This case is worth reading for any business that lends money, introduces borrowers, brokers finance or uses business-purpose declarations. The practical risk is assuming that paperwork alone decides the character of the loan. The earlier findings were that the corporate respondents needed a credit licence and that the National Credit Code applied, including where a business-purpose declaration did not work because reasonable inquiries had not been made.
The later judgment also shows that regulatory publicity orders are evidence-driven. ASIC wanted the companies to publish a notice about the findings and penalties through specified websites and publications. The Court accepted the regulatory purpose of adverse publicity orders, but was not satisfied on the evidence that the proposed publications would achieve that purpose or reach the right audience proportionately. So the revised publicity orders were not made.
For small finance businesses, the lesson is twofold. First, classification of a loan should be evidenced before the loan is made, especially if the business is relying on a declaration to avoid consumer-credit treatment. Second, if a regulator seeks corrective or publicity orders, the detail of the audience, placement, cost and purpose can matter just as much as the fact of contravention.