ASIC has launched Federal Court action against Lightspeed Finance Pty and its director, Mark James Fitzpatrick.
ASIC is claiming that the company, and Fitzpatrick, failed to comply with AFCA (Australian Financial Complaints Authority) determinations.
The determinations arose after AFCA found that Lightspeed accepted a declaration from its client that the funds raised (that were secured by a mortgage) were for business purposes, when they were actually for home renovations. AFCA found that the NCCP would apply, and that those provisions would have shown that the loan would have been unaffordable.
In late 2016, pensioner Nabilla Elghalemi was renovating her house with her husband, Mr Birnie. Looking for a loan of $60,000 to allow them to finish the work, they went looking for bridging finance, planning to refinance with a major lender when the work was finished.
In January 2017, the couple went and met Lightspeed Finance staff who arranged for Mr Birnie to be the borrower, with Ms Elghalemi as a guarantor. Mr Birnie was asked to get an ABN and complete a “Business Purpose Declaration”.
Mr Birnie was offered a loan by Stephen Broomhall, of $90,000 at 2% per month, which would jump to 6% if there was a default. Lightspeed’s interest would be 1.5% per month on top of that amount.
Although Lightspeed had given the lender a due diligence report that said that the couple would use the borrowed money for renovations, when they were given a loan offer, it clearly said that the loan would only be offered on acceptance by the borrowers that the loan was entirely for business purposes.
The loan settled on March 1st, but by September the couple were served with a notice of default which was followed in mid-December by court proceedings to get possession of the premises.
Mr Birnie lodged a complaint with the Financial Ombudsman in the following January, but unfortunately for him and his wife, the complaint was only against Lightspeed which meant that the lender was still able to continue with his eviction action.
This ASIC action against both Fitzpatrick and Lightspeed followed two determinations by AFCA – the first from December 2018 was that Lightspeed should pay Mr Broomhall the total loan debt, and that Mr Birnie would then pay a total of $65,082 to Lightspeed. The second determination, made in July the following year, was that Mr Birnie’s repayment to Lightspeed would now only be $43,485.45. By the end of 2019, Mr Broomhall had sold the property for $200,000. None of the funds went to the couple.
When neither Lightspeed nor Fitzpatrick complied with either of the AFCA determinations, ASIC launched this action to recover the $220,000 that it claims Ms Elghalemi has lost.
Lightspeed and Fitzpatrick face potential fines of $10,500,00 and $1,050,000 respectively