weekly expenses or minimum necessary expenses, some portion of which may have been foregone in order to meet future loan commitments, is not to the point. Data to that level of discrimination was neither supplied or requested. What is in issue is whether Money3 made a reasonable inquiry as to the actual weekly expenses of Consumer 2 before applying the minimum amounts in the Product Guide. That inquiry, and subsequent verification of data, is an anterior step before undertaking the forward-looking assessment of likelihood of compliance in the future, perhaps by reducing some components of discretionary expenditure.

444    The next contention is (d). Mr McAuley raised two queries with the broker by email on 23 September 2019 (CB 338, row 9), concerning a default recorded with Rent4keeps and the 13 September 2019 $50 loan as recorded in the illion transaction listing. Ms Costantini elaborated on the default in her evidence-in-chief. The credit check (CB 3014) records a payment default in an amount of $777 on 18 August 2016 and the notation “Clearout” in that amount on 20 February 2017. ASIC did not adduce evidence as to what is meant by that notation in a credit reference check.

445    I have set out above what next occurred. The questions were answered and Mr McAuley moved on. Ms Costantini gave evidence that Mr McAuley was not required to take any further steps in relation to the default because it was more than six months old, and the consumer was not in a repayment arrangement for the debt. She was not challenged on that evidence.

446    Those facts do not support a finding that a reasonable lender in the position of Money3 at the time would have made further inquiry as to either of these matters. The explanation given by the consumer for the $50 debt was plausible and required no further detail. The fact that Ms Costantini was not challenged on her evidence about the default, is fatal to the submission that further inquiry should have been made.

447    As to the Panthera Finance defaults, these are recorded in the amounts of $1,586 and $889 each as “payment default” on 19 May 2016. There is no basis in the evidence adduced by ASIC to support the submission that a reasonable lender in September 2019 would have made further inquiries of the consumer about a default three years earlier.

448    Finally, as to contention (e), ASIC has not adduced evidence that a reasonable lender in the position of Money3 would have made further inquiries as to the deductions identified in the Centrelink statement of Consumer 2 and their likely duration. Nor is it obvious from the documents why such inquiries would have been made. The amounts in issue (CB 2769) are fortnightly amounts: $390.30 for rent and $30 for debt repayment. Money3 applied each amount in the APL capacity calculator (CB 3016). The application form disclosed the landlord as the Department of Housing. There was no reason for Money3 to have thought at the time that this expense would not continue. If the debt repayment of $30 per fortnight was not a continuing obligation, the financial capacity of Consumer 2 would improve. ASIC has not identified any useful purpose in making the further inquiries it asserts, or what useful information may have been obtained therefrom.

Conclusion: Issue 1and Issue 3

449    The only contraventions that are established is that Money3 failed to make reasonable inquiries in accordance with s 130, before making the assessment pursuant to s 128(d), about the financial situation of Consumer 2 in that it failed to consider and assess the expense information in the illion bank statement list of transactions, and relatedly failed to take reasonable steps to verify the weekly expenses of Consumer 2 before applying the minimum amounts in the Product Guide.

6.4 Issue 2: ss 128(c) and 129

Submissions

450    ASIC makes these submissions:

(a)    The serviceability assessment included the Product Guide living expense amounts and dependants allowance which were substantially lower than the reasonably necessary expenses for the consumer, in her case HEM, being the greater of HEM or disclosed expenses. Those amounts were arbitrary and were not based on the consumer’s financial situation and bore no rational relationship to the minimum expenses of the consumer;

(b)    In purporting to assess the unsuitability of the credit contract, Money3 determined the weekly surplus of $107.26 having regard to an income of $692.41 from the Centrelink statement, expenses of $390 (comprising $225 for living expenses and $150 for dependant allowance each from the Product Guide), $15 for other expenses from the debt repayments deduction in the Centrelink statement, a dependants allowance of $0 and rent of $195.15 from deductions in the Centrelink statement;

(c)    The calculated weekly repayments under the credit contract were $107.34, which was greater than the surplus calculated by Money3 of $107.26;

(d)    It is unclear if or what proportion of the $390 for living expenses was to cover the cost of running and maintaining the vehicle; and

(e)    The assessment undertaken failed to specify the period covered, to identify any credit contract and key aspects of any credit contract including the total amount to be borrowed, the term and the interest rate, to identify any assessment that the loan was not unsuitable including by reference to the consumer’s requirements and objectives; including any reference to the amount of credit sought by the consumer for the purpose of the loan.

451    Money3 submits that it conducted an assessment which covered the period that included the credit day and it specified in the proposed contract document the period that the conditional assessment covered, being 14 days from the Disclosure Date of 23 September 2019. Money3 submits that it was an assessment that addressed the statutory question. The minimum expense amounts in the Product Guide were not arbitrary, and in any event, Money3 did not use those figures in the manner contended. The minimum expense amount was higher than the amount declared by the consumer in the application. Accordingly, it was an appropriate assessment in determining whether the contract would be unsuitable. A difference of $0.08 in the ultimate outcome is negligible and is not indicative of unsuitability. Although the assessment involves the consideration of expenses at the time of the assessment, it may be inferred that the consumer had travel expenses before and after acquiring the motor vehicle, and accordingly that is not a matter of consequence.

Consideration

452    I reject ASIC’s submission (a) for the same reasons that I have given for Consumer 1. ASIC has not established that the Product Guide expense amounts for weekly living expenses or for dependants were arbitrary or bore no rational relationship to the minimum expenses of Consumer 2. It has not been established that a reasonable lender would have used the greater of HEM or declared expenses in the circumstances. Further, as Mr Harris explained during his examination, the weekly living expense amount in the Product Guide was increased from $200 to $225 by reference to a comparable amount of $250 in the HEM benchmark at the time (CB 5103).

453    It is difficult to understand the point ASIC seeks to make by the “purported” assessment submission (b). Money3 correctly applied the income amount of $692.41 per week from the Centrelink statement. The additional income amount, being the Newborn Supplement, as contained in the Centrelink statement was not used because, according to Ms Costantini’s evidence, it is not a continuing entitlement and would not have been available to the consumer throughout the life of the loan. ASIC does not suggest that was inappropriate. It has not been established that the Product Guide expense amounts were arbitrary. The $15 weekly debt repayment from the Centrelink statement was accurate. The rental amount of $390.30 per fortnight ($195.15 per week) was accurately taken from the Centrelink statement. It is not correct that Money3 applied a dependant allowance of $0; the amount applied was $150 per week for 3 dependants.

454    This submission seems to be anchored by the central proposition that using two expense amounts from the Product Guide was arbitrary. It fails as that contention has not been established.

455    Submission (c) is pedantic. A difference of $0.08 is inconsequential and, in any event, it is incorrect in that it overlooks the recalculation that Ms Costantini undertook in her evidence-in-chief and which resulted in a weekly surplus of $107.26, $0.11 greater than the weekly repayment of $107.15.

456    Submission (d) is of no merit. Consumer 2 did not give evidence which deprived Money3 of the opportunity to directly question her about her travel or vehicle maintenance expenses prior to entering into the credit contract. The submission is also speculative: any lack of clarity in the evidence must be borne by ASIC as the party with the onus of proof.

457    The multifaceted submission (e) is not made out in any respect. As I have explained, s 129 does not prescribe how the period covered by the assessment must be specified. It does not require a specification to have any particular form or that it be in writing. The assessment is evaluative. The requirement of s 128 is that the assessment be made within 90 days before the credit day and must cover the period in which the credit day occurs. For Consumer 2, the credit day was 26 September 2019, being the day she signed the credit contract. The offer that Money3 made was conditional, containing the same terms as for Consumer 1 (CB 2838). It states the Disclosure Date of 26 September 2019 and that the information contained in the loan schedule may alter before or after the date that the money is first advanced, being the Settlement Date. It specified a period of 14 days from the Disclosure Date as the period covered by the assessment. It follows that there was an assessment within 90 days of the credit day.

458    The total amount to be borrowed, the loan purpose, the interest rate, the loan term, the monthly repayments, the brokerage, the application fee and the then understood estimate for warranty insurance are each specified in the pre-approval document that was sent to the broker on 23 September 2019 (CB 2777). Consumer 2 in her application form (CB 2731) identified her requirements and objectives being a maximum advance, determined in accordance with her borrowing capacity, for the purpose of purchasing a motor vehicle.

Conclusion: Issue 2

459    ASIC has not established that Money3 failed to make the assessment as required by ss 128(c) and 129.

6.7 Issue 4 and Issue 5: ss 131(1) and 133(1)

Submissions

460    ASIC submits:

(a)    At the time of conducting the serviceability assessment, Money3 had the Centrelink statement, a credit check and the illion bank statements. The submission does not acknowledge that Money3 also had the signed application form;

(b)    If Money3 had made reasonable inquiries as required by s 130, it would have determined that the average weekly income of Consumer 2 was $692.41 (from the Centrelink statements) and her average weekly expenses were $769.25 (from a combination of the Centrelink deductions and the illion bank statements);

(c)    Money3 did have reason to believe that the information contained in the Centrelink statements, the credit check and the illion bank statements was true and therefore those documents satisfied the requirements of s 131(4)(b)(i) and 133(4)(b)(i);

(d)    Money3 would have had reason to believe that the information referred to in the illion bank statements was true if it had undertaken a calculation of the average of weekly expenses in the preceding 90-day period;

(e)    The information that Money3 had demonstrates the following:

(i)    an account with no transactions for the period 18 June 2019 to 16 September 2019;

(ii)    a savings account with debits near to equal credits (an opening balance of $20 and the closing balance of $0), a transaction account recording a payment of $50 on 13 September 2019 described as a loan, the debits were nearly equal to credits (an opening balance of $0.53 and the closing balance of $0.69) and that the account was overdrawn on 6, 12 and 13 September 2019.

461    Overall, ASIC submits that it ought to have been concluded that the weekly expenses of Consumer 2 exceeded her weekly income with the result that the credit contract was unsuitable. The submission is taken further: ASIC describes her financial situation as “very precarious” at the time she entered into the credit contract.

462    Money3 submits that the assessment that it in fact undertook considered whether it was likely that Consumer 2 would be unable to comply with her financial obligations under the contract or could only do so with substantial hardship and further considered whether it was likely that the contract would not meet her requirements and objectives if entered into. In doing so, it reached the overall conclusion that it was not likely that she would be unable to comply with her financial obligations or could only comply with substantial hardship. A licensee is not required to make a correct prediction as to the future.

463    The retrospective recalculation of average weekly expenses departs from the pleaded and particularised case and, in any event, ASIC has not established that if that type of assessment had been undertaken, it would have been concluded that the contract was unsuitable. The contended overdrawn amounts were each corrected by credits on the same day, and the ASIC submission overlooks the unchallenged evidence of Ms Costantini that these may be the result of timing errors in the arrangement of the illion bank statements. In any event, the savings account had a positive balance on each of 6, 12 and 13 September 2019. There can be no criticism that Money3 failed to consider the rent and debt repayments recorded in the Centrelink statement.

Consideration

464    ASIC’s submissions (a) and (c) are correct, but do not establish a contravention. Submission (b) is not the pleaded case. The particulars of 31 July 2023 stated that Consumer 2 received $735.50 per week as income from Centrelink benefits and then, partly by reference to the HEM benchmarks, had total weekly expenditure of $777, producing a weekly deficit of $41.50. That case has not been established on the evidence. It was not the pleaded case that some different calculation by reference to the identification of expenses in the illion bank statements should have been undertaken in making the unsuitability determination. It is too late for ASIC to now map out a new case in closing submissions.

465    Further, the retrospective recalculation of the transaction data departs from a central aspect of the ASIC case: that Money3 was required to ascertain the “minimum necessary expenses” of each consumer. The exercise of adding up the debits over a period of 90 days to derive a total of $12,662.86, deducting therefrom transfers to her savings account of $5,474.42 to produce total expenses of $7,188.44 and then to average that amount over the period to derive an average weekly spend of $559.10, does not reveal anything about which of those expenses were minimum necessary amounts that Consumer 2 was likely to be able to forego in order to meet her financial obligations under the credit contract in order to secure the vehicle that she required.

466    Submission (d) falls with submission (b). As to submission (e), whilst it is correct that there were no transactions in the personal account (CB 2741) over the 90-day period, all that demonstrates is that the account was inactive and had a nil balance. It is not relevant to the unsuitability assessment.

467    The savings account (CB 2710) commenced with an opening balance on 19 June 2019 of $15.66 and ended with a nil balance on 14 September 2019. But it does not follow that within that period the debits were equal or nearly equal to the credits. For example, on 21 June 2019 the credit balance was $315. The balance did not drop below $100 until 24 June 2019. Within that period the credits totalled $97 and the debits $298.05. On one day within period of the transaction data, 12 July 2019, the account was substantially in credit: $1,378.85. On many days credit balance exceeded $300.

468    The overdraw submissions relate to a different account (CB 2717). The account was overdrawn on 6 September 2019 in the amount of $312.29. That was immediately corrected by the receipt of two family allowance payments that day which restored the account to a credit balance of $364.47. On 12 September 2019, the account was overdrawn in the amount of $9.45, which was then corrected by three deposits totalling $55. On 13 September 2019, the account was overdrawn by $204.95, but once again was corrected by a credit of $374 being the consumer’s Centrelink pension. The account remained in credit until the end of the transaction period on 16 September 2019. Correspondingly, the savings account (CB 2710) was in credit on 6 September 2019 within the range of $653 down to $85. It was also in credit on 12 and 13 September 2019. Thus, when one looks at the entire financial position as revealed by the transaction data, the technical overdraws are of no significance.

469    I also accept the evidence of Ms Costantini that overdrawn amounts in the illion transaction data may be due to the incorrect timing of the transactions. ASIC’s submission fails to grapple with that issue.

Conclusion Issue 4 and Issue 5

470    For these reasons, ASIC has not established a contravention by Money3 of either s 131(1) or 133(1).

7. CONSUMER 3

7.1 Essential chronology of facts

471    Consumer 3 made an affidavit on 3 May 2023, and appeared remotely on 6 February 2025. She was cross-examined.

472    At the time of her loan application, Consumer 3 was a single mother with three dependant children. Her main source of income was Centrelink benefits. She also received small and irregular child support payments from her former partner. She had been unemployed for approximately 9 years.

473    In October 2019, Consumer 3 desired to purchase a vehicle to provide transport for herself and her children, so that she would no longer need to rely on taxis, walking or transport from family members. Consumer 3 made an inquiry about a loan through the website of Aussie Bike Auto & Boat Loans Pty Ltd trading as Aussie Loans, a broker. She provided information about her financial situation through a form on the website, which she understood to be a pre-approval form. She entered this information without reference to any bank statements in “rough amounts” to the best of her ability. A few days after submitting the form, she received a telephone call from a representative of Aussie Loans who went through the information that she had provided and told her that some documents would be sent to her to be signed electronically. The same day, she was provided by email with those documents. She “skimmed” the documents without reading them in detail and then electronically signed them on 14 October 2019. These documents included a Privacy Disclosure Statement and Consent Authorisation Form (CB 3056-3067). That document included the following acknowledgements:

If Aussieloans (sic) successfully obtains an approval for the loan you require and the loan settles, you must pay us a fee for our services. This fee will be included in the loan and will not exceed a maximum amount of $1500 (including GST)…

Motor Vehicle Warranty Plans

This is great for private sales where the vendor offers no warranties. We offer a diverse range of warranty plans to suit every customer’s needs, from a range of 1 Star through to 5 Star each warranty covers a different combination of mechanical/electrical elements on your new car and are essential for any car lover.

474    On 14 October 2019, Aussie Loans applied to Money3 on her behalf (CB 3055). The application material included a standard Aussie Loans broker application form (CB 3084). The form disclosed the personal details of Consumer 3, that she was a Centrelink benefit recipient and that she was single. The form did not disclose the amount of her Centrelink benefits and did not disclose any current or previous employment. The table of assets and liabilities was left blank. The statement of monthly expenditure disclosed two amounts: $1,100 for “home expenses (food utilities, etc)” and $403 for rent. The form is not signed by Consumer 3, and it was not provided to her to review or sign prior to being submitted.

475    The last page of the document has two sections with various questions. The first section is titled “Preliminary Assessment of Enquiry” and includes: “Is a surplus evident based on the information supplied by the client?”, “The client/s appears to fully understand the loan and has confirmed that the proposed payments are within their financial capabilities?”. The second section is titled “Enquiry Data Verification Summary” and includes the questions: “is a capacity surplus evident” and “income verification – verified by?”. None of the questions were answered and this part of the document was left blank.

476    Money3 also received a Centrelink statement dated 14 October 2019 (CB 3068). This document recorded her total fortnightly income as $1,533.19 (ASIC incorrectly refers to $1534.18 in submissions) or $3,066.38 per month (excluding the Newborn Supplement which is not a continuing payment) and records fortnightly deductions of $405.60; comprising $186.60 for rent, $84 to “Rent4Keeps”, $59 to Radio Rentals, $50 for home care and $16 for government housing. After those deductions, Consumer 3 was left with $1,127.59 per fortnight for other living expenses.

477    The application material also included an illion bank statement account summary for the 90-day period up to 14 October 2019 (CB 3072). This disclosed receipt by Consumer 3 of the monthly Centrelink benefit of $2,053.08, an unexplained difference. The transaction data is for the period 16 July to 14 October 2019. This also disclosed two recurring fortnightly debits of $26 and $40 to Credit Corp.

478    Mr Marchesin from the Money3 Micro Motor Department was the credit analyst assigned to assess the application. On 15 October 2019, Mr Marchesin ran a credit check with ARM Consumer Plus for an inquiry amount of $8,000 (CB 3090). It disclosed two defaults to the credit provider “Ergon Energy Queensland P/L”. It is Ms Costantini’s evidence that credit analysts following the usual practice were not required to inquire about utility defaults (CB 1791 [158]). However, on 15 October 2019, Mr Marchesin emailed the broker at Aussie Loans to inquire about the defaults with Ergon and the payments to Credit Corp and Radio Rentals (CB N 440). The broker called Consumer 3 to discuss the Credit Corp debts. Next, the broker responded to Mr Marchesin that the defaults with Ergon were not in a payment plan and that the Credit Corp repayments were for a Foxtel default. It is Ms Costantini’s evidence that the usual practice did not require Mr Marchesin to do anything further in relation to the defaults, as the repayments were not under a “payment plan” (CB 1791 [160]).

479    In her affidavit, Consumer 3 states that when the broker called her to discuss her Credit Corp debts, he also told her that she needed to take out her own car insurance policy, as she would not be covered if she was in an accident. She further states that he did not explain that she was taking out mechanical breakdown insurance with the Australian Warranty Network, which cost would be included in the finance application. However, she signed an application for warranty insurance (CB 937), which is undated but records the application date as 18 October 2019. It is marked as page 12 of 12 as an annexure to her affidavit at page 61. Scattered elsewhere within the vast Court Book there is an unsigned version of the complete document provided by the insurer with the certificate of cover (CB 1016) and (at CB 3244) there is a document signed by Consumer 3 dated 22 October 2019 titled: General Advice Warning. That document is addressed to the broker as the agent of the consumer. It contains various acknowledgements to the effect that the agent has provided information about, amongst other things, motor vehicle warranty insurance and includes this acknowledgement:

I UNDERSTAND THAT I DO NOT HAVE TO PURCHASE ANY OF THESE PRODUCTS FROM THE AGENT & I ACKNOWLEDGE RECEIVING THE AGENTS FINANCIAL SERVICES GUIDE & PRODUCT DISCLOSURE STATEMENTS.

480    In cross-examination (T 138-140), Consumer 3 stated that when she signed the application for warranty insurance, she did not understand she was doing so. She acknowledged that before she signed, she had an opportunity to read the text of the page, but she chose not to. At best she may have “skimmed some details”. One of the details, shortly above her signature, is the cost of the insurance at $1,600. She confirmed that she was not intending to pay for the insurance from funds that she had available to her. She accepted that she required finance to cover that cost, but maintained her evidence that she did not understand these things at the time.

481    I am not satisfied that ASIC has established that Consumer 3 did not require warranty insurance to be financed in addition to the cost of the vehicle. She engaged the broker in writing on 14 October 2019 to act as her agent in submitting the finance application to Money3 (CB 3056). In the appointment document, on the page next after her signature, there is listed insurance options including under the bold heading: Motor Vehicle Warranty Plans (CB 3066):

This is great for private sales where the vendor offers no warranties. We offer a diverse range of Warranty Plans to suit every customer’s needs…

482    She also signed the document described above as “General Advice Warning” on 22 October 2019 (CB 3244), recording that she had been provided advice about the option of obtaining warranty insurance and understood that she was not obliged to purchase it.

483    These contemporaneous documents cannot be reconciled with her later claimed ignorance that she did not understand at the time that she was also requesting warranty insurance and finance for it. To that extent, I reject her evidence. Of course, whether this requirement was inquired into by Money3 or whether it received a request to include the insurance as part of the finance application, is another matter.

484    The Product Guide at the time was the 2019 Product Guide (CB 6370), which replaced the Matrix. As with the Matrix, the 2019 Product Guide required credit analysts to use the higher of the declared or Product Guide figures for living expenses.

485    Ms Costantini reviewed the illion bank statements and concluded that there was no “poor banking conduct” that met the knockout criteria in the 2019 Product Guide (CB 1792 [165]). I accept that Mr Marchesin also reviewed the illion bank statements and likewise concluded, as there is a file note from 16 October 2019 which includes: “26 years old Centrelink housing good banking x2 defaults” (CB N 439, row 9).

