Ferratum Australia Pty Ltd (in liquidation) has been ordered to pay a total of $16 million in penalties by the Federal Court for numerous contraventions of the National Consumer Protection Act and the National Credit Code.
The Court had earlier found that Ferratum had:
- entered into contracts which imposed prohibited fees and charged those fees to its customers,
- incorrectly calculated payout amounts for its customers in two-thirds of the sample that ASIC reviewed, including one customer who was overcharged over 30% of their total loan amount, and
- failed to maintain the systems necessary to ensure it charged its customers properly for early payouts on small amount credit contracts.
ASIC Deputy Chair Sarah Court said, ‘Ferratum’s conduct was egregious. It offered short term loans to often vulnerable customers, significantly compounding their hardship by charging fees that it was not legally entitled to charge. This significant penalty is the latest outcome in ASIC’s ongoing work to combat consumer harm resulting from high-cost credit.’
In handing down the penalty decision, Justice Kennett noted that Ferratum’s breaches of the law appeared ‘systemic and deliberate (or at least reckless) […] because they are a function of Ferratum having, over a long period, failed to deal with obvious and persistent deficiencies in its system.’
His Honour said, ‘the great majority of [Ferratum’s] customers can be taken to have been persons of very limited means who were vulnerable to exploitation. The amounts involved could well have been significant for some customers.’
In determining the penalties to be imposed on Ferratum, his Honour took into account the control of the Australian business by Ferratum’s parent company, Multitude SE, a Finland-based multinational.
Justice Kennett observed that Ferratum’s non-compliance appeared to arise from Multitude SE’s lack of attention to Australian regulatory requirements. ‘It is appropriate that the orders made should seek to deter Multitude SE against taking a similar approach to doing business in Australia in future in the event that it seeks to re-enter the market,’ His Honour said.
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Background
ASIC commenced proceedings against Ferratum on 1 November 2021. Ferratrum defended the allegations until its voluntary liquidation on 4 April 2023. The Court granted ASIC to leave to continue the proceeding notwithstanding Ferratum’s liquidation (21-287MR).
On 7 September 2023, the Court found that between March 2019 and August 2021, Ferratum breached consumer credit protection laws in relation to small amount credit contracts by:
- charging borrowers prohibited fees such as direct debit fees when using certain credit cards and fees to alter direct debit arrangements,
- entering into contracts with borrowers which imposed prohibited fees,
- incorrectly calculating the payout amount for early repayment in two-thirds of identified contracts, and
- failing to act efficiently, honestly and fairly by ensuring it had an accurate and reliable system to calculate, record and monitor early payout amounts (23-248MR).
At the time of the misconduct, Ferratum’s ultimate holding company was Multitude SE, a European public limited liability company based in Finland which provides mobile and digital financial services to consumers and small businesses globally.
Under National Consumer Credit Protection laws, small amount credit contract providers must not impose fees and charges beyond an establishment fee, a monthly fee, a fee payable in the event of a default in payment under the contract, or a government fee, charge or duty.
If consumers have taken out a loan with Ferratum and are concerned that they may have been affected by this conduct, they can make a complaint to the Australian Financial Complaints Authority (AFCA) on 1800 931 678.
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