Asic loses court fight against ‘book-up’ credit scheme in Indigenous community | Australia news


The corporate regulator will push for reform to better protect remote Indigenous communities against predatory and exploitative businesses after losing a high court battle against what it alleged was an illegal “book-up” credit scheme operating in South Australia.

The high court on Wednesday found against the Australian Securities and Investments Commission (Asic) in the case of Lindsay Kobelt, who owned the “Nobby’s” general store in Mintabie, a town in the APY Lands.

The store was used to run a “book-up” credit scheme, which tied the customers to Kobelt’s store and gave him significant control over their finances. The customers – Anangu people with little financial literacy – handed over their bank card and pin number in exchange for goods, including second-hand cars.

Kobelt then withdrew the vast majority of his customers’ wages or welfare payments soon after they were deposited, and used most of the money to service the debt.

Other funds were given back to the customers to buy groceries or other necessities from Kobelt’s store.

Many remote Indigenous communities support book-up credit schemes because they typically have little ability to access other forms of finance or buy cars.

Asic had no intention to outlaw such schemes, but wanted to ensure communities were properly protected from predatory or exploitative practices.

The regulator took Kobelt to the federal court, which initially found the arrangement breached Australia’s credit laws and amounted to “unconscionable” conduct, because it took advantage of customers’ vulnerability to “tie” them to his store. Asic later lost on appeal, and took the case to the high court, which delivered its judgment on Wednesday.

The high court found the scheme did render customers “more vulnerable to exploitation”. But it found the behaviour was not unconscionable because “no feature of the respondent’s conduct exploited or otherwise took advantage of the Anangu customers’ vulnerability”.

“The basic elements of the book-up system were also understood and voluntarily accepted by the Anangu customers,” the court said in a judgment summary. “The Anangu customers’ acceptance of the terms on which book-up credit was supplied was not the product of their lack of financial literacy, but rather reflected aspects of Anangu culture not found in mainstream Australian society.”

Nathan Boyle, from Asic’s Indigenous outreach program, said the regulator was still working through the judgment. But he said it was clear that reforms were needed to ensure remote communities were better protected.

Boyle said book-up was an essential service, a fact that was clear from consultation with Indigenous communities. But he said consultations made clear there was significant support for greater rules and protections to protect customers against exploitation.

“The judgment has shown us that the law as it currently applies is not adequate to find that these things are in breach of the law,” Boyle said. “It gives further momentum to Asic to continue our consultation with Aboriginal and Torres Strait Islander people as well as with our colleagues in Canberra about what we might be able to do to ensure appropriate rules are put in place around book-up.”



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