486    On 16 October 2019, Mr Marchesin prepared the APL capacity calculator (CB 3105):

487    He recorded weekly income of $767.09 which was derived from the Centrelink statement, excluding the Newborn Supplement. The weekly expenses of $488 is the derived weekly amount from the fortnightly debits of $26 and $40 paid to Credit Corp, fortnightly deductions totalling $160 in the Centrelink statement and weekly amounts of $225 for living expenses and $150 for dependants each from the Product Guide. The rent figure of $100 per week is the minimum rent expense in the Product Guide. In her affidavit, Ms Costantini states that the credit analyst would have applied this amount because it was higher than the amount of rent recorded in Consumer 3’s Centrelink statement, which was $186.60 per fortnight.

488    The result of the APL capacity calculation was a weekly surplus of $179.09, not including the repayments that would be required if Consumer 3 entered into the loan with Money3.

489    Mr Marchesin then prepared an Excel repayment calculator (CB 3363-3364). It resulted in a weekly repayment of $94.40 or $108.98 including insurance. The calculation for the repayment not including insurance records the total amount to be financed as $9,655 comprising $8,000 principal, $995 application fee, $660 brokerage and it records an interest rate of 24.95% over 78 payments and a monthly account fee of $28. The calculation for the repayment including insurance records the total amount to be financed as $11,255 including $1,600 for insurance.

490    On 16 October 2019, Mr Marchesin generated a pre-approval document and sent it to Aussie Loans by email (CB 3093, 3116) which records the loan amount as $11,255 comprising a principal of $8,000, $1,600 for insurance, $995 for the application fee and $660 for the brokerage fee. The interest rate is specified as 24.95%, there is a monthly account fee of $28 and the repayment period is 36 months, with payments to be made fortnightly. The calculated fortnightly payment amounts are $218.32 or $189.12 without insurances (or, converting to weekly amounts, $109.16 and $94.56).

491    On 18 October 2019, Aussie Loans emailed Money3 attaching a tax invoice from Cheap Car Co for a vehicle and requested that Money3 generate the contracts (CB 3116). The vehicle was a 2007 Holden Commodore for a price of $8,000.

492    At 12.51pm, a credit support officer generated the Money3 application form and the secured credit contract in APL and emailed each to Aussie Loans (CB N 439). The officer saved another copy of the APL capacity calculator, but did not undertake any unsuitability assessment. Rather, they checked to ensure that the repayment amount in the credit contract matched the amount in the APL (Costantini, CB 1797 [181]). This contract did not include any amount for insurance (CB 3370-3372). At 2.28pm, the credit support officer generated a second settlement pack, including a Money3 application form and a revised credit contract which included an amount of $1,600 to be paid to “Australian Warranty Network” (CB 3132-3134). This was then emailed to Aussie Loans (CB N 439). This act marked the end of the unsuitability assessment.

493    It is Ms Costantini’s evidence (CB 1798 [187]), that there is no evidence in the Money3 files that records a request by or on behalf of Consumer 3 to include finance for the cost of the warranty insurance, which I accept. Her evidence continues that it was not the usual practice of credit analysts to include an amount in the credit contract to fund the purchase of insurance or warranty products without being asked by a broker to do so. That may be so, but it does not explain why Money3 without a broker request did not make an inquiry about finance for the insurance premium. Another fact that is unexplained is why the insurance premium ultimately charged by the insurer of $1,600 inclusive of stamp duty and GST (CB 1016) exactly matches the amount in the pre-approval that was calculated as the maximum amount being 20% of the loan principal.

494    The second credit contract is in the form of an offer to make a loan on the terms set out. The Disclosure Date is 18 October 2019 and there is a note that the information in the Schedule “may change before or after the date we first lend money to you (the Settlement Date)”. The loan schedule records the amount of credit as $11,255, the interest rate of 24.95% per annum, the total amount of interest to be repaid of $4,782.26, the repayment period of 78 fortnightly repayments each in the amount of $218.32 with a final payment of $234.62, amounting to a total of $17,045.26 over the loan term. There is separate disclosure of the credit fees and charges of $995 for the loan application fee, $28 for the monthly servicing fee in advance of the settlement date and $28 monthly thereafter, together with a list of fees and charges in the event of default or a request for variation. The total fees and charges, assuming the entire loan term, is disclosed at $6,785.26. There is a separately disclosed the amount of $8,000 to be paid to the motor vehicle dealer, $1,600 to Australian Warranty Network, $995 to Money3 for credit fees and charges and $660 to Aussie Loans. The contract required Consumer 3 to make various declarations, including that she had “carefully read” the document and each of its terms and conditions, that the information she had provided was accurate and not misleading and that she had not relied on “any promise or representation by anybody when deciding to enter this transaction”. The standard reservation to withdraw if settlement does not occur within 14 days of the Disclosure Date is included.

495    In the application form provided in the settlement pack to Aussie Loans (CB 1144), the loan purpose is recorded as “purchase of car and additional products”. The weekly expenses section records $0.00 for each category of food and entertainment, travel, home and utility, insurance, personal expenses, small loans and other loans. Conformably with my finding for Consumer 1, this was a computer error and did not affect the assessment process.

496    On 20 October 2019 at 12.14am, Consumer 3 signed the documents including the credit contract and the application form electronically via DocuSign (CB 1144, 1132). In her affidavit, she states that neither document was explained to her and there were some aspects of the documents that she did not understand. Despite this, she states that after “skimming” the documents, she signed each very quickly, within about a minute. She also stated that she “would have signed whatever documents I was asked to sign and would not have read any documents” as she “really needed a car”, that she did not understand and was not aware of the warranty cover she took out or the fees that would be charged. Further, she thought that the amount of $11,255 was the loan amount of $8,000 plus interest. At the time, she understood the lender was Aussie Loans and was not aware she was seeking finance from Money3.

497    That evidence was not directly challenged in cross-examination. However, Consumer 3 accepted that she had time to read the documents if she had chosen to and to ask questions of the broker and also understood the importance of providing accurate information (T 130-131, 138-139).

498    On 21 October 2019, Money3 received the signed settlement pack from Aussie Loans, and the documents were saved to the APL system (CB 3333). The settlement pack included the signed secured credit contract, the signed Money3 application form and a certificate of cover for the extended warranty insurance.

499    On 22 October 2019, Money3 received additional documents from Aussie Loans, including a broker checklist and identification documents (CB 3232). The broker checklist included a declaration signed by Nick Brown of Aussie Loans dated 21 October 2019, that Consumer 3 “has received or has been advised of”, four matters including: “They may gain (sic) independent financial advice before signing the proposed credit contract”.

500    Responsibility for the application process then passed to the Money3 settlements team. By reference to the settlement’s checklist for Consumer 3 (CB 3382), Ms Cavar explained the steps undertaken. The settlements offer completed all steps in the pre-fund checklist including: (1) all settlement documents had been attached and renamed; (2) an email allocation had been sent to the broker and the credit analyst; (3) the broker declaration had been signed and dated; and (4) there is an authority to complete.

501    The settlements officer then undertakes the process described above and undertakes a number of other checks, including that the credit contract has been signed and witnessed together with the broker declaration, and that the loan purpose referred to in the contract is consistent with the purpose recorded in the APL. As noted above, there are various other checks that are undertaken which are not material to the resolution of issues in this case, save for the welcome call.

502    Ms Cavar’s evidence of the welcome call procedure replicates her evidence for the other consumers. The welcome call record for Consumer 3 records the following, when read with the evidence of Ms Cavar. The settlements officer called Consumer 3 on 22 October 2019 (CB 3267). Consumer 3 confirmed her personal details, including her Centrelink benefit status and that she had three dependants (CB 3245). The welcome call checklist also records that she confirmed the purpose of the loan as “purchase of car and additional products”, the principal amount and term of the loan, and that she was happy to proceed.

503    Money3 then settled the loan and disbursed the funds (CB N 439, row 19). Next, Money3 sent a text message to Consumer 3 which reads: “as discussed your fortnightly repayments of $111.00 will start on 23/10/19 by direct debit” and emailed her a welcome pack which included a welcome letter and a copy of the signed credit contract (CB 3242-3243).

504    Shortly after entering the loan, Consumer 3 experienced difficulties with the vehicle and incurred significant expenses as a result (CB 893). In her affidavit, she states that she was not aware of the insurance she held with Australian Warranty Network, and if she had known, she would have made an insurance claim for the repairs. In November 2019, her rent increased. On 24 December 2019, she contacted Money3 to ask that her next payment was put on hold. Money3 declined as the payment had already been processed (CB 1830). In December 2020 her rent increased again. In January 2020, her Centrelink benefits reduced by approximately $147.42 per fortnight, as the father of one of her children began paying child support.

505    Consumer 3 met her monthly repayment obligations from 22 October 2019 to 24 February 2022 (CB 3299). On 26 July 2021, Money3 received a complaint from the Indigenous Consumer Assistance Network (ICAN) on her behalf (CB 1830). On 18 August 2021, Money3 agreed to waive the balance of the loan and refund the amount of $1,323 (CB 1830). Consumer 3 paid a total of $10,323 under the credit contract (CB 1830).

506    In her affidavit, Consumer 3 undertakes a reconstruction of her financial circumstances for the period being 90 days prior to entering the loan, from 20 July to 20 October 2019. The reconstruction was prepared with the assistance of a representative of the ICAN. Her evidence contains retrospective calculations of her Centrelink income and particularised expenses. In the result, her weekly expenses of $766 equalled her weekly income.

507    I do not accept the accuracy of her reconstruction evidence. In cross-examination (from T 144), she agreed that when she made her affidavit in March 2023, it was difficult to recall her expenses from the period in 2019. She received unspecified assistance from a financial counsellor in retrospectively calculating her weekly expenses. She accepted that it was “pretty difficult” to recall what her expenses were in 2019 and confirmed she would not have suffered the same difficulties in providing a contemporaneous account of her expenses. Her attention was then directed to an application that she signed and submitted to Rent4keeps on 12 September 2019 (CB 3295-3296). In that document, per fortnight, she recorded her Centrelink income at $1,616.52 and her total expenses at $948.35, producing a surplus of $668.17. She confirmed that she provided the information which was populated to the document. She confirmed that the information contained in it was true and correct to the best of her ability and that it was a more accurate representation of her income and expenses in September 2019, than the reconstructed table in her affidavit.

508    A consequence of rejecting this aspect of the evidence of Consumer 3 is that ASIC’s 31 July 2023 particularised case that the reasonably necessary expenses of Consumer 3 were $770.50 per week, $4.50 less than her weekly income of $766, fails.

7.2 Issue 1 and Issue 3: ss 128(d) and 130(1)(a)-(c)

Submissions

509    ASIC submits that Money3 failed to make reasonable inquiries and to take reasonable verification steps by failing to:

(a)    Inquire into whether she required warranty insurance to be financed in addition to the purchase price of the vehicle;

(b)    Inquire whether she wanted finance for the other add-on fees;

(c)    Obtain a signed and/or completed statement from her that set out her financial situation including her likely expenses;

(d)    In circumstances where the broker application form did not break down living expenses of $1,100 per month and the illion bank statements indicated average expenses of $687.98 per week, to bring its own inquiring mind to reconcile the disparity and better understand the nature of her expenses and whether they were one-off or continuing and the likely impact on her ability to comply with the loan;

(e)    Inquire into whether the deductions listed on the Centrelink statement of $84 to Rent4keeps, $59 to Radio Rentals, $25 to Mareeba Community Housing, $16 to the Department of Housing and a $10 debt repayment were continuing or one-off expenses;

(f)    In circumstances where the illion bank statements exhibited same day account clearing, to make inquiries about the reasons for that behaviour and the likely impact on her ability to comply with the loan;

(g)    In circumstances where she demonstrated cash withdrawals totalling $3,530 over 90 days, to inquire as to what that money was spent on in order to determine whether it was likely to impact on her ability to comply with the loan;

(h)    In circumstances where the illion bank statements indicated regular payments to Grand Fortune Casino gambling totalling $440 (approximately $35.80 per week), to inquire as to whether she had a gambling problem which was likely to impact on her ability to comply with the loan; and

(i)    To verify the purported expenses in the application form (or the lack thereof) being $1,100 in home expenses per month and $403 in rent per month by considering those amounts against primary documents such as bank statements which would have indicated average expenses of $687.98 per week.

510    Money3 submits that Consumer 3 perfectly understood that she engaged a finance broker to act for her to make the finance application. ASIC does not contend that Money3 is liable for acts, errors or omissions of the broker. There are multiple documents, including some signed by Consumer 3, which expressly reference the purchase of warranty insurance which Money3 was entitled to rely on in concluding that the finance application extended to the cost of the insurance. It invites an inference that the broker must have communicated to it the requirement to finance the insurance premium. The add-on fees are not separate requirements and objectives for the purpose of s 130. It is obvious from the application documents that Consumer 3 sought, as her requirements and objectives, to obtain finance to purchase a motor vehicle with warranty insurance. Money3 had no reason to conclude that was untrue.

511    The retrospective calculation by ASIC of average weekly expenses should not be entertained because it steps outside of the pleaded case and, in any event, it is not possible to determine from the debits in the illion transaction listing, which of those sums formed part of her average weekly expenses.

512    The prescriptive list of failures which ASIC relies upon should be rejected because the provisions do not require a licensee to take “only one specific approach” to the inquiries and verification of the consumer’s financial situation, requirements and objectives. In particular, Money3 was not required to obtain a signed and completed statement from Consumer 3, it would not have been feasible or reasonable to purport to calculate average weekly expenses from the illion bank statements and, in any event, it should not be assumed that each debit is an average weekly expense that could not have been forgone in order to comply with the consumers obligations under the credit contract.

513    Further, ASIC has not established that the steps it contends were required to be taken would have resulted in obtaining new information relevant to the unsuitability assessment. Even if Money3 had asked further questions about each of the matters relied on by ASIC at (d) – (i), it has not been established that information would have been provided that would have changed the unsuitability assessment. The likelihood is, by inference from the contemporaneous documents, that the information as to expenses set out in the application form would have been confirmed as correct.

Consideration

514    As to submission (a), Consumer 3 appointed the broker as her agent and in writing acknowledged that she had received from the broker information about motor vehicle warranty insurance and acknowledged that she was not obliged to purchase that product. She could not finance the purchase of warranty insurance from her own funds. The evidence of Ms Costantini in her affidavit (CB 1790 [152]), which was not challenged and which I accept, is that the email from the broker of 14 October 2019 to Money3 included, as an attachment, the Privacy Disclosure Statement and Consent Form. Page 11 of that document advised that the broker could offer warranty insurance, but did not state that it must be obtained and included in the finance application. I draw the inference, consistently with the evidence of Ms Costantini, that the broker must have advised Money3 that Consumer 3 wanted to include finance for the warranty insurance in the application. That is why the second credit contract was prepared, to include the amount of $1,600 as the cost of the warranty premium.

515    However, what that reveals is that Money3 made no inquiry of Consumer 3 whether she wanted finance for the warranty premium, even though that was the fact. Would a reasonable licensee in the position of Money3 have made that inquiry, conformably with s 130(1)(a)? It follows from the inference drawn in the preceding paragraph that I am not satisfied that ASIC has established that a reasonable licensee would have made a separate inquiry as to whether to include in the loan documentation finance for the warranty insurance where that requirement had been communicated to it by the broker for Consumer 3. Thus, I reject submission (a).

516    I reject submissions (b) and (c) for the reasons I have explained for Consumers 1 and 2: the brokerage and application fees were clearly referenced in the pre-approval, and even though Money3 made no specific inquiry as to whether Consumer 3 required finance for these items, ASIC has not established that a reasonable licensee in the same circumstances would have made that inquiry. Rather, I am satisfied that it was open to a reasonable licensee to assume that if the consumer did not raise an objection through the broker, finance for these items was a requirement of the consumer. Further, for Consumer 3, the fact that the broker fee would be included in the finance application, was disclosed to Money3 on page 9 of the Privacy Disclosure Statement And Consent, which was lodged with it.

517    Submissions (d), (g) and (i) are related and raise for consideration whether Money3 should have considered the transaction data in the illion bank statements as a reasonable inquiry about the financial situation of Consumer 3 and should have used that information as a reasonable verification step.

518    As stated above, Mr Marchesin in performing the capacity calculation on 15 October 2019, questioned two payments to Credit Corp and Radio Rentals in an email to the broker (CB 440, r 4). The Credit Corp amounts are listed under “Debt Collection” in the data summary in the illion bank statements. They are the third and fourth entries in the transaction data. The Radio Rentals payments are recurring fortnightly entries, in varying amounts. For example, there is a debit of $83 on 8 October 2019, debit of $50 on 24 September 2019 and a further debit of $50 on 10 September 2019.

519    What this demonstrates is that Mr Marchesin did examine, to an extent, the entries in the transaction data, or at least three pages of that data (CB 3077-3079). The transaction data comprised only four pages. Mr Marchesin did not give evidence. ASIC tendered portions of his examination on 9 August 2022, most of which is not objected to. Mr Marchesin could not specifically recall his assessment of Consumer 3 (CB 5742-5743, 5779). He was employed by Money3 between December 2014 and June 2022. He commenced as a customer service attendant, progressed to being a credit analyst and for at least one year was on secondment in the position of team leader. He concluded that role in January or February 2022.

520    When questioned about the APL capacity calculator, he confirmed that the minimum amount for weekly living expenses was “pre-populated” (CB 5747). He confirmed that the amounts in the Product Guide were the “minimum expenses that must be entered on a Micro Motor application” (CB 5754). When questioned about the HEM, he said that he had “heard of it”, but Money3 applied its own Product Guide amounts (CB 5758-5759). When pressed further on that matter he said (CB 5759):

A. What, I guess, yeah, just what I’m trying to say is that an applicant’s assessment is, is done via the policy and, yeah, that’s what I’d say of that.

…

Q: And, Julian, you refer back to the policy and you have several times, are you aware as to whether there was any particular reference within a particular policy that provided some guidance around those weekly living expenses?

A: So do you mean for analysts, like as in support for analysts or…

Q: Yes. Yes, that’s right.

A: Its , they, they just refer, they refer to the policy which says minimum 225 per week which has to be on there, and 100 per week for rent or board.

521    Eventually, he was asked more focused questions about the weekly expense amounts (CB 5764-5765). His evidence was:

Q: I just have one more question about the minimum expenses. And you’ve got a section down there that says “living expense” and then it’s got again the single, joint and cost per dependant?

A: Yeah.

Q: Just as a bit of a rough estimate, how often would you say that these minimum expense figures would be used on a loan application?

A: Well, I mean, it’s the minimum required at least as to be put, put in on each, on each application.

Q: Sorry. Just to go back to that, Julian. You said, and correct me if I’m wrong, you said the minimum expenses figure is what stated there 225 per week, plus 100 per week minimum rent, that’s what must be stated on the loan application form and assessment of that loan application?

A: That, that amount is just minimum what must be included in the assessment. Whatever the broker puts in is whatever the customer declares and yeah. So say if they declare 100 per week, you know, they only [indistinct] 100 per week for general living, we will include the minimum, that sits on the file.

Q: And if they meet the minimum requirement, there are ultimately approved for a loan under the Micro Motor product?

A: Yes. Yes.

522    Mr Marchesin was then taken to the application for Consumer 3 (CB 5777-5790). He was asked to explain how the broker application form was applied as part of the assessment process. He answered:

A: You, you, you would have a reader, you would have a read through document and what information has been supplied, and continue with your assessment once you have read through it.

Q: So just breaking it down a little bit for us, Julian, because it’s helpful just to sort of talk us through the process. But typically here what would be the sort of things that you would look at initially?

A: You’d look at everything, you look at all the information that’s [indistinct].

523    The questions then turned to the principal amount applied for with a maximum payment of $100 per week over a term of 36 months. His attention was then drawn to the statement of assets and liabilities and statement of monthly income and expenditure (CB 3085). It will be recalled that most of the entries on this form are blank; but there is at least a total of two expense figures, $403 for rent and $1,100 for home expenses. His evidence then was (CB 5781):

Q: Would you consider that there’s quite a bit of detail missing from that section in the broker application form?

A. The, the broker’s put in that information, then that ends, yep, that’s, that’s what the broker’s given, given to Money3.

Q. So at what point would you, in doing, you know, sort of conducting the assessment would you take further steps to verify further details and figures given you’ve informed us earlier that the broker application forms and figures are put into the system, the APL system, and then they’re transpired into the repayment calculator?

A. So I’m not sure how to explain this. That’s, that’s what the broker’s given to us, given to Money3, and it’s not necessarily automatically put in the APL system. The, yeah, that, that’s what I’d say to that, so I don’t know if that answers your question.

Q. Yeah, I’m just, I’m just wondering. Because based on those figures and the, I guess, lack of information in terms of the figures there, what steps would you typically take to check and verify those figures prior to giving the pre-approval? So talk us through what would be your next steps in conducting an assessment based on this particular loan application.

A. Well, then income would be verified by the Centrelink statement. I’m pretty sure the applicant said they’re on Centrelink. If, if they’re renting, then a rental check. And then their, their, their expenses are being put in there. And, yeah, I hope, I hope that, that gives you enough information.

Q. And just generally, looking at that total expenses figure there, and that’s not taking into account transport, mobile, entertainment and so forth, would you say that that total expenses amount per month would equate roughly to five plus 100 in weekly expenses in order to reach the minimum for the Micro Motor product?

A. The rental amount doesn’t seem to be a minimum, so we would, we would just charge the minimum, and I’m not sure about the, the other expense.

Q. Okay. So just to clarify, in this scenario you would just charge the minimum?

A. It’s, okay, so – privilege. So for the rental amount it does look like that that’s below the required amount of 100 per week, so we can’t put anything that’s below 100 as per the policy, so 100 per week would, would be the default figure for the time being.

524    Mr Marchesin was not asked the obvious direct question: As the credit analyst for Consumer 3, did you examine the illion bank statements to determine the type, pattern and amounts of expenditure by way of comparison with the amount of $1,100 referred to in the application form? This is another example of the discursive manner in which the examinations were conducted. His attention was, however, drawn to the blank next page which is in the form of a preliminary assessment and inquiry to be undertaken by the broker (CB 3086). He was questioned whether he would “take issue” with the submission of a blank form of that type. His evidence was:

A: That, that was, that’s what we’ve, that’s what we have, that’s the document that we’ve got.

Q: So that’s the document you’ve got but then are you saying that you didn’t take further steps to verify the information prior to conducting the assessment and approving the pre-approval?

A: I mean, that, that’s, as I said, that, that’s what’s given, yet that, that’s what’s given, given to the analyst.

525    The Centrelink statements disclose a Community Housing deduction of $186.60 per fortnight, paid to a co-operative. This is less than the Product Guide minimum amount for rent of $100 per week that was applied in the APL capacity calculator. Similarly, the general living Product Guide expense of $225 per week and the minimum amount for three dependants of $150 per week was also applied.

526    In contrast, a rudimentary assessment of the most recent seven day period in the illion transaction data between 6 and 12 October 2019, reveals sixteen debit transactions totalling $907.05. (Noting that there are no transactions on 6 or 7 October). Selecting another seven day period at random, 14 to 19 September 2019, reveals seven debit transactions totalling $440.79. (Noting there are no transactions on 19 September).

527    I am satisfied that ASIC has established that Mr Marchesin did not inquire into the bank transaction data to form a view about the expenses of Consumer 3. Nor did he use that data to undertake any verification of her declared expenses. In my view, ASIC has established that a reasonable licensee in the position of Money3 in assessing the application made by Consumer 3 would have considered the transaction data in the illion bank statements for the purposes of determining whether the declared amount of monthly home expenses “food, utilities etc” of $1,100 was a reasonable figure and in order to be satisfied that the Product Guide amounts were in fact greater than the information supplied with the application. A reasonable licensee would also have used the transaction data as a means of verifying the financial situation of Consumer 3. As to why, I adopt my reasons for Consumer 1.

528    I am satisfied that Mr Marchesin did not do either of those things in his assessment of unsuitability. If he had looked at the transaction data, it would have been obvious that the declared monthly average home expenses (apportioned to a weekly average of $275) were substantially less than the actual amounts in the transaction data. I am also satisfied that this is confirmed by the evidence he gave in his examination, considered as a whole. What is clear from his evidence is that he accepted at face value, without inquiry or verification, the amount of $1,100 per month of home expenses in the broker application form. On a weekly basis, that was less than the minimum Product Guide sum of $225 plus $150 for three dependants, in total $375. He made no further inquiry and took no further verification step.

529    Accordingly, I am satisfied that submissions (d), (g) and (i) are made out to that extent. I do not, however, find that reasonable inquiries and verification steps required Money3 to retrospectively calculate the average weekly expenses to the precise amount contended by ASIC in closing submissions as that sits beyond the pleaded case.

530    As to submission (e), the Centrelink deductions are each self-explanatory and were included in the capacity calculation as continuing liabilities. Although Mr Marchesin queried the Credit Corp and Radio Rental payments, he only received an answer to the former. He included the Credit Corp payments in the capacity calculation. He made no follow up inquiry about the failure to respond to whether the Radio Rental debits were continuing and if so in what amount. A reasonable licensee having asked that question, would not in my view have proceeded with the unsuitability assessment absent an answer: otherwise, why ask the question in the first place? To this limited extent, this ASIC submission is made out.

531    As to submission (f), Ms Costantini accepted in her evidence-in-chief that the illion transaction data does evidence same day account clearing and excess drawing on six days. However, as she further explained, within the period 4 September to 12 October 2019, the transaction data does not record poor banking conduct because Consumer 3 retained sufficient funds in her account to meet her expenses. I am not satisfied that ASIC has established the reasonable licensee would have made any further inquiry or undertaken any further verification step.

532    Finally, as to submission (h), the summary of transaction data in the illion statement (CB 3074) under the prominent heading “Gambling” records a total expenditure of $440 between 27 August and 12 October 2019 and a monthly average expenditure of $258.26. ASIC contends that a further inquiry should have been made as to whether Consumer 3 “had a gambling problem” and which may impact on her future ability to meet the credit contract repayments. As explained by Ms Costantini, the Product Guide at the time applied a “knockout” criteria if gambling exceeded 20% of the consumers income. It did not for Consumer 3. ASIC has made no attempt to explain why the 20% criteria was not a reasonable measure applied by a licensee in the position of Money3 at the time, and accordingly this submission fails.

Conclusion: Issues 1 and 3

533    Money3 failed to make reasonable inquiries and undertake reasonable verification steps of the financial situation of Consumer 3 in that it failed to:

(a)    inquire into the transaction data in the illion bank statements to assess the declared amount for monthly home expenses of $1,100;

(b)    verify the claimed monthly amount of $1,100 for home expenses by reference to the transaction data in the illion bank statements; and

(c)    follow up the query made relating to the Radio Rentals payments evidenced by the transaction data in the illion bank statement.

7.3 Issue 2: s 128(c) and 129

Submissions

534    ASIC’s submissions are very brief, which is surprising given the detailed interrogation in the submissions for Consumers 1 and 2. The submissions commence with a summary of the unsuitability assessment which determined a weekly surplus of $179.09 and proposed weekly repayments under the credit contract of $109.16, which is uncontroversial. ASIC then submits:

(a)    It is “unclear if or what proportion” of the $375 for weekly living expenses was to cover the cost of running and maintaining the vehicle the subject of the contract;

(b)    The serviceability assessment applied arbitrary expense amounts from the Product Guide which were not based on the financial situation of the consumer and which were substantially less than her reasonably necessary expenses; and

(c)    The general submissions about the inapplicability of the Product Guide expense amount are cross-referenced and adopted.

535    Money3 submits that I should find in accordance with the evidence of Ms Costantini that, in undertaking the assessment, information from the illion bank statements was used, the statements did not record poor banking conduct and they included regular debits that were included in the capacity calculation. The amounts that were used in the APL calculation were appropriate, a credit check was undertaken with no adverse consequence, the assessment covered the period that included the credit day and specified the period that the conditional assessment covered, being 14 days from the Disclosure Date of 18 October 2019 and that overall the assessment primarily had regard to the circumstances of Consumer 3 and addressed the statutory question. Specifically, Money3 did not use arbitrary amounts in the Product Guide for weekly expenses or the cost of dependants, which amounts were higher than the disclosed expenses of the consumer.

Consideration

536    I am not satisfied that ASIC has made out the contended contraventions. The Product Guide weekly expense amount of $225 may not have been sufficient to cover the running costs of the vehicle to be purchased, but framing a submission in the form of the question is of itself unsatisfactory where ASIC made no attempt in its evidence to make good the proposition that the weekly expense Product Guide amount was insufficient in the case of Consumer 3.

537    Submission (b) is another way of expressing the arbitrary Product Guide case and fails for the reasons that I have given rejecting that submission in the case of Consumer 1. It follows that submission (c) fails for the same reason.

Conclusion: Issue 2

538    ASIC has failed to establish a contravention by Money3.

7.4 Issue 4 and Issue 5: ss 131(1) and 133(1)

539    ASIC submits:

(a)    At the time of conducting the serviceability assessment, Money3 had access to the Centrelink statement, a credit check and the illion bank statements. The submission does not acknowledge that Money3 also had the broker application form;

(b)    If Money3 had made reasonable inquiries and undertaken reasonable verification steps, it would have known that in the three months before the submission of the application, the weekly income of Consumer 3 was $767.09 from the Centrelink statements and reasonably necessary expenses of $687.98, being the deductions of $202.20 from the Centrelink statement and her average weekly expenses of $485.18. The average weekly expenses figure is taken from an Excel spreadsheet conversion of the illion bank statements;

(c)    The illion transaction data for the period 1 February (sic) to 12 October 2019 records same day account clearing (the February date is an obvious error in the ASIC submissions. The transaction data is from 18 July to 12 October 2019);

(d)    The account was overdrawn on three separate days;

(e)    The account recorded regular gambling payments;

(f)    The account recorded cash withdrawals totalling $3,350;

(g)    The account recorded regular payments to Radio Rentals for furniture hire;

(h)    The account recorded regular payments in relation to a telephone debt, which Consumer 3 had been repaying since she was 16 years of age;

(i)    The actual weekly surplus was $79.11, which was insufficient to cover the payments under the credit contract of $109.16; and

(j)    Therefore, the consumer was “in a very precarious financial position” at the time of entering into the credit contract.

540    Money3 submits that the assessment which it undertook determined that it was not likely Consumer 3 would be unable to pay or be unable to pay without substantial hardship. Even if further information had been sought, or if the illion transaction data reconstruction exercise had been undertaken, ASIC has not established that the assessment would have found the contract to be unsuitable. In fact, the consumer complied with their obligations under the contract until other unrelated matters increased her expenses and reduced income. There is no evidence of same day account clearing in that the statements confirm that she retained sufficient funds in her bank account to meet recurring debits. The value of gambling transactions did not exceed the 20% knockout threshold in the Product Guide and ASIC has not addressed why that threshold was unreasonable or inappropriate.

Consideration

541    Submission (a) does not advance the case and may be put aside. Submissions (b) and (i) do not align with the pleaded case as set forth in the ASIC particulars of 31 July 2023 which combines debts of $113.50, the greater of HEM or disclosed comparable expenses of $564 and non-HEM comparable expenses of $93 to derive a total of $770.50. This results in a weekly deficit against income of $4.50. ASIC must be held to the pleaded case, which was not made out following the cross-examination of Consumer 3 in that she confirmed that the reconstruction of her income and expenses was prepared with the assistance of a financial counsellor and she could not give accurate evidence as to what her weekly expenses were at the time. She also confirmed the document she submitted to Rent4keeps dated 12 September 2019 was a more accurate reflection of her expenses at the time.

542    Submissions (c), (d) and (e) each fail for the reasons I have given in addressing these matters when considering Issues 2 and 3.

543    Submissions (f), (g) and (h) fail to expose why individually or collectively, they require the conclusion that Money3 should have concluded that it was likely that the consumer will be unable to comply with her obligations under the credit contract or could only do so with substantial hardship. They also fail to address why it is that these amounts were not collected within the general allocation of weekly expenses and dependants allowance that Money3 applied.

544    The parasitic submission (j) is accordingly not made out.

Conclusion Issues 4 and 5

545    ASIC has failed to establish a contravention of s 131(1) or 133(1).

8. CONSUMERS 4 AND 5

8.1 Essential chronology of facts

546    It will be recalled that Consumer 4 made an affidavit comprising his and Consumer 5’s joint evidence on 21 April 2022. Consumer 4 died on 11 March 2024. Nonetheless, as explained, I ruled during the trial that the affidavit would be received, despite the objections of Money3. Much of his affidavit evidence is uncontroversial and aligns with the business records of Money3.

547    At the time of the loan application, Consumers 4 and 5 were a married couple. Both were unemployed and relied solely on Centrelink benefits for income. Consumer 5 had a disability that required support and care, which Consumer 4 provided for her and for which he received a carer’s benefit. They resided in community housing provided by Mission Australia and paid $510 per week in rent. Their son and grandson lived with them. Their son required medical support and care, which Consumer 4 provided for him and received a further carer’s benefit.

548    In January 2021, Consumers 4 and 5 began looking for a new motor vehicle. Prior to 29 January 2021, they attended a car dealership called Ray Benson Motors and identified a 2011 Holden Captiva advertised for $13,000 and available to purchase with finance of $75 per week. Their son gifted them $5,000 to put towards the vehicle. At the dealership, they were directed to an office where they spoke with Mr Anthony Wakeham of Jambl Industries Pty Ltd trading as Finance My Bike. At the time, they understood Mr Wakeham to be the finance manager of Ray Benson Motors. Mr Wakeham requested copies of their bank statements and Centrelink statements, which Consumer 4 provided at a later date.

549    On 29 January 2021, Finance My Bike submitted a loan application to Money3 (CB N 497). The application included a standard Finance My Bike application form (CB 3394) which records their marital status and the number of dependants as “0”. It records that their rent was $1,050 per fortnight and that four individuals were on the lease. This form was not signed by or reviewed by either of the consumers.

550    Money3 also received an undated Privacy Act Consent form which was signed by the consumers (CB 3397). It is on a Finance My Bike letterhead and provides that the company is authorised to “submit your application for credit to our supplier for consideration” but does not disclose any fee.

551    Finance My Bike also provided Money3 with various bank statements, including Consumer 4’s BCU bank statement for the period 1 July 2020 to 31 December 2020 (CB 3399), Consumer 5’s bank statement for the period 28 October 2020 to 28 January 2021 (CB 3415) and two joint account BCU bank statements for the periods 1 July 2020 to 31 December 2020 (CB 3403) and 31 December 2020 to 28 January 2021 (CB 3414). The bank statements record regular cash withdrawals, a loan from BCU with fortnightly repayments of $128.89, fortnightly payments to Radio Rentals of $40 and fortnightly payments to Thorn Australia of $14.46. The bank statements disclose 77 cash withdrawals totalling $34,350.

552    The 2020 Product Guide applied at the time (CB 6624). As with the Matrix and the 2019 Product Guide, it required credit analysts to use the higher of the declared or Product Guide figures for living expenses. Ms Costantini reviewed the bank statements for Consumers 4 and 5 and gave evidence that as sufficient funds were retained in their bank account to meet recurring debits, a credit analyst following the usual practice would not treat same day account clearing as "poor banking conduct" for the purpose of the Product Guide. Mr Benan Ondem from Money3 was the credit analyst assigned to assess the application. He did not give evidence and no transcript of any compulsory examination of him is relied on by ASIC (assuming he was examined).

553    I accept that Mr Ondem conducted a review of the bank statements for evidence of poor banking conduct as there is a file note made on 1 February 2021, which includes “good banking” (CB N 497, row 15).

554    Finance My Bike also provided Money3 with Centrelink statements for Consumers 4 and 5. The Centrelink statement for Consumer 4 (CB 3406) records fortnightly income of $1,041.40 or $520.70 weekly, which includes carer payments and allowances, with fortnightly deductions of $20 for professional fees to Victims Services. The Centrelink statement for Consumer 5 (CB 3408) records a fortnightly pension of $777.60 or $388.80 weekly, with deductions of $79 for Red Energy and $77.70 for a lump sum advance repayment. After the deductions, the Centrelink statements record a total fortnightly income of $1,642.30 or $821.15 weekly.

555    On 1 February 2021, Mr Ondem obtained a credit check for each consumer for an amount of $8,000 with ARM Consumer Plus (CB 3419, 3732). Neither credit check disclosed any defaults. The Veda credit score for Consumer 4 was 846. The Veda credit score for Consumer 5 is illegible.

556    Mr Ondem then prepared the APL capacity calculator (CB 3730):

557    He recorded the combined weekly income as $909.50, combined weekly expenses of $470.53 and combined weekly rent of $264 to derive a weekly surplus of $174.97. The weekly income figures were taken from the Centrelink statements: $520.70 for Consumer 4 and $388.80 for Consumer 5. The expense amounts were partly derived from the Centrelink and bank statements and by applying amounts from the Product Guide. As explained by Ms Costantini, Mr Ondem proceeded as follows. He applied an amount of $360 per week for living expenses from the Product Guide by using the individualised weekly amounts (CB 6444). That is for each consumer, $68 for food and entertainment, $32 for home and utilities, $48 for travel and $32 for personal expenses.

558    For rent, he divided the declared fortnightly amount of $1,050 by two and then further divided by four “to reflect the fact that the broker application form says there are four people on the lease” and rounded up the result to $132 which he then doubled to account for two applicants.

559    Ms Costantini’s evidence continues that for other expenses, Mr Ondem referenced the Centrelink and bank statements. In the APL calculator for Consumer 5 he recorded: other loans, Lump Sum Advance in the fortnightly amount of $77.70 from the Centrelink statements (CB 3730). He also recorded: BCU Personal Loan of $128.89 per fortnight, a recurring entry in the bank statements for Consumer 4 (CB 3399). Finally, he recorded $14.46 per fortnight being a rental payment to Thorn Australia, another recurring entry in the bank statements of Consumer 4.

560    The result of the APL calculation was a joint weekly surplus of $174.97, not including repayments that would be required if they entered the loan with Money3.

561    It is Money3’s submission that the credit analyst then prepared an Excel capacity spreadsheet for Consumers 4 and 5, but it is not included in Money3’s records as it was not saved to the APL system. Ms Costantini gave evidence that it was the usual practice of credit analysts to use the Excel capacity calculator to determine the repayment amount (CB 1777) and that in order to generate a pre-approval document, the Excel capacity spreadsheet must have been completed (CB 1778). It is Money3’s submission that the pre-approval document (described below) shows that the credit analyst calculated the weekly repayment amounts using the Excel capacity spreadsheet. I accept the evidence of Ms Costantini.

562    On 1 February 2021, Mr Ondem generated a pre-approval document for Consumers 4 and 5 and emailed it to Finance My Bike (CB 3418). It calculates the total amount to be financed as $11,255 comprising $8,000 principal, $1,600 for insurance, $995 for the application fee and $660 for brokerage. The specified interest rate is 24.95%, there is a monthly account fee of $28 and the repayment period is 36 months with payments required to be made fortnightly. The calculated fortnightly repayment amounts are $218.32 with insurance or $189.12 without insurance (converting to weekly amounts, $109.16 or $94.56). The pre-approval was subject to a condition that a rental ledger issued by the Housing Department was required at settlement. Ms Costantini’s evidence is that a credit analyst following the usual practice would have included this condition, as the documents provided to Money3 did not include any document that would allow the credit analyst to verify the amount of rent paid by Consumers 4 and 5 (CB 1802 [205]).

563    On 15 February 2021, the pre-approval expired and Mr Ondem emailed Finance My Bike to inform of that fact (CB N 497). In his affidavit, Consumer 4 states that on 17 February 2017, he received a call from Finance My Bike to inform him that the loan was not approved. He claims that he was not told why the loan was not approved or which finance company it was through, and that Mr Wakeham ended the phone call with words to the effect of “I will see what I can do, leave it with me”. Money3 does not take issue with being unable to cross examine that evidence, and I accept it.

564    On 17 February 2021, Finance My Bike provided Money3 with further documentation. This included updated Centrelink statements for each of Consumer 4 and 5 dated 16 February (CB 3420-3423) and two further bank statements for the period 2 February 2021 to 16 February 2021 (CB 3424-3426). The documentation also included a tax invoice for a vehicle from Ray Benson Motors, being the 2011 Holden Captiva (CB 3467) and a tax invoice for the brokerage fee (CB 3465). Money3 was also provided with an unsigned Warranty Policy Schedule for the amount of $1,595 with the date and time prefilled as 17 February 2021 at 10.11am (CB 3466). Mr Ondem forwarded these documents to a credit support officer of Money3 to generate the credit contract.

565    At some point, a signed Warranty Policy Schedule was provided to Money3 (CB 3473). It is not clear when this document was signed by Consumers 4 and 5, although the prefilled date and time is the same as the unsigned version.

566    On 17 February 2021, Money3 generated and provided to Finance My Bike the Money3 application form and the secured credit contract (CB 1831).

567    The “Secured Loan Contract” (CB 3436) is in the form of an offer to make a loan on the terms set out. The Disclosure Date is 17 February 2021 and there is a note that the information in the Schedule “may change before or after the date we first lend money to you (the Settlement Date)”. The loan schedule records the amount of credit as $11,250, the interest rate of 24.95% per annum, the total amount of interest to be repaid of $4,780.13, the repayment period of 78 fortnightly repayments each in the amount of $218.23 with a final payment of $234.42, amounting to a total of $17,038.13 over the loan term. There is separate disclosure of the credit fees and charges of $995 for the loan application fee, $28 for the monthly servicing fee in advance of the settlement date and $28 monthly thereafter, together with a list of fees and charges in the event of default or a request for variation. The total fees and charges, assuming the entire loan term, is disclosed at $6,783.13. There is separate disclosure of the amount of $8,000 to be paid to the motor vehicle dealer, $1,595 to Integrity Car Care, $995 to Money3 for credit fees and charges and $660 to Finance My Bike. The contract required Consumers 4 and 5 to make various declarations, including that they had “carefully read” the document and each of its terms and conditions, that the information they had provided was accurate and not misleading and that they had not relied on “any promise or representation by anybody when deciding to enter this transaction”. The standard reservation to withdraw if settlement does not occur within 14 days of the Disclosure Date is included.

568    Money3 also provided their standard application forms for each consumer. Each records the loan amount as $8,000. For Consumer 4, the weekly income is recorded as $520.70 with weekly expenses of $383.68 (CB 1346). For Consumer 5, the weekly income is recorded as $388.80 with weekly expenses of $350.85 (CB 1340). Each included a breakdown of the expenses that Money3 considered the consumers to have, into categories including food and entertainment, travel expenses and home and utility. Consumer 4 stated in his affidavit that apart from providing their signatures, they did not complete any part of the form and did not review the details. Absent an opportunity to cross-examine, I do not make that finding.

569    On 19 February 2021, Money3 received the signed settlement pack from Finance My Bike, and the documents were saved to the APL system (CB 3736). The settlement pack documentation included a Mission Australia statement dated 18 February 2021 which discloses rent and weekly water charges (CB 3453). On 22 February 2021, Mr Ondem emailed Finance My Bike to advise that the Mission Australia statement was not a valid rent ledger as it was not up to date and did not show four tenants on the lease (CB N 497, row 33). He requested a letter signed by all tenants stating the payment amounts and frequency. Finance My Bike then provided Money3 with a Mission Australia Household Declaration Form (CB 3585). The form was signed by Consumer 4 only. It lists the people residing in the household, but does not specify which tenants were paying rent, or in what amount. Nonetheless, Mr Ondem considered that the document met his request and that the special condition was met (CB N 497, row 37).

570    Responsibility for the application then passed to the Money3 settlements team. By reference to the settlement checklist for Consumers 4 and 5 (CB 3720), Ms Cavar explained the steps undertaken. The settlements officer completed all the steps in the pre-fund checklist, including: (1) all settlement documents had been attached and renamed; (2) an email allocation had been sent to the broker and the credit analyst; (3) the broker declaration had been signed and dated; (4) there is an authority to complete; and (5) the special condition to provide a rental ledger was fulfilled. As this was a joint application, the settlement officer confirmed that the requirements were satisfied for both applicants (CB 1745).

571    The settlements officer then undertook the same steps that were undertaken for each of the consumers, including the welcome call. It is unnecessary to make particular findings save that the welcome call record confirms that each of Consumers 4 and 5 confirmed their personal details, confirmed that the deposit was a gift from their son and confirmed that they were happy to proceed with the loan.

572    The same day, Money3 settled the loan and disbursed the funds (CB N 497, row 42). Next, Money3 sent a text message to Consumer 4 and 5’s joint mobile phone which read “As discussed your fortnightly repayments of $218.23 will start on 02/03/2021 via direct debit” (CB N 497, row 39-40). Money3 then sent by mail to Consumers 4 and 5 a welcome pack, which included a welcome letter and a copy of the signed credit contract.

573    In his affidavit, Consumer 4 states that approximately three months after entering the loan, he and Consumer 5 started to fall behind in rent and bills. He claims that at this time, he discovered that the repayments for the Money3 loan were $218 per fortnight, rather than $150 per fortnight as he was led to believe by the advertising at the dealership. I do not place weight on this evidence because Money3 was unable to test it in cross-examination.

574    On 1 September 2021, Consumer 4 telephoned Money3 to discuss reducing the loan repayments. He requested that Money3 extend the loan term and reduce the repayment amount. It was suggested by Money3 that the payment amounts be reduced temporarily and then increased “later on” to catch up, and if the customer could not afford the repayments at that time, the car could be sold (CB N 497 row 43). Consumer 4 declined.

575    In May 2021, Mission Australia telephoned Consumer 4 as they noticed changes in Consumer 4 and 5’s rental and bill payments. Between May and November 2021, their case was referred to Wesley Mission, the Mid North Coast Legal Centre and eventually to the FRLC. On 23 November 2021, Consumer 4 was contacted by the FRLC. On 24 December 2021, Money3 received a letter from the FRLC regarding the financial hardship of Consumers 4 and 5 (CB 1832).

576    On 24 January 2022, Money3 agreed with Consumers 4 and 5 that they would repay the cost of the vehicle purchase price, warranty and broker fee, being $10,255 less payments of $5,237.52, by instalments of $128 per fortnight, and that no interest or fees would be charged by Money3 (CB 1832).

577    Consumers 4 and 5 made all regular payments on the loan, before and after the repayment amount changed (CB 3605).

578    In his affidavit, Consumer 4 undertook a reconstruction of the financial circumstances of himself and Consumer 5 as at the time of making the loan application in February 2021. The affidavit discloses that it was prepared with the support of a representative from the FRLC. The table at [67] of his affidavit contains calculations of Centrelink income and family tax benefits, and a retrospective calculation of particularised expenses. The conclusion from the analysis is that their total weekly income at the time was $1,444 and their total weekly expenses were $1,434.05, leaving a weekly surplus of $9.95. I do not place weight on this evidence because Money3 was unable to test it in cross-examination and no contemporaneous documents were annexed to the affidavit to justify the table of expenses.

8.2 Issue 1 and Issue 3: ss 128(d) and 130(1)(a) – (c)

Submissions

579    ASIC submits that Money3 failed;

(a)    To verify the living expenses of the consumers, other than their rental payments. The consumers later provided a rental ledger, but they were not required to provide a document showing which tenants were paying rent;

(b)    To inquire whether the consumers wanted finance for the add-on fees in addition to the price of the vehicle;

(c)    To obtain a signed and/or completed statement from the consumers that set out their financial situation, including their likely expenses;

(d)    In circumstances where the Centrelink statements recorded carers payments, to inquire whether those being cared for were dependants or whether the carers responsibilities would impact on the consumer’s ability to comply with the credit contract;

(e)    In circumstances where the broker-submitted application form did not record any living expenses and the submitted documents indicated the average expenses of $1,440.70 per week, to bring its own inquiring mind to reconcile that disparity and to better understand the nature of the expenses and whether they were one-off or continuing and the likely impact on their ability to comply with the loan;

(f)    In circumstances where there were regular and significant cash withdrawals (often same day withdrawals of close to the entire amount credited), inquire as to what that money was spent on to determine whether it was likely to impact on the ability to comply with the credit contract; and

(g)    To verify the purported expenses in the application form, in that no amount for income or expenses was recorded and to inquire into the Housing Commission leasing arrangements with four people on the lease at a rent of $1,050, by considering those matters against the primary documents such as bank statements which would have indicated average expenses of $1,440.70 (deductions of $88.35 from the Centrelink statements and average weekly expenses of $1,352.38).

580    Money3 submits the consumers had excellent credit scores, which Mr Hartman accepted in evidence and also accepted that they were “good at managing their finances” (T324-325). They did not have any poor banking conduct. Although the consumers had a Centrelink debt and other fixed expenses, they had a demonstrated history of ability and intent to service those debts by the making of regular payments on time, consistent with their favourable credit score, which Mr Hartman also accepted. They were not therefore in financial difficulty. The amounts applied in the APL capacity calculator were appropriate and ASIC has not demonstrated that the amounts in the Product Guide were arbitrary or not rationally related to the expenses of the consumers. The result of the capacity calculation was a surplus of $174.97 per week, after including each of the regular debits as recorded in the bank statements. That was more than adequate to finance a fortnightly loan repayment of $218.32 or $189.12, depending on whether warranty insurance was to be included in the finance contract.

581    To the extent that the living arrangements of the consumers are relevant, their grandson was 26 years old at the time and paid rent of $125 per week. ASIC has not adduced evidence of the extent of his contribution to the household and there is no evidence that the consumers were responsible for his household expenses so as to make him a dependant.

582    Money3 was aware, from the application documents, that the consumers sought finance in relation to the purchase of a motor vehicle, and no further inquiry was reasonably required as to their requirements and objectives. Money3 was entitled to rely on the documents as submitted to it. When the totality of the submitted documentation is understood, Money3 had in the circumstances made reasonable inquiries and undertook reasonable verification steps.

Consideration

583    There were two assessment periods. The first commenced when receipt of the application was assigned to Mr Ondem at 1.27 pm on 1 February 2021 and concluded at 1.54 pm when he determined to pre-approve the loan. That pre-approval expired on 15 February 2021. The second assessment commenced on 17 February 2021 at 8.56 am when a new bundle of documents were uploaded to the APL and concluded at the same time, as evidenced by the client note (CB 497 N r 25): “MAX LEND: $8000+ $1600 insurances Joint App Married 0 Dep Government Housing Centrelink Good Banking Clear Veda CONDITIONS: Rental Ledger.” There is no distinct evidence as to when the settlement pack was provided to the broker to mark conclusion of the unsuitability assessment period. What is known is that Consumers 4 and 5 signed the credit contract and related documents on 18 February 2021 (CB 3427-3449), so it must have concluded before then.

584    As to ASIC’s submission (a), the handwritten broker application form (CB 3394) contained no statement of client objective and was blank as to the amount sought to be borrowed, the loan purpose, the add-on fees, income or expenses, save for an amount of $1,050 paid fortnightly for rent. With the application there was attached four bundles of BCU bank statements, comprising statements for two joint accounts and separate accounts for each of the consumers. There was also attached separate Centrelink statements for each consumer.

585    In the client notes made by Mr Ondem at 1.52 pm on 1 February 2021, he recorded: “BANKING: Looks Okay Applicants pay joint financial commitments ran it by Julian and advised we can proceed” (CB N 497 r 9, 10). The APL capacity calculator (CB 3730) does not record the time it was created, but what is known from the client notes is that the credit check was cleared at 1.52 pm and the loan was pre-approved two minutes later at 1.54 pm.

586    There is evidence that Mr Ondem turned his mind to some expenses evidenced in the application and the Centrelink and bank statements. What is revealed is that he did consider the Centrelink statements and noticed the regular lump sum advance deduction of $77.70 per fortnight and from the bank statements, the recurring fortnightly loan repayment to BCU of $128.89 and the rental payment of $14.46 to Thorn Australia. There is no evidence in the client notes or any other business record that Mr Ondem turned his mind to other obvious debits in the bank statements to consider any pattern of expenditure, frequency, type or average amount in any period before he determined to apply the Product Guide expense amounts in the APL capacity calculator.

587    There are glaring examples. In the bank statements for the Advantage Saver account (CB 3399) of Consumer 4, there are very frequent ATM cash withdrawals (in significant sums for a Centrelink recipient) between 1 July and 31 December 2020. I list some: $1,250 on 7 July, $1,900 on 14 July, $1,500 on 15 July, $1,250 on 21 July, $1,250 on 4 August, $1,400 on 18 August, $1,400 on 1 September, $1,250 on 15 September, $1,350 on 29 September, $1,600 on 6 October, $1,250 on 13 October – which pattern continues to the conclusion of the statement on 9 December 2020. For the joint loan account (CB 3403), there were significant cash withdrawals between 15 and 30 December 2020, in varying amounts from $250 up to $1,000. In the transaction listing for a joint account with BCU (CB 3414) for the period 31 December 2020 to 25 January 2021 there are six cash withdrawals totalling $3,300. In the transaction data for Consumer 6 for the period 28 October 2020 to 28 January 2021 (CB 3415) there are 12 cash withdrawals totalling $5,170, the smallest of which was $20 and the largest of which was $1,250. There is also a distinct pattern of withdrawing amounts of $580 or $540. A notable aspect of the bank transaction data is that it does not record obvious payments for the purchase of food, such as debits at well-known supermarkets.

588    Money3 in a statement in response under s 49 dated 31 January 2023 (CB 4470), to the question to provide details of the inquiries and verification steps, answered for Consumers 4 and 5 (CB Excel Tab 635, r 5) that on 1 February 2021:

Application, bank statements reviewed for income, expenses and banking conduct. Credit file run in Armnet and analysed. Bank statement findings updated in Armnet/APL.

589    Ms Costantini’s evidence is that Mr Ondem did undertake some analysis of the Centrelink and bank statements for a limited category of expenses. Nonetheless, the Product Guide minimum amounts for food and entertainment, home and utilities, travel expenses and personal expenses were each applied. There is no evidence that Mr Ondem inquired into why the bank statements do not evidence payments for expenses in those categories.

590    The completed APL screenshot for Consumers 4 and 5 (CB 3730) is blank for each declared expense category, save for $1,050 for “weekly” (sic) rent. The verified column lists the expenses, some of which were derived from the Centrelink and bank statements. The obvious omission, however, concerns the Product Guide living expense subcategories.

591    In January 2020, Money3 published an Expense Training Guide (CB 6432). It explains changes that were made to the minimum expenses in the Product Guide, by subdivision into four categories: food & entertainment, travel expenses, home & utility and personal expenses. It explains how the APL assessments screen “now” has declared and verified income and expenses columns. When an application is received by email, the administrative teams will manually enter the expenses as declared. There is a requirement that a credit analyst must verify any income or expense in the APL. The credit analyst is required to choose the loan type, relevantly the Micro Motor loan, and then enter the declared expenses and assess whether they are less than the minimum expenses in the Product Guide, and where that is so, the difference is to be added to the personal expenses item.

592    When the APL screenshot is read with the Expense Training Guide the fact that no expenses were recorded in the application (save for rent), the absence of any client note that expenses identifiable in the bank statements were reviewed and the very short time period of the assessment (17 minutes at best), I am satisfied that Mr Ondem did not inquire into all obvious debits in the bank statements, to determine whether the Product Guide amounts were in fact greater than the corresponding expense categories in the information that he reviewed. His more limited review of loan and rental repayments in the bank statements, where he did notice relatively insignificant recurring expenses, sits starkly in comparison with not noticing the obvious pattern of significant cash withdrawals, which ought to have led to obvious inquiries: How are the consumers funding their living expenses?; Is the answer by paying for them in cash?

593    The next issue is whether a reasonable licensee in the position of Money3 at the time would have made these inquiries and would have taken the verification step? I am satisfied that it would. I apply my reasoning for Consumer 1 and, in addition, I find that a reasonable licensee would have taken these steps because of the paucity of disclosed expenditure in the application, the internal requirement to list declared expenses in the APL, the requirements of the Expense Training Guide and the glaring pattern of significant cash withdrawals by Centrelink benefit recipients.

594    Accordingly, submissions (a) and (f) are made out for the first assessment period. I note, however, an anomaly in how ASIC puts this aspect of the case. It is not one that affects my conclusion but does warrant separate mention. Despite the fact that ASIC submits for all consumers that the unsuitability assessments were complete by the time the settlement packs were sent to the brokers (and therefore the only relevant reasonable inquiries and verification steps are those which were taken prior to dispatch of the settlement packs), for reasons that are not explained by ASIC there is a concession in submission (a) that the rental expense was verified. The obvious fact is that this was not addressed when the first settlement pack was sent to the broker – it was noted as a matter requiring evidence “at settlement”.

595    It follows for the same reasons that in the circumstances submission (c) is made out in that a reasonable licensee assessing an application with virtually no declared expenses would have sought more detail from the consumers. It also follows that in part submissions (e) and (g) are made out. That is, I am satisfied that a reasonable licensee would have inquired into the bank statements to ascertain the nature, frequency and type of expenses in order to derive reasonable amounts for the subcategories of expenses referenced in the declared expense column of the APL capacity calculator, to then determine which, if any, of the Product Guide expenses were required to be inserted.

596    As to the second assessment period, the client notes record that on 15 February 2021, Mr Ondem emailed the broker and recorded that the pre-approval had expired, concluding with: “Thank you for your application”. On 17 February 2021, at 8.56 am documents were saved to the APL comprising BCU bank transaction records for the period 1 to 16 February for Consumer 5’s single account (CB 3424) and 2 to 16 February for the joint account of both of Consumer 4 and 5 (CB 3426). In those periods the debits for Consumer 5 total $830 and for the joint account total $3,057. The total weekly average is $1,943. The pattern of significant cash withdrawals is repeated. No further APL capacity calculation was performed, despite the total average expenses greatly exceeding the amount of $470.53, excluding rent, in the APL calculation in the first assessment period.

597    The client notes record the pre-approval determination as having been made at 8.56 am on 17 February 2021, with the notation: “MAX LEND: $8000 + $1600 insurances…Good Banking Clear Veda..”. There is no mention of any additional inquiry or verification in the s 49 response for the second assessment period. Ms Costantini’s evidence of the usual practice is that a credit analyst would review and record the assessment in the client notes. The client notes do not record the detail of any other inquiry or verification.

598    I make the same findings and for the same reasons as the previous consumers for ASIC’s submissions (a), (c), (f), (g) and (e) with an additional reason. There was a failure to inquire into and verify expenses as evidenced in the bank statements. Further, a reasonable licensee having required updated bank transaction data, would have noticed that the significant quantum of expenses disclosed in the updated bank data could not be reconciled with use of the Product Guide expense amounts as greater than the declared amounts and would have questioned the cash withdrawals.

599    That leaves for determination submissions (b) and (d). As to the add-on fees, the consumers had not identified a vehicle to be purchased by the time the broker lodged their application, nor by the time the first pre-approval expired on 15 February 2021. Money3 was advised that the consumers had identified a suitable vehicle on 17 February 2021, when it received a tax invoice from the dealer and an unsigned warranty insurance policy schedule (CB 3470-3471). The purchase price of the vehicle, after allowing for a trade-in, was precisely $8,000. That is another coincidence that strains credulity, nonetheless this is not a general unconscionable conduct case brought against Money3, the car dealers, the brokers and the warranty insurers.

600    When Mr Ondem prepared the pre-approval documentation on 1 February 2021 (CB 3418), he included an amount of $1,600 calculated as 20% of the principal advance of $8,000, he also included the application fee of $995 and the brokerage of $660. In the repayment section he calculated $218.32 per fortnight with insurance or $189.12 without it. Before preparing the documentation, there was no evidence that the consumers requested finance for warranty insurance, the application fee or the brokerage. Mr Ondem made an assumption that the consumer’s requirements included a request to finance the application fee and the brokerage. I am satisfied that a reasonable licensee would not have made that assumption and would have inquired as to whether finance was sought for these fees. As to the cost of the warranty insurance, Mr Ondem did not make the same assumption. He gave the consumers the option of financing the cost up to an amount of $1,600 (CB 3418). The consumers were given a choice. In that circumstance, I am not satisfied that ASIC has established that a reasonable licensee would have made an anterior inquiry about warranty insurance for an unidentified vehicle where the consumers chose to apply for a pre-approval (i.e. they had not at the time of the application identified a vehicle to purchase).

601    As to the carers payments submission, Money3 is correct to submit that ASIC has not identified any connection between this asserted requirement and its obligations under the Act. The fact is that the Centrelink statements record a regular carer payment in favour of Consumer 4 and that Consumer 5 was in receipt of a disability support pension. It is obvious from the documents that Consumer 4 was providing caring support to Consumer 5. Their combined Centrelink income was correctly translated into the APL calculator. True it is, that their Centrelink payments may have ceased at a time in the future, but that is so for all Centrelink recipients.

Conclusion: Issues 1 and 3

602    ASIC has established a contravention of ss 128(d) and 130(1)(a) – (c) in that Money3 failed to make reasonable inquiries about the requirements and objectives of Consumers 4 and 5, to make reasonable inquiries as to their financial situation and to take reasonable steps to verify their financial situation, to the extent to which I have made specific contravention findings.

8.3 Issue 2: ss 128(c) and 129

Submissions

603    ASIC makes submissions that closely align with the case for Consumer 3. That is, the submissions commence with a summary statement of the “purported assessment” which determined a weekly surplus of $174.97, the income and expense amounts which were applied for that purpose and then a statement as to the required weekly repayments of $109.16. From that foundation, the submission is:

(a)    It is “unclear” if or what proportion of the $180 for living expenses was applied to the cover the cost of running and maintaining a vehicle;

(b)    The serviceability assessment applied arbitrary expense amounts from the Product Guide which were not based on the financial situation of the consumers and which was substantially lower than their reasonably necessary expenses; and

(c)    Therefore, Money3 failed to make the required unsuitability assessment.

604    Money3 submits that the objective evidence establishes that Consumers 4 and 5 were very good at managing their finances, evidenced by their excellent credit scores, the bank statements were reviewed and disclosed no poor banking conduct, certain expenses from the Centrelink and bank statements were applied in the APL capacity calculation and ASIC has not demonstrated that the minimum expense amounts in the Product Guide were inappropriate in the circumstances.

Consideration

605    For the reasons I have given for Consumer 3, I reject each of the ASIC submissions. The contravention has not been established.

8.4 Issue 4 and Issue 5: ss 131(1) and 133(1)

Submissions

606    ASIC submits:

(a)    At the time of undertaking the serviceability assessment, Money3 had the Centrelink statements and the bank statements for the consumers;

(b)    If Money3 had made reasonable inquiries and undertaken reasonable verification steps, then it would have known that in the three months prior to the submission of the application the combined income of the consumers was $1,319.16, their reasonably necessary expenses were $1,440.70 comprising deductions of $88.35 from the Centrelink statements and their average weekly expenses of $1,352.38, calculated from the bank statements;

(c)    The bank statements from 1 July 2020 to 28 January 2021 record:

(i)    regular and significant cash withdrawals, often on the same day and close to the entire amount credited to the account;

(ii)    a loan from BCU with repayments of $128.89 per fortnight and a balance owing as at 31 December 2020 of $1,567.50;

(iii)    fortnightly payments of $40 to Radio Rentals in respect of a lease of a refrigerator;

(iv)    fortnightly payments of $14.46 to Thorn Australia in respect of the lease of a television;

(v)    debits were near-equal to credits in that an account had an opening balance of $23.09 and the closing balance of $50.77 and another account had an opening balance of $2.05 and the closing balance of $8.57;

(vi)    the net weekly income of the consumers was $1,319.16 and their average weekly expenses calculated from the bank statements were $1,440.70, producing a weekly deficit of $121.54 meaning that they could not afford the repayments under the credit contract of $109.16;

(d)    The assessment of Consumer 4 is that his reasonably necessary expenses were $1,434.05 which was essentially equal to their combined income of $1,444, before loan repayments were considered; and

(e)    The consumers were in a very precarious financial position at the time of the assessment and when the credit contract was entered into and Money3 has not adduced any evidence suggesting that they could have increased their income or reduced their expenses in order to meet their loan commitments.

607    Money3 submits the assessment that it did conduct concluded that it was not likely that the consumers would be unable comply with their financial obligations under the credit contract or could only comply with substantial hardship. ASIC has not established to the contrary at the time of the assessment and entry into the credit contract.

Consideration

608    Submission (a) does not advance the case and may be put aside. Submission (b) steps outside of the pleaded case as set forth in the ASIC particulars of 31 July 2023, which put the case on the basis of the combined income of $1,444, comparable HEM expenses of $783.75, non-HEM comparable expenses of $510 and a weekly surplus of $74.40. Once again, ASIC must be held to the pleaded case. For the same reason, submission (c)(vi) is not the pleaded case. Submission (d) is inconsistent with submission (b), which inconsistency ASIC fails to explain, but for the same reasons steps outside of the pleaded case.

609    As to the multi-faceted submission (c), sub paragraphs (ii) and (iv) comprise expenses that were considered in the APL capacity calculation. As to subparagraph (iii), the expense of $40 per fortnight for the rental of a refrigerator is a recurring electronic transfer that is disclosed in the separate account of Consumer 5 (for example CB 3415). There is no mention of this expense in the APL capacity calculator. This amount is included in the ASIC particulars of 31 July 2023 as a component of the combined amount of disclosed debt of $75.85 per week. Thus ASIC has established that this expense was not considered when conducting the unsuitability assessment. However, that is not the end of the matter. No attempt was made by ASIC to challenge Ms Costantini as to this omission and whether it may have impacted the unsuitability assessment. Nor was it put to her that the Product Guide minimum amounts for home and utilities in the weekly amounts of $32 for each of the consumers was insufficient to cover this payment, as well as other home and utility expenses. Having not pursued that issue with Ms Costantini, it is not in my view open to ASIC to raise this matter in final submissions.

610    Sub paragraphs (i) and (v) of submission (c) are related and may be considered together. It follows from my earlier findings that the cash withdrawals were not inquired into or verified. But it does not follow that Money3 also failed to conduct the unsuitability assessment as to whether the consumers will be unable to comply with their financial obligations under the credit contract, or could only comply with substantial hardship. I have explained why I reject that submission in my reasons for Consumer 1: this is a separate statutory obligation. Further, the consumers had excellent credit scores and no history of prior material credit default. As Mr Hartman accepted in cross examination, they were “good at managing their finances” (T 324). The review that was undertaken of the bank statements did not disclose poor banking conduct. They had a demonstrated history of being able to service the regular debts by making payments on time.

611    Also from a review of the bank statements, the same day account clearing submission is not made out. What is demonstrated is that the consumers would regularly withdraw cash on the day, or the day after, the receipt of credits from Centrelink (CB 3399-3405, 3414-3416). The accounts were not cleared, or nearly so, of funds. The inference that clearly can be drawn is that they used cash to pay for their living expenses.

612    Thus, I am not satisfied that ASIC has made out these components of its submissions.

613    Finally, submission (e) requires acceptance of the untested affidavit evidence of Consumer 4. I do not place weight on that aspect of the evidence because it is not consistent with contemporaneous documents and there is no explanation how he apparently reached the reconstruction of his average weekly expenses of $1,434.05, with the assistance of a representative from FRLC. Further, it would be distinctly unfair and prejudicial to act on that untested evidence. The latter part of this submission overlooks where the onus of proof lies.

Conclusion Issue 4 and Issue 5

614    The contraventions have not been established.

9. CONSUMER 6

9.1    Essential chronology of facts

615    Consumer 6 made an affidavit on 15 May 2023 and appeared in person on 7 February 2025. She was cross-examined. At the time of her application to Money3, Consumer 6 was a single mother with two dependant children aged under 9 years. Her sole source of income was Centrelink payments and child support payments from time to time. She has been unemployed since 2011 and lives in community housing provided by Aboriginal Housing Victoria.

616    Consumer 6 did not have a car and lived about 20 minutes out of town. She required transport for her children to get school and to attend medical appointments. In 2019, Consumer 6 attended a Bendigo Bank branch to inquire about obtaining a car loan and was told that she could not because Centrelink payments were her only source of income. In around August 2019, Consumer 6 started saving for a car.

617    On 2 September 2019, Consumer 6 attended a caryard with a friend and found a car she wanted to purchase. Consumer 6 told the salesman that her only income was Centrelink payments. The salesman made a telephone call to a finance broker, Car Finance 4 You, and introduced Consumer 6 to a representative. The representative asked Consumer 6 about her income, including her weekly expenses. Consumer 6 provided rough estimates of her expenses and said that she had around $250 left each fortnight after expenses. During the call, the representative told Consumer 6 she could take out an optional three year extended warranty, which would make the loan repayments $107 per week. Consumer 6 agreed. It is Consumer 6’s evidence that the representative told her about the terms of the loan, but did not tell her that she would need to borrow money to cover other costs, such as fees.

618    While Consumer 6 was at the caryard, the representative sent her an email requesting the following documents in order to “complete her application”: (1) a copy of her rental agreement; (2) Centrelink statement; and (3) three months of bank statements. The email included a link to bankstatements.com.au and instructed Consumer 6 to click the link and follow the prompts to provide the broker access to her bank transaction history and Centrelink statement. Consumer 6 provided access to these documents. On 2 September 2019, Consumer 6 signed a ‘Privacy Disclosure and Consent’ form for Car Finance 4 (CB 1832, 3782-3784).

619    On 2 September 2019, Consumer 6 signed a ‘contract for sale of used motor vehicle’ at a price of $10,402.30 (CB 1832, 3785-3786). On 2 September 2019, she paid “most of” the deposit on the vehicle.

620    On 3 September 2019, Car Finance 4 You submitted a loan application for Consumer 6 directly through Money3’s API platform. The API platform allowed brokers with a login to transfer information and documents from their own loan application platform directly into Money3's APL system. As the loan application was submitted by the broker directly, there was no application form for Consumer 6 to sign. Car Finance 4 You entered the following note on the API platform: “Single application Other Employment has not Real Estate Asset without Guarantor” (CB 1807, N Tab 596 rows 2 and 3). Car Finance 4 You directly entered income and expense information into the Money3 API system. The following income and expenses (totalling $322.5) were recorded (CB 3851):

(a)    Income:

(i)    $379.40 fortnightly for Centrelink Part A

(ii)    $293.46 fortnightly for Centrelink Part B

(iii)    $924.10 fortnightly for Centrelink Parenting

(b)    Expenses:

(i)    $3.17 fortnightly for LSA (loan)

(ii)    $100 weekly for dependants

(iii)    $1,250 monthly for general living expenses

(iv)    $169.65 weekly for rent

(v)    $64.90 fortnightly for Rivera Rentals

621    Based on those figures, total weekly income of $798.48 and total weekly expenses of $322.50 (plus $169.65 rent per week), produces a surplus of $206.33. It is apparent that the figure of $798.48 is the weekly total income, however it is unclear how the expense figure of $322.50 has been reached. On my calculation, the weekly total of the expenses listed is $446.54 not including rent. When rent is included, the total is $616.19: a surplus of $182.29.

622    The application was accompanied by: (1) two illion bank statements for different accounts for the 90-day period to 2 September 2019; (2) a Centrelink statement dated 2 September 2019 (CB 3787-3790); (3) a signed Car Finance 4 You Privacy Disclosure and Consent form; (4) a signed rental agreement dated 19 December 2017 (CB 3740-3745); (5) the contract to purchase the vehicle; and (6) an Equifax credit check dated 2 September 2019 (CB 3791-3793). The Centrelink statement recorded fortnightly deductions from her Centrelink payments of $64.90 for basic household goods (Riviera Rentals), $339.30 for rent, $100 for electricity, $10 for water, and $3.17 for a lump sum advance repayment.

623    The two illion bank statements may be summarised. First there is Bendigo Bank account ending in 6648 (CB 3768): This account bears the nickname ‘Statement Account’ and had a balance of $98.17 at the date of the statement. The statement records average monthly income of $1,874.23 from Centrelink Family Benefits, $1,187.63 from Centrelink Pension and $422.89 from Centrelink Carers Benefits – an average monthly total of $3,484.75. The statement records debits of $10,752.08 over the statement period, some $343.23 more than the credits to the account of $10,408.85. The account was regularly drawn down close to $0 over the 90-day period, on one occasion being overdrawn.

624    Second, Bendigo Bank account ending in 2134 (CB 3781): This account bears the nickname ‘Savings Account’ and had a balance of $1,050 at the date of the statement. The only transactions recorded are credits of $50 and $1,000 on consecutive days, described as ‘car savings’.

625    On 3 September 2019, the loan application was assigned to Ms Costantini as the credit analyst. Her evidence is that she does not specifically recall assessing the application, which is unsurprising. On 3 September 2019, Ms Costantini ran a further credit check with ARM Consumer Plus for the amount of $11,886 (CB 3843-3844). The credit report listed an outstanding default for utilities, to Panthera Finance in the amount of $806.

626    As explained by Ms Costantini, when a broker uses the API system no application form is generated. The information as to income and expenses is populated into the system by the broker. The recorded weekly income of $798.48 was derived from the fortnightly Centrelink statement amounts for Centrelink Part A, Part B and Parenting payments. The weekly amount for living expenses of $322.50 was derived from the income details submitted directly by the broker. The weekly amount for dependants of $100, being $50 per dependant, was derived from the Product Guide. The weekly rent amount of $169.65 was derived from the ‘Deduction Details’ entry for housing paid to ‘Aboriginal Housing Victoria’ on the Centrelink statement. The two weekly ‘other expenses’ amounts of $32.45 (described as Riviera Rentals) was derived from the ‘Deduction Details’ entry for basic household goods on the Centrelink statement. The fortnightly ‘other expenses’ amount of $3.17 was derived from the ‘Deduction Details’ entry for a lump sum advance repayment on the Centrelink statement.

627    Ms Costantini was not concerned by the fact that the illion transaction data recorded two overdraws: 1 July 2019 of $5.96 (CB 3778) and between 15 and 19 August 2019, an overdraw of four days of up to $31.28 (CB 3774). That is because it did not evidence poor banking conduct amounting to a knockout under the Product Guide. She gave as her reasons that the transaction data does not always correctly record the sequence of transactions, the extent of the overdrawing was minimal, and the transaction data otherwise recorded a running balance that in her view was healthy. She was not challenged on this evidence, and I accept it.

628    The result of the API capacity calculation was a weekly surplus of $206.33 (CB 3851). Ms Costantini then prepared an Excel repayment calculator which resulted in a weekly repayment of $108.98 (or $218.32 fortnightly) including insurance (CB 3852). It records an interest rate of 24.95% over 78 payments in 36 months, and a monthly account fee of $28. It records the total amount to be financed as $11,255, comprising $8,000 principal, $1,600 insurance, $995 application fee and $660 brokerage fee. Ms Costantini explained that it was not the usual practice to complete the data in the calculator under the heading: CAPACITY CALCULATOR, but it was her practice to do so for every loan that she assessed, even though it required her to enter the income and expense data in two places. She was not challenged on this evidence, which I accept.

629    In preparing the Excel calculator the living expenses amount for one applicant is $225 and the cost per dependant is $100, which are the figures in the Product Guide. Ms Costantini made a further adjustment by increasing the general living expense by $350 per month. She explained the adjustment as follows. The living expense amount in the Product Guide is built into the Excel calculator as a standard formula. To account for this, Ms Costantini made an adjustment on the right-hand side of the capacity calculator with the notation: Increased GL monthly $350. She calculated that amount by subtracting from the broker living expense monthly amount of $1,250, the Product Guide amount of $225 (multiplied by 4; i.e $1,250 -($225 x 4) = $350). In her Excel calculation this produced a surplus amount of $189.03, lower than the amount in the APL calculator. Surprisingly however her evidence was then: “credit analysts following the usual practice always used the surplus calculated in APL in their assessment”. She did not explain why that was so, and was not directly and distinctly questioned about this evidence in cross-examination. I accept her evidence.

630    On 3 September 2019, Ms Costantini determined to pre-approve the application. The client notes for Consumer 6 record the following entry at 3:05 pm on 3 September 2019:

“BANKING - GOOD RESI - DOH C/PAY DEDUCTION VEDA - 1 UTILITIES DEFAULT EMP - NIL 100% C/LINK INCOME HAPPY TO MOVE FIORWARD WITH FULL LEND BANKING IS GOOD INCREASED GENERAL LIVING PROVIDED BY THE BROKER AND SURPLUS STILL EVIDENT”.

631    Ms Costantini generated a pre-approval document (CB 3813). It records the loan amount of $11,255, comprising $8,000 principal; $1,600 insurance; $995 application fee; and $660 brokerage fee. The repayment period is specified as 36 months with repayments to be made fortnightly. The calculated fortnightly repayments are $218.32, or $189.12 without insurance. The pre-approval document was then sent by email to Car Finance 4 You (CB 3848).

632    On 3 September 2019, Car Finance 4 You emailed Money3 attaching a tax invoice from Automotion Used Cars for a vehicle and requested “an Eric (sic) Warranty for 3 years for $1236.00” also be included (CB 3847-3850).

633    On 3 September 2019, a Money3 credit support officer generated and provided to Car Finance 4 You a settlement pack that included an unsigned credit contract and Money3 application form. The loan document is styled ‘Secured Loan Contract’ and is in the form of an offer to make Consumer 6 a loan on the conditions set out in the loan schedule and on the accompanying terms and conditions, together said to form the ‘Loan Agreement’. The Disclosure Date is 3 September 2019 and there is a note that the information in the Schedule “may change before or after the date we first lend money to you (the Settlement Date)”. The loan schedule records the amount of credit as $10,891, the interest rate of 24.95% per annum, the total amount of interest to be repaid of $4,627.60, the repayment period of 78 fortnightly repayments each in the amount of $211.68 with a final payment of $227.24, amounting to a total of $16,526.60 over the loan term. There is separate disclosure of the credit fees and charges of $995 for the loan application fee, $28 for the monthly servicing fee in advance of the settlement date and $28 monthly thereafter, together with a list of fees and charges in the event of default or a request for variation. The total fees and charges, assuming the entire loan term, is disclosed at $6,630.60. There is a separately disclosed the amount of $8,000 to be paid to the motor vehicle dealer, $1,236 to the insurer, $995 to Money3 for credit fees and charges and $660 to Car Finance 4 You. The standard reservation to withdraw if settlement does not occur within 14 days of the Disclosure Date is included

634    The contract required Consumer 6 to make various declarations, including that she had “carefully read” the document and each of its terms and conditions, that the information she had provided was accurate and not misleading and that she had not relied on “any promise or representation by anybody when deciding to enter this transaction”. Under the heading ‘Special Conditions’, the loan purpose is stated to be for the purchase of car and additional products.

635    On 4 September 2019, Consumer 6 signed the warranty policy schedule (CB 1617).

636    On 5 September 2019, Consumer 6 electronically signed the settlement pack documents, including the credit contract and Money3 application form (CB 3928-3941). The Money3 application form recorded weekly income of $798.48 and nil expenses aside from the amount of $169.65 for rent and $1,250 for home and utility.

637    On 6 September 2019, Money3 received from Car Finance 4 You the settlement pack signed by Consumer 6. The documents were saved to the APL system on the same day (CB 4054). The settlement pack included the signed credit contract and Money3 application form, a copy of the warranty insurance, a broker checklist, an ID verification, a tax invoice for the vehicle and a Bendigo Bank statement.

638    When Money3 received the signed settlement pack, a settlement officer was assigned. On 6 September 2019, the settlement officer performed the same procedures that Ms Cavar described for the other consumers, which does not require separate findings for this consumer. In the welcome call, Consumer 6 confirmed her personal details including her Centrelink benefit status and that she had three dependants; the purpose of the loan was for the purchase of a car and additional products; the principal amount and term of the loan; and that she was happy to proceed (CB 4053).

639    On 6 September 2019, Money3 settled the loan and disbursed the loan funds to the dealer and warranty provider (CB Tab 596, row 14). Money3 then sent a text message to Consumer 6 which read "As discussed your fortnightly payments of $211.68 will start on 17/09/2019 via direct debit" and emailed her a welcome pack which included a welcome letter and a copy of the signed credit contract (CB 1666-1697)). Money3 also sent the broker a settlement advice.

640    On 18 November 2020, Money3 sent Consumer 6 an offer for her to redraw up to $1,000 on her current loan. On about 23 December 2020, Consumer 6 applied for the $1,000 redraw offer, which Money3 approved.

641    From 24 December 2019, Consumer 6 did not make the required loan repayments on 14 occasions. In 2021, Money3 received correspondence regarding the financial hardship of Consumer 6, including a letter from the FRLC and from the Victorian Aboriginal Legal Service (CB 3981). On 20 December 2021, Money3 and Consumer 6 agreed that Money3 would waive the balance of $9,517.20 owing on the loan, remove the encumbrance on the vehicle, refund Consumer 6 the amount of $2,891 (representing the add-on fees), and not make any adverse listing on her credit file. Consumer 6 paid a total of $8,180.22 under the credit contract.

642    In her affidavit, Consumer 6 undertakes a reconstruction of her financial circumstances for September 2019. The reconstruction was prepared with the assistance of a representative of the Central Coast Region Financial Counselling Service. Her evidence contains retrospective calculations of her Centrelink income and particularised expenses. The result is that her weekly income is $798 and her weekly expenses are $955, producing a weekly deficit of $157. In cross-examination, she had difficulty in explaining particular expense entries or to reconcile the expenses with contemporaneous documents (T 183-185). Further, the basis for the calculation of the reconstructed figures was not exposed, nor what assistance was provided by representatives of the counselling service. The reconstruction is inconsistent with the contemporaneous documents. I find the reconstruction unreliable.

9.2 Issue 1 and Issue 3: ss 128(d) and 130(1)(a) – (c)

643    ASIC submits Money3 contravened the relevant provisions:

(a)    “Including” by failing to inquire whether the consumer wanted finance for an application fee and a broker fee in addition to the price of the vehicle;

(b)    By failing to obtain a signed and/or completed statement from the consumer that set out her financial situation, including her likely expenses;

(c)    In circumstances where the broker-submitted information did not break down the living expenses of $1,250 per month and the illion bank statements indicated average expenses of $1,012.52 per week, by failing to bring its own inquiring mind to make inquiries to reconcile that disparity and better understand the nature of the consumer’s expenses and whether they were one-off or ongoing and their likely impact on her ability to comply with the loan;

(d)    In circumstances where the bank statements recorded a deposit of $160 on 2 July 2019 with the narration “The Smith Family”, inquire as to the circumstances giving rise to this payment and the likely impact on her ability to comply with the loan where she was receiving payments from a charity;

(e)    In circumstances where her debits exceeded her credits, her account was overdrawn several times and there were four days on which the balance was negative, inquire as to the reasons and their likely impact on her ability to comply with the contract; and

(f)    By failing to verify the expenses used in the APL capacity calculator by considering them against primary documents such as bank statements which would have indicated average expenses of $1,012.52 per week.

644    Money3 submits that when Consumer 6 first spoke with the car dealer and with the broker, the intended vehicle was identified, and the inclusion of warranty insurance was part of that discussion. She spoke for approximately one hour with Jenny Harris from Car Finance 4 You who informed her, amongst other things, that she could take out “optional extended warranty” insurance for a period of three years, which the consumer agreed to. She was informed that the total repayments, including the extended warranty, would be about $107 per week, and to which the consumer agreed that she would “make it work”. In cross-examination, she confirmed that her understanding at the time was that including the price of the warranty insurance had the effect of increasing the loan repayments (T 169-170). She agreed that the broker would on her behalf seek finance to purchase the vehicle inclusive of the cost of the warranty insurance.

645    The application fee and the brokerage fee are not separate requirements and objectives for the purpose of s 130. The requirements and objectives of the consumer was to obtain finance for a car inclusive of warranty insurance.

646    Money3 did make reasonable inquiries and took reasonable steps to verify the financial situation of Consumer 6 in that a review was undertaken of her bank account statements which did not evidence poor banking conduct, the expense amounts that were employed in the APL capacity calculator were taken either from the Centrelink statements, from the information provided by the broker or from the Product Guide.

647    The reconstruction of average weekly expenses set out in the affidavit made by Consumer 6 is unreliable in that it was prepared with the assistance of a financial counsellor, the consumer admitted in cross-examination that she found it “difficult to be accurate”, and in any event the table was created with the benefit of hindsight. The most reliable contemporaneous record of the living expenses of Consumer 6 at the time is the information that she provided to the broker.

648    The ASIC reconstruction in final submissions of average weekly expenses from the illion bank statements should be rejected because it sits beyond the pleaded case and in any event it is not possible to identify from each debit in the bank statements which expenses formed part of average weekly expenses and which expenses may have, as discretionary items, been forgone in order to meet repayments under the credit contract.

649    ASIC has not established that the steps that it contends that Money3 was required to take would have resulted in it obtaining new information relevant to assessing unsuitability. Even if Money3 had asked the additional questions that ASIC contends should have been asked, it has not been established that information that would have been provided would have changed the assessment – the more likely conclusion is that the expense amounts provided by the consumer to the broker were correct.

Consideration

650    The assessment commenced when the broker lodged the application at 11:53 am on 3 September 2019. Ms Costantini determined to pre-approve the loan application and generated the pre-approval documentation at 3.05 pm that afternoon. The pre-approval system note includes the notations “banking – good” and “increased general living provided by the broker and surplus still evident”: (CB N 596 r 6).

651    The broker responded by email to Ms Costantini at 4.26 pm on 3 September 2019, attached a tax invoice for the purchase of the vehicle and requested the inclusion of the premium for warranty insurance of $1,236. The credit support officer generated the contract and associated documents which were delivered to the broker at 5.07 pm on 3 September 2019, which conformably with ASIC’s case, is when the unsuitability assessment concluded.

652    As to submission (a), in a civil penalty proceeding it is distinctly unhelpful for ASIC to allege a contravention framed as “including” a failure to inquire whether Consumer 6 wanted finance for the application fee and the broker fee. No broker application form was lodged. Although Consumer 6, on 2 September 2019, signed a Credit Guide and Quote which document set out the services that the broker would provide to her and included a statement that the fees payable would include the lender application fee and a broker service fee to not exceed a maximum of $1,100 (CB 3905-3906), that document was not uploaded by the broker to the Money3 API system.

653    When Ms Costantini reviewed the documentation and undertook the capacity calculation, she made no inquiry as to whether Consumer 6 required finance for these fees before she determined to pre-approve the loan and to generate the pre-approval form (CB 3813), which included in the amount to be financed an application fee of $995 and brokerage of $660.

654    No other inquiry was made by Ms Costantini about financing these charges before the settlement pack was sent at 5.07 pm on 3 September 2019. I find that Money3 made no inquiry of Consumer 6, before making the unsuitability assessment, whether it was a requirement of her that these fees be included in the amount to be financed.

655    The next issue is whether ASIC has established that a reasonable licensee at the time would have made these inquiries?

656    The Analyst’s Guide November 2017 (CB 6081) was “designed to be consistent with the responsible lending practices”. In section 3.1, it is stated that “you must make reasonable inquiries in relation to the consumer’s requirements and objectives” including: “the amount of credit requested or the maximum amount sought”. The Awareness Training Module May 2018 (CB 6223) on page 13 references inquiries about how much credit a consumer may need or the maximum they would like. The Responsible Lending Policy February 2019 (CB 6296) in section 6 references the loan amount as a component of assessing the consumer’s requirements by asking questions that are incorporated into the application form. It may reasonably be thought that those statements highlight why an inquiry as to finance should be made when there is no broker application form.

657    However, this is another example of the issue of a pre-approval which clearly set out that the proposed finance included the application fee and the brokerage. Applying my reasons for Consumers 1 and 3, I am not satisfied that ASIC has established that a reasonable licensee would have made inquiries about finance for these fees in circumstances where a broker was acting for the consumer, the pre-approval referenced finance for these charges and no objection was raised.

658    Thus, I reject submission (a).

659    As to submission (b), I am not satisfied that ASIC has established that where a broker directly uploaded documents to the Money3 API system, that a reasonable licensee would have also required a signed and/or completed statement from the consumer that set out her financial situation, including her weekly expenses. The broker populated the information in the system for the income and expenses of Consumer 6, and in support provided the Centrelink statements (CB 3787) and the illion bank statements (CB 3768). ASIC has not established that a reasonable licensee would have also required the broker to provide a signed and/or completed application form from the consumer in such circumstances.

660    Submissions (c) and (f) are related and may be dealt with together. Ms Costantini’s evidence is that the monthly living expense amount of $1,250 equated to a weekly amount higher than the Product Guide of $225 per week, and the Product Guide amount was automatically populated into the API system. To compensate, she increased the general living expense in the Excel calculator by $350. By this method, she calculated total weekly expenses of $609.45 resulting in a weekly surplus of $189.03 (CB 3852). To that extent, Ms Costantini did bring an inquiring mind to the expenses question.

661    ASIC takes the submission further and retrospectively calculates total debits from the illion bank statement between 4 June and 2 September 2019 in the sum of $9,692.08, excluding transfers to her separate account, and then derives an average weekly spend of $753.83 to which it then adds a weekly amount of $258.69 being deductions from the Centrelink statements to produce the amount of $1,012.52 per week. Money3 is criticised for not “breaking down” the declared figure of $1,250 per month in order to reconcile the disparity with the recalculated amount of $1,012.52 per week.

662    How that calculation was undertaken needs to be understood. The total of credits in the transaction data is $10,408.85 and the total debits is $10,752.08. It does not follow that Consumer 6 spent more than she earned in the period as two debits totalling $1,050 were transfers to her savings account for the purpose of funding a vehicle purchase (26 August $50 and 27 August $1000: CB 3773. Thus, her expenditure was $9,702.08, less than her income by a margin of $706.77.

663    There are several difficulties with the ASIC submission. Like each other case, it steps outside of how ASIC pleads and particularises this contention. In the particulars of 31 July 2023, ASIC calculated weekly income of $798, and expenses of $697.50 as the greater of HEM or disclosed HEM comparable expenses plus non-HEM comparable expenses of $257.52, in total $955. That resulted in a weekly deficit of $157.

664    Another difficulty with the submission is that if the retrospective recalculation of average weekly expenses of $1,012.52 per week is correct, then Consumer 6 was spending an average weekly amount far greater than her Centrelink income of $798.48. If that were so, one would expect to see in the illion bank statements that the account was regularly overdrawn. There is next to no evidence of that occurring (save for on five occasions, addressed below). There is no evidence of any other income, apart from an annual maintenance payment of $868.64.

665    That does not conclude the difficulties. On 27 August 2019, Consumer 6 withdrew $1,000 recorded as “Car savings” (CB 3773). Her evidence was that she approached Bendigo Bank to inquire about a car loan, and was rejected because she was a Centrelink recipient. In August 2019 she “decided to do what the person at the bank told me” and commenced saving to purchase a car. By the end of August 2019, she transferred $1,050 from her transaction account into her savings account for that purpose. Her evidence was also that she told the broker that she had a surplus of about $250 each fortnight “after I pay for everything” (CB 1387 [36]). Although the ASIC recalculation excludes the transfers, it fails to grapple with what she told the broker which was part of her evidence-in-chief. It also fails to explain how Consumer 6 could have truthfully declared in writing to the broker on 5 September 2019, that her monthly general living expenses were $1,250 (CB 3908-3911) when according to ASIC it was more like $4,000.

666    The final difficulty is that the tax invoice for the vehicle purchased (CB 3850) records that Consumer 6 paid a deposit of $2,402.30. Her evidence-in-chief was that she negotiated the purchase price of the car from $11,000, down to $10,000 and then: “so, after the deposit, I needed a loan of about $8000”. The ASIC submission fails to explain how she could have saved for a car deposit of approximately $2,000 if, according to the retrospective recalculation, her average weekly expenses exceeded her weekly income by approximately $214.

667    I therefore reject submission (c).

668    Dealing next with submission (f), apart from making the living expenses adjustment to the general living expenses to align with the declared amount, Ms Costantini did not say that she made any other inquiry into the living expenses of Consumer 6. Nor did she say that she undertook any verification step in relation to the declared living expenses.

669    It will be recalled that in addressing the Consumer 1 claims, I set out the extent of the cross-examination of Ms Costantini relevant to the consideration by the credit analysts of the bank transaction data on the inquiry into and verification of expenses issues. I also set out the extent to which Ms Costantini was questioned about what she did for Consumer 6. Her evidence went no further than a reference to the pre-approval note (“banking good”), and that she “conducted an overall view of the banking conduct and the expenditure and the liabilities and income that is going into the bank”, which evidence she did not include in her affidavit. Nor did she explain just what she did if that review had been undertaken by her of the bank transaction data for Consumer 6. She was not re-examined on this evidence. I reject this aspect of her evidence. Ms Costantini’s affidavit extends to 63 pages and 261 paragraphs. It contains detailed evidence of what steps were taken for each of the consumers in issue. Her evidence plainly addressed a central issue in the case: the contention that Money3 failed to make reasonable inquiries and take reasonable verification steps conformably with the obligations at s 130. It is implausible that if more detailed inquiries have been made by her of the bank transaction data and that if she had taken specific steps to verify the declared expenses of the consumer, that this evidence would have been omitted from her affidavit.

670    If Ms Costantini had considered the bank transaction data, she would have noticed an obvious a pattern of weekly expenditure substantially greater than the amount uploaded by the broker to the API system of $1,250 per month. As examples, in the seven day period between 26 August and 1 September 2019, excluding rent and transfers to the car savings account, the expenses were approximately $485 and for the period 12 to 18 August 2019, the expenses were approximately $540 (CB 3773-3774). The declared amount in the API did not distinguish between reasonably necessary expenses, minimum necessary expenses or some other subcategory. The $1,250 amount was simply entered as home and utilities and general living expenses.

671    Hence, considering all of Ms Costantini’s evidence when read with the business records, I find that no inquiry was undertaken by Ms Costantini into the bank account transaction data save for her determination that it did not evidence poor banking conduct. Correspondingly, she did not take any step to verify the declared general living expenses with reference to the bank account data.

672    The next issue is whether ASIC has established that a reasonable licensee in the position of Money3 at the time would have inquired into the bank account data and would have used it as a verification tool to be satisfied about the quantum of the declared general living expenses of Consumer 6? I am satisfied that it has, adopting my analysis and findings mutatis mutandis for Consumer 1.

673    Accordingly, submission (f) is made out, though not to the extent of a finding that Money3 should have averaged the debits over the entire period and then added the Centrelink debits to derive a weekly average expense of $1,012.52.

674    As to submission (d), the transaction data discloses a direct credit from the Smith Family of $160 on 2 July 2019. It is not a recurring payment. Ms Costantini does not address this credit in her affidavit, nor was she questioned about it in cross-examination. Accepting that she did not undertake any separate inquiry about it, I am not satisfied that ASIC has established that a reasonable licensee in the position of Money3 at the time would have given any separate consideration to this one-off payment. ASIC has not explained why an inquiry as to the circumstances which led to this payment, or as to the likely impact on the ability of the consumer to meet her loan commitments, would have been material to the overall consideration of the requirements and objectives and financial situation of Consumer 6. In the context of the income and expenses in the 90-day period, this payment was inconsequential.

675    Submission (e) is not made out. Within the 90 days of transaction data, the account was overdrawn to a maximum amount of $31.28 on 16 August 2019. It was overdrawn on five occasions between 15 and 19 August 2019. I accept the evidence of Ms Costantini in that the illion transaction data did not always accurately record the timing of transactions and in any event, the overdrawing was minimal and therefore not material. Further, it is not correct that there was a general pattern of debits exceeding credits and on many occasions within the 90-day period the balance exceeded $200.

Conclusion: Issues 1 and 3

676    ASIC has established a contravention of ss 128(d) and 130(1) (a)-(c) in that Money 3 failed to:

(a)    Make reasonable inquiries about the declared living expenses of Consumer 6 by examination of her bank account transaction data; and

(b)    Take reasonable steps to verify her declared living expenses by reference to her bank account transaction data.

9.3 Issue 2: ss 128(c) and 129

Submissions

677    ASIC submits that in purporting to undertake the unsuitability assessment by deriving a weekly surplus of $206.33, Money3 relied on the declared expenses of Consumer 6 which were greater than the arbitrary expense amounts in the Product Guide, but was substantially lower than her reasonably necessary expenses, which, as I have explained, ASIC recalculates in the amount of $1,012.52.

Consideration

678    I reject the submission. For the reasons that I have given for Consumer 1, ASIC has not established that the Product Guide minimum figures were arbitrary and, for this consumer, ASIC has not established the recalculated reasonably necessary weekly expense. Further, Ms Costantini recalculated weekly expenses at $439.80 excluding rent (CB 3852), which exceeds the declared general living expense (excluding rent) when converted to a weekly amount of $312.50. which cannot be described as the result of the application of arbitrary amounts from the Product Guide.

9.4 Issue 4 and Issue 5: ss 131(1) and 133(1)

679    ASIC submits:

(a)    If Money3 had made reasonable inquiries and verification of the financial situation of Consumer 6, then it would have known that her reasonably necessary expenses were $1,012.52, which exceeded her weekly income of $798.48 with the consequence that she could not afford the loan repayments of $105.84 per week;

(b)    The bank transaction data records a payment from the Smith family of $160 on 2 July 2019, that her debits exceeded her credits and that her account was overdrawn several times;

(c)    The Centrelink statements data further records deductions totalling $517.37 fortnightly or $258.69 weekly for Riviera Rentals, Aboriginal Housing Victoria, Red Energy and lump-sum advance repayment and East Gippsland Water;

(d)    Therefore the consumer was “in a very precarious financial position at the time of the assessment and at the time of entering into the credit contract”; and

(e)    Money3 has not introduced any evidence which suggests that the consumer could have increased her income or reduced her expenses and she was not challenged in cross-examination about her capacity to do either.

Consideration

680    I reject submissions (a) and (b) for the reasons that I have given in resolving Issues 1 and 3. Submission (c) is factually correct, but fails to understand that the capacity calculation that Ms Costantini undertook included the amounts paid to Riviera Rentals of $32.45 per fortnight and the amount of $169.65 paid to Aboriginal Housing Victoria, which was separately assessed as rent. That leaves the utility amount of $50 per week paid to Red Energy (CB 3788-3799), which Ms Costantini did not separately account for. However, what it leads to is the support that it provides for the conclusion that the weekly expenses of the consumer exceeded her income and which is dependent on accepting that her average weekly expenses were $1,012.52, which I have rejected. It further follows that ASIC has not established that Consumer 6 was in a “very precarious” financial position at the time of the assessment and submission (d) fails. Finally, as to submission (e), Money3 does not carry any onus of proof in this proceeding, and it fails for that reason alone.

681    Accordingly, these contraventions are not established.

10. ISSUE 6 AND ISSUE 7

682    These issues may be considered together. The ASIC closing submissions identify 17 contraventions based on multiple findings of fact.

10.1 What is the ASIC case?

683    The case pleaded in the Concise Statement is:

41.     During the relevant period, Money3:

a)     failed to provide or arrange adequate training, professional development or other instructional assistance;

b)     failed to provide adequate templates, forms, checklists and guides; and

c)     failed to assess the skill and competency of its representatives, to ensure that its representatives were adequately trained, and were competent, in discharging Money 3’s obligations under sections 128, 130, 131 and 133 of the Act, in contravention of sections 47(1)(g) and (4) of the Act, and in particular, Money3:

d)     failed to provide its representatives with adequate training and tools to ensure that its representatives were competent to make reasonable inquiries about consumers’ requirements, objectives and financial situation and to take reasonable steps to verify consumers’ financial situation;

e)     directed its representatives to apply the minimum expense amounts contained in the Product Guide rather than adequately carrying-out the steps referred to above; and

f)     failed to provide its representatives with adequate training and tools to ensure that its representatives were able to competently carry out assessments as to the unsuitability of credit contracts.

42.     As a result of the matters referred to in paragraphs 5 to 41 above, Money3 did not take reasonable steps to ensure that its representatives complied with sections 128, 130, 131 and 133 of the Act, in contravention of section 47(1)(e) and (4) of the Act, and failed to ensure that its representatives were adequately trained, and were competent, to engage in the credit activities authorised by Money3’s licence, in contravention of section 47(1)(g) and (4) of the Act.

684    The particularised case is somewhat more detailed. Initially, in particulars provided by letter dated 24 October 2024, ASIC contended that the s 47 case is not confined to the dealings by Money3 with the six consumers in issue and is disclosed in the annexures to an affidavit made by Ms Berry on 30 November 2023 and the Expert Report of Mr Hartman. Nonetheless, ASIC invited Money3 to request further and better particulars of the case.

685    Such request was made on 15 November 2024 and responded to on 5 December 2024. The response comprises four pages. ASIC emphatically stated that the s 47 case is not limited to the broker submitted applications for Micro Motor loans in issue. The particulars then provide in part:

The evidence ASIC relies on in relation to training and supervision by Money3 of its representatives during the relevant period is comprised in the exhibits to the affidavit of Ms Berry and the Expert Report of Mr Harman.

Reliance on the Product Guide

Although there are other facts which establish the contraventions of s 47 set out in paragraphs 41 and 42 of the Concise Statement, a critical aspect of the s 47 case is the use of and reliance on the living expense figures contained in the Product Guide when assessing applications for Micro Motor loans to inform:

a.    the steps Money3 took to purportedly ensure its representatives complied with the credit legislation; and

b.    the content of the training Money3 provided to purportedly ensure its representatives were adequately trained, and were competent to engage in credit activities authorised by Money3,

and which resulted in ss 47(1)(e) and (g) being contravened because the living expense figures contained in the Product Guide were: (a) not a reasonable approximation/benchmark of the consumer’s reasonably necessary expenses; and/or (b) too low and demonstrably unrealistic, for assessing whether a consumer would be able to comply with a credit contract.

Section 47(1)(g)

In addition, Money3 failed to ensure its representatives were adequately trained, and were competent, to engage in discharging the obligations under ss 128, 130, 131 and 133 because:

the training materials contained generic content that lacked adequate explanation of how staff are expected to apply the obligations to their dayto-day activities, were not updated to reflect relevant case law or updates to RG209, and did not include specific training for those responsible for governance;

whilst records of training were maintained, staff did not complete retraining regularly or in response to issues identified from complaints and breach reporting; and

the training materials found to include instruction on how, within the practices of Money3, its obligations were to be complied with.

Money3 directed its representatives to apply the minimum living expense figures contained in the Product Guide and the training provided to staff was to use the higher of declared or minimum living expenses from the Product Guide.

Reliance on the minimum living expense figures contained in the Product Guide resulted in a failure to properly consider the minimum necessary expenses of the consumer.

Section 47(1)(e)

Money3 did not take reasonable steps to ensure that its representatives complied with ss 128, 130, 131 133 because:

the policy and procedure documents were drafted and approved of by business managers, and not by the risk and compliance function:

the policy procedure documents were inconsistent, were missing practical guidance to staff, and were not formally reviewed and updated at regular intervals;

the systems and processes were missing information, elements and controls to ensure that required information was gathered;

the Credit Analyst Guide was out of date, it did not address obligations to verify information gathered, and encouraged staff to override policy;

the ability to monitor compliance was compromised by the overwriting of data and the use of text fields;

there was limited compliance reporting outside of the complaints and breach reporting and Money3 had no compliance reporting to front-line staff, who were instead provided with leaderboards in relation to loan approvals; and

those in governance roles did not receive appropriate training, identify risk and compliance issues on ensure corrective action was taken.

686    The primary source of these contentions is the Expert Report of Mr Hartman. ASIC requested his opinions in answer to two questions (numbered 3 and 4) framed by the reasonable steps a licensee in the position of Money3 should have taken during the relevant period to: (3) ensure compliance by its representatives with the credit legislation and whether Money3 did in fact take such steps; and (4) to ensure that its representatives were adequately trained and competent to engage in the credit activities authorised by the licence and whether Money3 did in fact take such steps.

687    There is an initial difficulty with the questions. The issue is what a reasonable licensee would, not should, have done in the circumstances. Further, Mr Hartman was tasked with expressing his opinion on the ultimate issue of fact. These are not, however, reasons to cast aside his evidence.

688    Mr Hartman’s opinions in answer commence at Part 31 of the Expert Report. Dealing first with question 3, the analysis commences at [779] and concludes at [922]. It begins with his defined execution framework and each of its sub elements: accountability, policy, process, procedure, training, monitoring, reporting and governance. these are contended to be the minimum expectations of reasonable and prudent lenders. An example of his granular analysis is [785] where he addresses the minimum expectation being the practice of reasonable and prudent lenders as follows (CB 2001):

It is common practice of Reasonable and Prudent lenders in their development and maintenance of documents that the various policy and operational settings are supported by analysis.

These artefacts, which are regularly maintained show in particular, deliberate decision is taken to ensure policies are set and adjusted as required so as to be appropriate for the nature of the applicants that the product if (sic) offers attract.

689    Having set that minimum expectation his corresponding analysis in part provides (CB 2001-2002):

I found no evidence of robust analysis and sound reasoning by Money3 to support key policy settings, such as any objective justification for… expense benchmark values such as… Money3’s GLE benchmark values.

I found anecdotal policy setting (i.e., statements/assertions without objective evidence and reasoning) and records showing that formal governance over policy setting was not timely with multiple instances of policy approval taking more than 10 months.

…

These aspects are not consistent with the practices of Reasonable and Prudent lenders.

Further, I found no evidence of portfolio level analyses feeding into any governance activities in relation to policy approval i.e. no analysis based justification for the approval was found.

…

Not having an Execution Framework that is adequately “tuned” to such a population i.e., that addresses both the income and outgoings appropriately is inconsistent with the practice of Reasonable and Prudent lenders.

690    Mr Hartman does not expose the practices of reasonable and prudent lenders that he refers to. He does not identify a practice of a reasonably prudent lender at the time. No lender is identified by name as having implemented the practice that he contends was the minimum expectation. He fails to expose his reasoning as to why the practices of Money3 fell short of the unidentified practices of reasonable and prudent lenders. Rather, Mr Hartman’s opinions proceed on the basis that this Court must accept his assertion about the common practices of reasonable and prudent lenders, together with their content.

691    For the reasons I have given in Part 4, Mr Hartman’s failure to expose his reasoning process makes it impossible for me to undertake an assessment of the basis on which he has expressed those opinions, and their ultimate value in assisting me in the making of relevant findings of fact.

692    This example of Mr Hartman’s failure to expose his reasoning process infects the entirety of his opinions in answer to question 3 where he addresses the execution framework [786] – [807], accountability [808] – [817], policy [818] – [835], process [836] – [849], procedures [850] – [875], training (which is cross-referenced to section 42) [876], monitoring [877] – [896], reporting and analysis [897] – [912] and governance [913] – [922]. The failures are material and so repetitive that I am not able to make findings of fact in accordance with any of Mr Hartman’s opinions as to these matters.

693    Regrettably, the same failure infects Mr Hartman’s opinions in answer to question 4 from [923] to [953] (CB 2059-2066). Within these paragraphs Mr Hartman contends that effective training requires four primary elements: content, logistics, assessment and integration which in each case he contends is the minimum expectation being the practices of reasonable and prudent lenders. As an example, when addressing the content primary element at [935], Mr Hartman commences with a statement of what “is necessary to ensure effective training” which is the standard by which he then analyses the training material of Money3. The first step in his analysis is in part:

Content:

The breadth of what needs to be developed and documented in training materials must cover the full scope of what is required to be done including operational, assurance and oversight activities.

There is a logical sequence required to ensure that the content of Training materials is appropriate. What elements are prerequisites depends on what is driving the change. The following are the sequence of items that must be developed (and approved) PRIOR to finalising training materials so that training can reflect what is expected to happen:

1.    Policy – to the extent that the updating practice relates to a policy change – the new policy must be drafted and approved first.

2.    Process – to the extent that the update in practice related to a new capability to undertake the activity – the new capability needs to be designed, develop (sic), and tested first.

3.    Procedure – to the extent that the updating practice relates to a new way of executing an activity – the new approach must be documented and tested first.

Training materials, whilst reflecting policy and procedure needs to be different. To be effective training materials need to provide more than instruction regarding what is required and how to deliver it.

…

694    Once again Mr Hartman fails to expose any practice of a reasonable and prudent lender during the relevant period which he contends amounted to a minimum expectation to support each of his contentions. And he employs mandatory language, such as “must cover” where the statutory obligations in issue are limited to the taking of reasonable steps to ensure that representatives comply with the credit legislation and to ensure that representatives are adequately trained and competent to engage in the credit activities authorised by the licence.

695    I am unable to make findings of fact in accordance with those opinions. That does not mean that aspects of the Expert Report that are not dependent on the practices and procedures of lenders at the time must also be put aside. In that more limited way, it is considered where relevant to this part of the case.

696    For completeness it should also be recalled that the Expert Report is dated 19 December 2023. Ms Costantini made her affidavit on 10 May 2024. She provides extensive evidence-in-chief as to the training provided for new credit analysts at [13] – [18], employee training at [19] – [22], meetings with team leaders at [23] – [26], audits at [27], analyst meetings at [28], boardroom meetings at [29], team huddles at [30] – [32] and the development and implementation of the Product Guides in issue at [54] – [62]. Mr Hartman was not requested by ASIC to review that evidence to determine whether it alters his opinions or to provide a supplementary expert opinion in response.

697    Ms Cavar made her affidavit on 9 May 2024. She addresses the training, oversight and procedures relevant to the settlement team at [9] – [25]. Her affidavit was not provided to Mr Hartman for review.

10.2 Submissions

698    Unhelpfully, ASIC’s written submissions replicate or summarise various contentions from the particulars of the case. Money3 complains that several ASIC submissions in support of the s 47(1)(g) case stray beyond the pleaded case as they seek to introduce matters referred to in support of the s 47(1)(e) case. The complaint is unfounded. The particulars are not so rigidly structured and there is considerable overlap between the statutory obligations in subparagraphs (e) and (g).

699    At this point it is necessary to resolve the difference between the parties in their formulation of the wording of Issues 6 and 7. The first difference is that Money3 confines each to its dealings with, and the credit contracts for, the six consumers in issue. As I have noted, in particulars ASIC expressly did not so confine its case. I reject the Money3 formulation to that extent. It follows that Issue 7 is as formulated by ASIC.

700    The second difference is the inclusive list at items 6.1, 6.2 and 6.3 of how ASIC formulates Issue 6. Each of these subparagraphs replicate the pleading at paragraph [41] of the Concise Statement. However, the particulars of 5 December 2024, in addressing the s 47(1)(g) case identify as the “critical aspect” the use of and reliance upon the living expense figures contained in the Product Guides and then by way of “other particulars” there is a list of asserted deficiencies in training materials and the maintenance of records. There is no reference to professional development, instructional assistance, templates, forms, checklists or to the assessment of the skill and competency of its representatives. Money3 makes the valid complaint that the ASIC case is unclear. In a civil penalty proceeding the obligation that ASIC must assume is to give adequate and fair notice of the case that must be met. The inclusive list at 6.1, 6.2 and 6.3 was not highlighted in the particulars, which unhelpfully references “other facts” which are said to establish the contraventions without identifying those facts. Nonetheless, I do not consider that by proceeding in this way ASIC must be taken to have abandoned the broader pleading at [41] of the Concise Statement.

701    Still, that is not the end of the matter. The written closing submissions of ASIC require careful attention to determine what is the case as finally formulated. As to 6.1, there are multiple submissions to the effect that Money3 failed to provide adequate training to its representatives. This is a prominent feature of the case at [94.2], [94.3] and [94.5]. There is no relevant reference to professional development. There is one reference a failure to include instructions to representatives as to how the statutory obligations were to be complied with: [94.4]. Thus, ASIC must be taken to have abandoned the professional development contention as a discrete issue, though it is an aspect of the broader adequate training contention.

702    As to 6.2 there is no relevant reference to adequate templates or forms. There is explicit reference to inadequate checklists and multiple contentions about the inadequacy of the Product Guides. Indeed, as noted the particulars of 5 December 2024 identify the living expenses in the Product Guides as a critical aspect of the case. But, ASIC must be taken to have abandoned the template and forms contentions.

703    As to 6.3, there is no reference to a failure to assess the skill of representatives. As to competence, there are multiple references, though in the context of directing representatives to apply Product Guide expense amounts ([8.1]), and as part of a general submission at [95] that Money3 failed to undertake a continuing training program designed to produce competent representatives.

704    Accordingly, Issue 6 becomes:

Whether Money3’s representatives were adequately trained, and were competent, to engage in the credit activities authorised by the credit licence, as required by s 47(1)(g) of the [Act], including whether Money3:

6.1     provided or arranged adequate training or other instructional assistance to its representatives;

6.2     provided adequate checklists and guides to its representatives; and

6.3     assessed the competency of its representatives.

705    Having cleared that ground, there is a further issue to address: Is it part of the ASIC case that Money3 failed to take reasonable steps to assess whether its representatives understood and then applied the training that was provided? Or put another way, failed to take reasonable steps to ensure that the training provided was effective. I have found that Money3 contravened the obligations at ss 128(d) and 130(1)(b) and (c) for the five credit contracts in issue for the six consumers. There were four representatives of Money3, Mr McAuley, Mr Marchesin, Mr Ondem and Ms Costantini, each of whom failed to make reasonable inquiries and to take reasonable verification steps of the financial situation of each of the six consumers by considering the bank transaction data as a method of inquiry and verification of declared living expenses. On one view, that may evidence a failure by Money3 to ensure that its representatives were adequately trained or to take reasonable steps to ensure they complied with the Act. Nonetheless, the more fundamental issue is whether ASIC pleaded and particularised that case and now presses it in closing submissions?

706    That case is within the general pleas at [41](a) and (c) of the Concise Statement – a failure to provide adequate training and to assess skill and competency. However, neither claim is particularised beyond a reference to documents annexed to the affidavit of Ms Berry of 30 November 2023 and Mr Harman’s Expert Report. Ms Berry’s affidavit references documents obtained from Money 3 during the investigation, which does not take the particularisation any further. As explained, Mr Hartman’s Expert Report cannot be the basis for particularising this aspect of the case.

707     To the extent that it forms part of the closing submissions, there are generalised references to the general conduct obligations at [91] – [99] which commences by replicating the contentions in the Concise Statement at [41]. Beyond that, at [94] the submission is that ASIC identified the case in correspondence dated 5 December 2024 (set out above). It will be noticed that the case framed relevant to living expenses is confined to reliance on the Product Guide amounts which is said to be the step that Money3 took “to purportedly ensure its representatives” complied with the Act and to “purportedly ensure its representatives were adequately trained, and were competent”, each because the living expense figures were not reasonable, were too low and or “demonstrably unrealistic”. As I have explained in detail, that case has not been established.

708    That does not conclude how ASIC particularises the s 47(1)(g) case. There is a further contention that reliance on the living expense amounts in the Product Guides “resulted in a failure” to properly consider the “minimum necessary expenses” of each consumer. I have also explained in detail why that case has not been made out: Money3 did not require or receive a breakdown of living expenses to that level of detail.

709    It was open, for example, to ASIC to contend for a less complex case to the effect that the training material in the form of the November 2017 Analyst’s Guide, in particular the reference in Part 9 to the bank statements as “crucial” in the assessment of an application, was not adequate or effective to comply with s 47(1)(g) because employees did not undertake the assessments in that way, but that is not how the case was framed. Similarly, the case may have been framed by reference to the May 2018 National Consumer Protection Awareness PowerPoint presentation or the May 2020 Credit Policy. Instead, ASIC made the forensic decision to focus on the Product Guide expense amounts, and the instruction to use the amounts therein where greater than consumer declared living expenses, instead of the anterior assessment and verification failures by reference to the bank statement data that have been established.

710    Returning to ASIC’s closing submissions, the reference to a failure to undertake a continuing training program that was designed to produce competent representatives or maintain their level of competence at [95], is a conclusion that flows from acceptance of the separate contraventions at [94]. There is no reference in [94] to a failure to ensure that the training that was provided was understood and applied by representatives, or was effective. There is a reference to Money3 being inhibited in its ability to monitor compliance, but that submission is confined to compromise by reason of the overwriting of data. ASIC’s reply submission takes the case no further in that it primarily relies on multiple references in Mr Hartman’s Expert Report.

711    As I have stated, in a civil penalty proceeding it is important that the contravention alleged is clearly expressed and identified in the evidence to be relied on. Having found that the evidence of Mr Hartman cannot be relied on as a basis to find relevant facts relating to the practices and procedures of reasonable lenders at the time, the door is closed to an excursion through the Expert Report to determine whether there is evidence of ineffective training of Mr McAuley, Mr Marchesin, Mr Ondem or Ms Costantini by reference to such standards.

712    For these reasons, I conclude that this is not part of the ASIC case.

713    Now, the practical approach to the ASIC case is to draw the submissions into the following groups. Doing so reduces the multiple contended contraventions to a manageable scale. Section 47(1)(g) (Issue 6) is concerned with adequate training and competence of representatives. ASIC contends that Money3 breached this obligation in that:

(a)    It trained its representatives to use or rely on the living expense figures contained in the Product Guides when those figures were not a reasonable approximation or benchmark of a consumer’s necessary expenses and were too low and demonstrably unrealistic for the purposes of assessing whether a consumer could comply with a credit contract. The Product Guide figures which were built into the APL capacity calculator, resulted in a failure to properly consider the minimum necessary expenses of the consumer in assessing whether they would be able to comply with a credit contract;

(b)    It provided training materials that contained generic content and which lacked an adequate explanation of how staff were expected to apply the statutory obligations to their day-to-day activities, were not updated to reflect relevant case law or ASIC regulatory guidance and did not include specific training for those responsible for governance;

(c)    Staff did not complete retraining regularly or in response to identified complaints and breach reporting;

(d)    The training materials failed to include instruction on how the obligations of Money3 were to be complied with;

(e)    Those in governance roles did not receive appropriate training, identify risk and compliance issues or ensure that corrective action was taken; and

(f)    It failed to maintain a continuing training program that was designed to produce competent representatives and maintain their level of competence.

714    Section 47(1)(e) (Issue 7) is concerned with taking reasonable steps to ensure that representatives comply with the Act. ASIC contends that Money3 breached this obligation in that:

(a)    The policy and procedure documents were inconsistent, were missing practical guidance to staff and were not formally reviewed and updated at regular intervals;

(b)    Systems and processes were missing information, elements and controls to ensure that required information was gathered;

(c)    The Credit Analyst’s Guide did not address obligations to verify information gathered and encourage staff to override policy;

(d)    The ability to monitor compliance with the Act was compromised by the overwriting of data and the use of text fields;

(e)    It had limited compliance reporting, outside of its complaints and breach reporting, and had no compliance reporting to front-line staff; and

(f)    It failed to take steps to properly monitor and supervise its representatives to ensure compliance concerns were escalated and to take action that was commensurate with the risk presented by such concerns.

715    In support of those contentions, ASIC submits that 26 findings of fact should be made as relevant to the inadequacy of the Product Guides and 55 findings of fact should be made as relevant to the inadequacy of the training, policies, practices and procedures of Money3. A considerable number of those findings turn on acceptance of the evidence of Mr Hartman.

716    Money3 submits that the evidence clearly establishes that it had in place processes to adequately train its staff to apply the statutory obligations to their specific activities, including one-on-one training and informal training. The training materials were updated. ASIC has not identified the specific training that it contends should have been included for management and executives and why the statutory obligation was not met without such training.

717    Money3 did implement regular training. ASIC has failed to identify any failure with respect to the responses of Money3 to complaints and breach reporting. The reasonable steps obligation to ensure compliance by its representatives did not require Money3 to have in place the prescriptive requirements that ASIC relies upon. No inconsistency in policies and procedures has been identified. ASIC has not identified the information, elements or controls that it contends were absent. The Credit Analyst’s Guide was not out of date, and ASIC has failed to identify the obligations it contends were missing or required. ASIC has not established that the Money3 software and systems were inadequate to ensure that reasonable steps were implemented to ensure compliance. It has not established any allegation of the lack of compliance reporting. Nor has it established any steps that ought to have been taken to escalate concerns or complaints with particularity.

718    Whether a contravention is established and whether it is the result of a lack of adequate training or a failure to take reasonable steps to ensure compliance is circumstance specific. In context, the alleged breaches relate to five contracts entered into over an extended period, which does not evidence deficiency in the policies, practices, procedures and training programs that Money3 had in place.

719    Like ASIC, Money3 contends that that a large number (50) of separate findings of fact should be made in its favour in support of its contentions.

10.3 Consideration

Outline of the evidence

720    Once the evidence of Mr Hartman concerning prescription of the minimum necessary practices, procedures and training requirements of reasonable and prudent lenders is put to one side, the ASIC case rests on what was put in place by Money3 during the relevant period, as set out in its internal business records and the evidence contained in the statutory responses and examinations, when considered with evidence adduced in cross-examination.

721    There is a vast quantity of this material. All of the documents are self-explanatory as to what Money3 did. What is in issue though is whether what it did without the benefit of hindsight analysis amounted to reasonable steps to ensure its representatives complied with the Act and whether it ensured they were adequately trained and were competent to engage in the credit activities authorised by the licence. In these respects, ASIC’s submissions are very detailed in analysing why the content of particular documents and the procedures and policies of Money3 fell short of the statutory standards.

722    In contrast, Money3 relies not only on its contemporaneous documents but also on the positive evidence of Ms Costantini and Ms Cavar. I first address their evidence as it cuts through the density of the documents.

723    In evidence-in-chief Ms Costantini commenced with the training provided to new credit analysts. An individual in the Micro Motor Department would commence training with credit support officers for a period of approximately two or three days. The person would sit next to an experienced officer who would teach them how to perform their role. This included the data that was required to be entered into the APL system and how to conduct employment and rental checks and to generate documents. The new credit analyst would be provided with a copy of the Product Guide. Having successfully completed that initial training, the new credit analyst would be trained in how to process loan applications. They would be assigned to an experienced credit analyst and would learn by observation. The new credit analyst would then assume the assessment process, observed by the more experienced officer. Once the experienced officer was satisfied that the new credit analyst could undertake each of the necessary steps, the new employee would move to the assigned Micro Motor team. Commonly, this would occur approximately two weeks following the commencement of training.

724    The new credit analyst would then commence assessing applications on their own. They would be supervised by a team leader. Before communicating an assessment decision, the results of the assessment would be provided to the team leader for review. The decision would not be communicated until the team leader had approved of the assessment. This process would continue for approximately one month until the team leader was satisfied that the new employee was capable of making the assessments. Once that point had been reached, the new employee would receive delegated authority to assess loans of no more than $5,000, without approval from a team leader. Once the new employee demonstrated proficiency in assessing loans to that amount, their authority would be increased to $8,000. Commonly this process could take up to two months.

725    New and current employees in the Micro Motor Department were required to complete training modules and read and acknowledge some of the Money3 policy documents. Retraining was required on an approximately annual basis, normally after the closure of each financial year. The training was conducted through a platform known as ELMO.

726    Ms Costantini refers to documents, in the form of an Excel spreadsheet record of training provided to employees and which records her attendance at three training courses between 20 July 2018 and 14 August 2019, respectively: National Consumer Credit Protection Act Awareness, National Consumer Credit Code Awareness and Responsible Lending. Although she does not now recall the content of each training module, having referenced each of the documents referred to, her evidence is that the content of each is consistent with her recollection of the training that she received.

727    The National Consumer Credit Protection Act Awareness module (CB 6223) comprises 21 pages. At a high level and in simple terms and language it addresses the key terms of the Act, the types of credit that it applies to, the licensing requirement and the licensee obligations, the credit representative obligations, the serious consequences of contravention of the statutory scheme, the essential steps to achieve the objective of responsible lending, the requirements to make reasonable inquiries of the financial situation and requirements and objectives of the consumer, the verification requirement, how to undertake a suitability assessment and the credit proposal disclosure obligations.

728    The National Consumer Credit Code Awareness module (CB 7011) is similar in form and content to the previous module in its description of the scope and application of the Act and the consequences of contravention. It differs in that it also includes information about the giving of guarantees, insurance, alterations to a contract, mortgage or guarantee, hardship variations, defaults and enforcement, statements of accounts and disputes and the mechanism for ending a contract.

729    The Responsible Lending training module (CB 6321) addresses the obligation of responsible lenders, references the ASIC Regulatory Guide 209 – Credit Licensing: Responsible Lending Conduct (RG 209) (and provides an electronic link to it), sets out the steps required to undertake a credit assessment by making reasonable inquiries and reasonable verification steps in order to establish whether the contract will not be unsuitable, how to assess a consumer’s requirements and objectives, how to assess the consumer’s financial situation by reference to income, fixed and variable expenses, credit history and circumstances, the verification step for income and expenses (including the use of 90-day bank statements to verify expenses), factors relevant to the scalability of the reasonable inquiries and verification steps, how to undertake the suitability assessment and the obligation to keep records and written assessments.

730    Returning to the evidence of Ms Costantini, she next addresses meetings between credit analysts and team leaders which were held every month, or every second month, as well as on an ad hoc basis, if there was an issue that required more timely attention. The topics of discussion included workload, performance and failures to comply with loan application assessment processes. Often issues were dealt with as they arose, without waiting for a one-on-one meeting.

731    Money3 conducted audits initiated by team leaders who would review loan application files for each credit analyst. The purpose was to assess whether the credit analyst had followed the required loan application processes. To the best of Ms Costantini’s recollection, the audit occurred on a monthly basis.

732    Credit analyst meetings, during which the loan application assessment process was discussed, were sometimes held. Ms Costantini recollects attending no more than four between March 2018 and December 2018, when she worked in the Micro Motor Department. During these meetings selected files would be worked through, and issues discussed.

733    There were also infrequent “boardroom” meetings between members of the Micro Motor Department, that would be initiated after a change in policies or procedures; for example the introduction of the new version of the Product Guide.

734    Finally, there were “team huddle” meetings between all team leaders, credit analysts and credit support offices which were usually held each Wednesday morning. Issues were raised and discussed.

735    Ms Costantini was not effectively challenged in her evidence in cross-examination on these matters (T 402-409). She denied a series of propositions to the effect that not every credit analyst received the training that she described: on her evidence the standard processes were followed. Several questions were put to her based on the evidence given by Mr McAuley during his compulsory examination, that he could not recollect receiving training of the type described by Ms Costantini, his files were not audited and he did not have one-on-one catch ups with his team leader. Ms Costantini could not answer for Mr McAuley, but maintained her standard practice evidence. Subsequently, it emerged that there is a documentary record of the training that Mr McAuley received between 16 October 2018 and 22 June 2020. Within that period, he is recorded as having enrolled and completed 30 separate courses ranging across: National Consumer Credit Protection Act Awareness, National Credit Code Awareness, Money3 Policies and Responsible Lending. That document significantly undermines the evidence of Mr McAuley who was not called as a witness. I place no weight on his evidence about training or audits.

736    Ms Costantini accepted that the ELMO training modules did not give specific directions about the procedure as to how a credit analyst should undertake the assessment of a loan application or carry out their duties on a day-to-day basis. She also accepted that there is no documentary evidence of the various meetings that she described in her evidence.

737    In my assessment, Ms Costantini was a careful and considered witness who was straightforward, direct and honest in her answers on the training issue. I have no hesitation in accepting her evidence-in-chief, and I find according to it.

738    Ms Cavar’s relevant evidence-in-chief as to the training, oversight and procedures for the settlement officers was as follows. She referenced the Settlement Procedure document (CB 8459), which she is responsible for maintaining and updating. She has been employed by Money3 or related entities for 17 years. Since January 2018 she has been the settlements manager for Money3. The settlements department was relatively small in the relevant period comprising herself, one or two team leaders and around 10 settlements officers.

739    All new employees, during the relevant period, in the settlements team received one-on-one training from Ms Cavar or from a settlements team leader. The settlement procedure document formed the basis of that training. It details the steps to be taken by the settlement officers. New settlements officers would initially work alongside a more experienced officer for the first few weeks of their employment. Initially, they would observe the process. They would then be monitored by the experienced officer for a few days. Once the experienced officer was satisfied that the new officer understood the process and was competent, they would be permitted to undertake settlements alone. However, each settlement file worked on by a new employee would be checked by a more experienced officer before making the welcome call.

740    All settlements officers (not simply new officers) completed online training modules about the policies and procedures of Money3. A training record is maintained. Ms Cavar references a record of her training between 17 May 2018 and 24 July 2019 (CB N 723) that she completed the modules: National Consumer Credit Protection Act Awareness, National Credit Code Awareness and Responsible Lending. These are the same modules referenced by Ms Costantini.

741    From July 2020, every month the settlements team leaders would complete an audit of three randomly selected settlement files for each settlement officer. The purpose was to provide continuing training and to provide more intense oversight of the work carried out by the officers. The audit process included a reprocessing of the settlement by reference to a pre-fund checklist. The checklist is in evidence (CB N 839). When an issue was brought to the attention of Ms Cavar, her practice was to send an email to the employee concerned and the required steps to address it. She gives as examples of the issues that she raised during the relevant period: reminders to check that what is recorded in the APL matches the information in the settlement documentation and of the need to follow-up communications with brokers and customers.

742    From July 2020, it was her practice to review daily sales reports to check that settlement files in the APL were being completed as required.

743    She was not challenged on this evidence in cross-examination. I have no reason to doubt her evidence and find according to it.

10.4 Resolution of the issues

Issue 6: s 47(1)(g)

744    ASIC’s contention (a) cannot be accepted. I have explained in Part 5.4 that ASIC has not established why the HEM benchmarks, though an available measure in the relevant period, would have been used by responsible lenders to assess comparable loans to those in issue. I have also explained that ASIC has not established by reference to the evidence of Mr Harris (when read with the s 49 responses) that the methodology employed by Money3 to determine the amount for general living expenses was arbitrary, not a reasonable approximation of living expenses for the class of consumers in issue and why his examination evidence falls short. It follows that ASIC has not established that Money3, by requiring its representatives to apply the greater of declared or Product Guide general living expenses, contravened s 47(1)(g).

745    Contention (b) has many moving parts. As to the generic content and inadequate explanation submissions, ASIC contends for findings of fact as follows. The ELMO National Consumer Awareness Training Module (CB 6223) provides limited awareness of key obligations, is not tailored to employees accountable and responsible for the assessment of consumer unsuitability, is overly generic and provides no practical guidance as to how the obligations are to be applied. Also, it was created before Westpac and the updates to RG 209 and does not provide guidance in terms of what additional questions to ask or how to treat and assess specific responses. In large measure these submissions depend on acceptance of the evidence of Mr Hartman at [783], [820], [822] and [936] of the Expert Report.

746    ASIC makes very similar submissions for the Responsible Lending training module (CB 6321), the Supporting Vulnerable Customers in the Finance Industry module (CB 6682) and the National Credit Code Awareness module (CB 7011). In each case it relies on paragraphs in Mr Hartman’s Expert Report.

747    To the extent that these submissions rely on the analysis in Mr Hartman’s Expert Report, I cannot accept them. The documents in their terms do not make out the ASIC case. Whilst they are drafted at a high level what must not be overlooked is that they are not directed to lawyers; but are intended to provide practical guidance as to the content of the statutory obligation which is directed to ensuring adequate training of representatives to a level of competence that meets the threshold requirement of being able to engage in the credit activities authorised by Money3’s licence. Nor should they be considered in isolation from the on the job training and experience set out in the evidence of Ms Costantini and Ms Cavar. The documents are not, and do not purport to be, specific step by step instruction manuals as to what the Act requires a licensee to do in order to meet its statutory obligations. That reflects the fact that the obligations are not cast in prescriptive terms and leave it up to the licensee to determine in the particular circumstances what reasonable inquiries and verification steps about the consumer’s requirements, objectives and financial situation should be undertaken and correspondingly, how the unsuitability assessment should proceed. ASIC has not established why providing generic guidance as to these matters, for example, falls short of the obligation to ensure that representatives are adequately trained and competent.

748    The next aspect of this submission is that the training materials were not updated to reflect relevant case law or ASIC regulatory guidance. Westpac is the case law relied on. ASIC correctly submits that the Quality Review for Finance Brokers Policy of January 2018 (CB 6111), foreshadowed review on an as-needed basis in “line with major policy and regulatory changes to ensure it remains relevant and applicable” (CB 6115). ASIC contends that it has not been updated despite “numerous events” since January 2018 which had “implications for changes to the expectations of brokers that would prompt review”, including RG 209 and Westpac.

749    The Policy is an outline document concerned with the review of finance brokers accredited with Money3. It sets out the principles pursuant to which accredited brokers will be monitored: the volume of loan applications submitted, the number declined, the number approved, approved loans in arrears, feedback from Money3 staff, information from complaints and information supplied by aggregators and lenders (CB 6114).

750    I reject the ASIC submission. This aspect of the case is concerned with Money3 and its representatives, it is not a roving inquiry into the relationships between Money3 and brokers, each of which separately held credit licences. Once again, ASIC must be held to its pleaded case.

751    The next document identified by ASIC for this submission is the National Consumer Credit Protection Act Awareness training module (CB 6223). I am unable to accept the ASIC submission. It rests on an assertion by Mr Hartman in his Expert Report at [783], [820], [822] and [936]. The effect of his evidence is that he did not notice updated modules of this document as listed in the training records of Money3. At [936] his reasoning includes: “given the nature of the changes both presented in these areas, it would be reasonable to expect updates”. That opinion depends on acceptance of his corresponding evidence of the minimum expectations the practices of reasonable and prudent lenders, which as I have explained I am not able to make findings of fact in accordance with.

752    There are further difficulties with this submission. The decision of Perram J in Westpac PJ was delivered on 13 August 2019. The Full Court judgment was delivered on 26 June 2020. Mr Hartman accepted in cross-examination that in September 2019 there was “a significant degree of uncertainty on the part of lenders as to what the relevant provisions in the Act required” (T 346). The primary effect of the majority reasons in the Full Court is that the legislation leaves it to the licensee to determine what reasonable inquiries and reasonable verification steps will be undertaken to inform the unsuitability assessment. The submission does not explain what update was required, or to what effect, in consequence of the decisions in Westpac PJ and Westpac. Nor does it explain what update was required in consequence of the publication of RG 209.

753    The submission also fails to address whether ELMO as the external provider and author of the document updated the module and if not, why not. There is no evidence about that and ASIC has not explained why it was not reasonable for Money3 to rely on material prepared by a third party.

754    Another difficulty is the inconsistency between this submission and the evidence. Ms Crowe gave evidence in cross-examination (T 218) that the training provided to staff included the training modules, policy or procedure documents and that when they were updated, the training would also be updated. Evidence to the same effect was given by Mr Harris during his examination (CB 5080).

755    Accordingly, I cannot accept this aspect of the submission.

756    The next matter ASIC relies on is that the Credit Analyst’s Guide of November 2017 was never updated. The submission is that given internal policy changes and court decisions, the document should have been updated “multiple times”. This submission is cross-referenced to paragraphs [856], [858] and [859] of Mr Hartman’s Expert Report. None of them support the submission. Assuming that ASIC’s submissions contain a mistake and the first reference intended is [855], the paragraphs do not support the submission, which in part, without attribution, adopts the language of Mr Hartman. Mr Hartman does not explain his reasoning: rather, he simply makes a conclusionary statement about unidentified internal policy changes (save for one reference to an email of 31 July 2019) and external court decisions, as requiring multiple updates of this policy. The email was sent by Mr Harris and is concerned with the need to exclude maintenance income as disclosed on Centrelink statements because this is the amount that the consumer is “supposed to receive”, but in practice it might not be received. There is no explanation why this policy document was required to be updated to reflect that internal direction. In any event, this opinion also turns on Mr Hartman’s assertion of the minimum expectations of reasonable and prudent lenders, which as I have said does not provide an exposed basis for me to make findings of fact.

757    The further difficulty with this submission is that ASIC does not explain what changes were required to the document and why. For these reasons, I reject this aspect of the submission.

758    Next there is reliance on the updated 1 May 2020 Responsible Lending Policy (CB 6531). This time the criticism of ASIC is that the document was updated six months after publication of the Full Court decision in Westpac and nine months after publication of RG 209. This submission is cross-referenced to paragraphs [783], [784], [785], [798] and [818] of Mr Hartman’s Expert Report. The ASIC submission replicates the language at [783], where Mr Hartman contends that the time that it took to update the policy was between three and six months slower than the updates of reasonable and prudent lenders. Once again, Mr Hartman does not identify which reasonable and prudent lenders acted with greater alacrity. For that reason I am not able to make the asserted finding. In any event, there is no explanation as to why the time that elapsed before the update to the policy was published amounts to a failure to comply with the obligation to ensure that representatives of Money3 were adequately trained and competent: s 47(1)(g).

759    The focus of ASIC then turns to the Risk and Compliance Presentation dated October 2020 (CB 6680). This is a dated list of various policies as published by Money3 between January 2019 and July 2020. There is a status column where the policies are either marked as “final”, “to be drafted” or “drafted”, but subject to review. The ASIC submission is that 12 of the 39 policy documents were not in operation at the time because they were in draft form. Of the remaining 27, 9 were in use for more than 12 months without being reviewed or updated. This submission is cross-referenced to paragraphs [821] and [915] of Mr Hartman’s Expert Report. At the risk of unnecessary repetition, each of these paragraphs contain various conclusions of Mr Hartman based on his review of Money3 documents in contrast with his asserted minimum expectation being the practices of reasonable and prudent lenders and for that reason, I cannot accept the findings of fact which ASIC submits should be made.

760    The final aspect of submission (b) is that the training materials did not include specific training for those responsible for governance, which ASIC defines as management and executives. The factual finding which ASIC seeks is set out at [228] of the schedule to the closing submissions, expressed as:

Those in governance roles received no training on what they practically need to consider and do in their oversight and governance roles in order to comply with the regulatory requirements. There are no training materials providing an explanation tailored to management, executives and board members as to the consequences of non-compliance with regulatory requirements. Money3’s Credit Licence – Continuing Professional Development Report for the 2021 Calendar Year records 50% compliance and that Craig Harris’ CPD was in progress but not complete.

761    Submissions to the same effect are expressed at [229] and [232]. The evidence relied on commences with paragraph [913] of Mr Hartman’s Expert Report, which as usual turns on his undisclosed minimum expectations being the practices of reasonable and prudent lenders which, this time, he contends were “essential”. I will not repeat why I cannot make the contended finding of fact, but in addition I note that in his reasoning Mr Hartman makes an unexplained assumption that “tailored training” was not provided to management, executives or board members. In any event, Money3 is correct to submit that ASIC has not identified the specific training that he contends should have included the management and executives in order to meet the s 47(1)(g) obligation.

762    For all of these reasons, I reject contention (b).

763    Moving to contention (c), this is concerned with the completion of regular retraining in response to identified complaints in breach reporting. In the schedule to the ASIC submissions there are two elliptical references to the relevant facts that it contends should be found: [205] and [232]. They are of little assistance. The contended fact at [232] references two Complaints Presentations (CB 7050, 7072). Each is an internal document that addresses specific loans where complaints had been lodged with AFCA. Each is a relatively detailed analysis, including recommendations to avoid similar complaints in future loan assessments. The ASIC submission is that the presentations contain recommendations but no action items or requests for approval and there is no evidence of continuing action or requests made by governance teams. These submissions find expression in Mr Hartman’s Expert Report at [915], which contains assertions by reference to his undisclosed minimum expectations of reasonable and prudent lenders. Beyond that, it is difficult to comprehend what the ASIC complaint is: the documents did address the failures, contained recommendations to avoid similar failures in the future and recorded the outcome that each complaint had ultimately been resolved. ASIC fails to identify the evidence in support of the contention that Money3 staff did not complete retraining in response to these complaints. Nor has ASIC identified why the assessment of the complaints fell short of the requirement to ensure that representatives were adequately trained and competent. Accordingly, this contention fails.

764    Contention (d) is that the training materials did not include instruction on how the obligations of Money3 were to be complied with. This covers the same ground as contention (b) and there is no distinct identification of any difference in the contended findings of fact in the schedule to the ASIC submission. I reject it for the same reasons.

765    Contention (e) overlaps with a component of contention (b). The difference is the focus on training to identify risk and compliance to then ensure that corrective action was undertaken. The only specific example in the schedule to the ASIC submission is [223] which references the “glitch” in the APL system whereby certain expenses were not replicated in the approval documents and consumers signed documents which included blank spaces for relevant data. According to the evidence of Mr Harris in his compulsory examination (CB 5134-5137), when the issue was noticed it was referred to the IT department to rectify, which process: “probably took longer than what we wanted to be rectified”, but he could not be certain as to the timeframe – his best answer was “more than a few months”. Mr McAuley in the course of his compulsory examination (CB 4826) said “I think that went for almost a year”.

766    ASIC has established an IT issue that resulted in incomplete documents being generated for consumers to sign. So far, so good. But the issue raised by this contention is concerned with the absence of appropriate training to management and executives to identify compliance issues, such as the IT fault with the APL system. The ASIC submission fails to identify what training material is referred to and why it was inadequate within the meaning of s 47(1)(g). Indeed, how training materials might have been at all relevant is unexplained: the problem was identified, was referred to the IT department and the issue was the period that it took the IT department to fix the problem. ASIC has adduced no evidence to the effect that the time taken by the IT department evidences a contravention of statutory obligation. This contention is therefore rejected.

767    Finally for the s 47(1)(g) case, there is contention (f). This is framed as a conclusion following acceptance of each of the earlier contentions, by reference to analogous provisions in the Corporations Act as considered in several cases. The first case relied on is Australian Securities and Investments Commission v Lanterne Fund Services Pty Ltd [2024] FCA 353 at [68], McEvoy J. That was an admitted contravention case where his Honour observed that the combination of statutory provisions there referred to require that the holder of an Australian Financial Services Licence “should undertake a continuing training program to produce competent representatives or maintain their level of competence”. That general proposition is not in dispute in this proceeding. But it is of no present assistance because ASIC has not established that Money3 failed to implement an adequate training system designed to achieve competent representatives to engage in the activities authorised by its licence. For the same reasons, none of the other cases relied upon by ASIC for that submission are of assistance.

768    For these reasons, ASIC has not established the contraventions relied upon to establish the s 47(1)(g) case.

Issue 7: s 47(1)(e)

769    For contention (a), the first item that is said to evidence inconsistency, the absence of practical guidance and a failure to formally review and update is the May 2020 Credit Policy (CB 6514) as particularised at item [196] of the schedule to the ASIC submission. There are seven separate contentions. The gravamen of the complaints fall into four groups. The first is that clause 9.3 (which is concerned with minimum living expenses) requires that when the amount of the loan exceeds $8,000, an additional buffer of at least $135 per week is to be added, when there is no evidence of the undertaking of any robust analysis or sound reasoning in support.

770    This complaint generically relies on paragraphs [783], [785], [810] and [818] of Mr Hartman’s Expert Report which turns on his assertion of the minimum expectations of reasonable and prudent lenders. To that extent I do not make findings of fact conformably with it.

771    Moving away from Mr Hartman’s evidence, the ASIC submission is that “in practice” it is clear that the value used to apply the policy differentiation was the vehicle purchase price. In the case of the six consumers in issue, the purchase price on each occasion was $8,000, but with the add-ons, the price increased to over $11,000. That may be accepted, but it does not establish the contention that Money3 failed to take reasonable steps to ensure that its representatives complied with the Act. To the extent that the submission draws on the more general submission that the living expense amounts in the Product Guides were arbitrary and not a reasonable approximation or appropriate benchmark of the consumers reasonably necessary expenses, it fails for the reasons that I have given above: ASIC’s evidence falls short of establishing those facts.

772    The second is that the May 2020 Credit Policy (CB 6514) at clause 9 requires that credit analysts must inquire into and verify living expenses according to the requirements in the Responsible Lending Policy, which is inconsistent with the Responsible Lending Policy which at clause 8 (CB 6535) states that Money3 “will make further inquiries where … the consumer has options about features that may be available under the credit product that will affect the cost of the product to the consumer”. There is a similar statement in clause 12 (CB 6538) as to making inquiries about the consumer’s requirements and objectives.

773    The asserted inconsistency does not exist. The May 2020 Credit Policy at clause 9, in alerting credit analysts to make inquiries and undertake a verification of living expenses “according to” the requirements of the Responsible Lending Policy, aligns with the circumstances where “further” inquiries will be made in defined circumstances.

774    The third is that the May 2020 Credit Policy “includes eligibility requirements for various Centrelink benefits as income, but does not effectively address how expenses of applicants reliant on such benefits should be assessed or where such applicants had little or no evidence of savings” which is taken directly from paragraph [785] of Mr Hartman’s Expert Report. Although unstated, that must be a reference to clause 8 of the May 2020 Credit Policy (commencing at CB 6518) which is concerned with minimum income amounts for loans above $8,000, where an applicant must be employed, and that Centrelink benefits “are acceptable forms of income in addition to paid employment”. Beyond that, the submission is difficult to understand and is otherwise unexplained. As such I cannot accept it.

775    The fourth is that on 31 July 2019, Mr Harris sent an email to all staff concerning the treatment of maintenance income and to the effect that it should not be included as disclosed in the Centrelink statements because that was not evidence that the amounts were actually paid and received. There is no basis to contend that the advice of Mr Harris was wrong and the fact that this topic was not addressed in the November 2017 Analyst’s Guide or the May 2020 Credit Policy does not advance the contravention submission. The fact is that a senior manager of Money3 sent an email by way of guidance to staff, and one would ordinarily expect that staff would implement his requirements. Indeed, the email is jarringly inconsistent with the contention that the procedure documents were “missing practical guidance to staff”.

776    The next matter of inconsistency is the contention at paragraph [218] of the schedule to the ASIC submission that of the 17,651 Micro Motor loans made within the relevant period, one third listed a vehicle value of greater than $8,000 and to $59,990, which exceeded the value used to define the M3 Asset Finance Product and was inconsistent with the definition of Micro Motor in the Product Guides. That contention strays outside of the pleaded case, and is rejected accordingly.

777    Item [220] of the ASIC schedule identifies the next matter of inconsistency, by reference to the “lazy broker” procedure (CB 7086). ASIC contends that this permitted a broker to only gather basic information about the purchase of a low value motor vehicle, which is inconsistent with the Broker Division Manual which requires a completed application form (CB 6117, 6126). The submission is misconceived. As correctly submitted by Money3, the lazy broker process is not used for broker submitted Micro Motor loans. Rather, it applies where a broker refers a customer to Money3, for it to deal directly with the customer: Ms Costantini explained that in her affidavit at [38] – [39], as did Ms Crowe in cross-examination (T 216).

778    The final contended inconsistency is at item [222] where ASIC submits that the Broker Accreditation Form is inconsistent with the Quality Review for Finance Brokers Policy in that it seeks no information about the broker’s knowledge of applicable regulations of Money3 policies. At this late point in the analysis, it should not be necessary to remind ASIC that it has not pleaded a case that concerns the conduct obligations of Money3 vis-à-vis brokers and I reject the submission for that reason.

779    Finally, there is the absence of formal review contention, which is no different from the review contention I have addressed when dealing with the s 47(1)(g) case and it fails for the same reasons.

780    For these reasons, contention (a) fails.

781    Contention (b) is concerned with the adequacy of Money3 systems to ensure that required information was gathered. At item [204] of the ASIC schedule, the submission is that the final assessment for Consumer 1 failed to include an additional allowance of $50 per dependant per week for three dependants who were disclosed on the broker application form. I have dealt with this in the analysis for Consumer 1. There is an allowance of $150 in the APL capacity calculator (CB 2646). It has been omitted from the Final Assessment (CB 2643) but as explained by Ms Costantini in her affidavit at [116], the document was not used. Its status has not been established by ASIC as one whereby information that was gathered and applied for a statutory purpose. The same analysis applies to the failure to record any amount for food and entertainment in the document (CB 2644). The contention fails accordingly.

782    Contention (c) returns to the November 2017 Credit Analyst’s Guide (CB 6081) and the submission is that it did not address obligations to verify information that was gathered and encouraged staff to override other policies. Items [178] and [179] of the ASIC schedule are relevant. The submission is founded on paragraphs [856], [858] and [859] of Mr Hartman’s Expert Report which, as a reader of this judgment will have appreciated by now, turn on the undisclosed execution framework, minimum expectations and practices of reasonable and prudent lenders and I do not make the contended findings of fact.

783    Whilst the Credit Analyst’s Guide does not explicitly reference the obligation to take reasonable steps to verify the consumer’s financial situation, the document cannot be read in isolation from the training that was provided to credit analysts and the other policy and procedure documents that applied during the relevant period, such as the National Consumer Credit Protection Act Awareness Training module (CB 6223) and the May 2020 Credit Policy (CB 6477) each of which referred to the reasonable steps to verify obligation. Further, ASIC has not adduced evidence as to how the Credit Analyst Guide encouraged staff to override these policies. The consistent finding that I have made is that the minimum general living expense amounts in the Product Guides were only applied where greater than the declared amounts for living expenses. Finally, ASIC has not explained why the Credit Analyst’s Guide was out of date, a fact not addressed in the schedule items. Although it states that Money3 has only produced one version of the Guide, that is hardly sufficient to found the submission. For these reasons I reject this contention.

784    Contention (d) is concerned with the impact of overwriting data and the use of text fields on the ability to monitor compliance. This contention is obliquely addressed at item [226] of the ASIC submission. It is put in this way:

Money3 analysts were not required to record the logic they applied in making decisions. The use of text fields (rather than a mandated system of combination of flags, drop-down fields and text fields) compromises Money3’s ability to pragmatically monitor what happened in the case of record overrides. This results in cases when notes are expected but not made (for example, where reductions and expenses are identified).

785    Two evidentiary sources are relied upon. Routinely, the first is paragraphs [892] – [894] of Mr Hartman’s Expert Report which, on this occasion, turns on his identified requirement of monitoring, which is the sixth element of his execution framework, as one of the minimum expectations of unidentified reasonable and prudent lenders, and for that reason I do not find according to his evidence. The other is the Complaints Presentation (CB 7055) which is given as an example of the inability of Money3 to locate evidence that a credit analyst considered or discussed a reduction in expenditure with a consumer in order to meet their loan commitments. That is a submission of one failure by one credit analyst, on one loan at one point in time. It does not support the conclusion that Money3 failed to take reasonable steps to ensure that its representatives complied with the Act.

786    Moreover, it overlooks that the Act does not specify how data is to be entered for the purpose of meeting the ss 128, 129 or 130 obligations.

787    Accordingly, contention (d) fails.

788    Contention (e) asserts limited compliance reporting and no reporting to front-line staff. There is no corresponding item in the schedule to the ASIC submissions that identifies any finding of fact in support and it fails for that reason. Further, to an extent this contention overlaps with contentions (d) and (e) that I have analysed under the s 47(1)(g) case and it fails for the same reasons.

789    Finally, there is contention (f) which is concerned with a failure to monitor and supervise representatives to ensure that compliance concerns were escalated and actioned. This is a conclusionary submission, not separately addressed in the schedule of items, and which flows from establishing a contravention by one or more of the specific contentions. It falls with them.

11. RESULT

790    The ASIC case has succeeded in very limited respects. The hearing must be adjourned to receive submissions about relief. In the meantime, ASIC must file a draft of the declaratory relief that it seeks consistent with the established contraventions. Thereafter, this proceeding will require further case management.

Associate:

Dated:    5 September 2025