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High Court sides with credit provider over ASIC on unconscionable conduct


In the case of Australian Securities and Investments Commission v Kobelt [2019] HCA 18, the High Court considered whether “book-up” credit provided to the Anangu Aboriginal community people for amongst other things the purchase of second-hand cars was in all the circumstances unconscionable in contravention of s.12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth).

The credit was provided to impoverished customers lacking in financial sophistication in circumstances where payment was deferred on the basis the customer supplied a debit card linked to their bank account and provided their PIN to the lender, who was authorised to access the relevant account and routinely did so upon the crediting to the account of Centrelink payments. Half of the customers income was generally retained.


At first instance the Federal Court found the book-up system of credit involved very expensive credit and took advantage of impoverished customers with limited financial understanding in a way that was unconscionable. That decision was overturned on appeal to the Full Federal Court.

The High Court in considering whether Kobelt acted unconscionably considered a range of matters including:

  1. Whether if the customers had been found wanting in financial literacy they would not have chosen to obtain credit under the book-up system.

  2. The consensual nature of the arrangements and the absence of bad faith or dishonesty on the part of the lender.

  3. The modest level of complaints and lengthy duration over which the book-up system operated.

  4. The level of understanding of the book-up system of the customers and the power balance.

  5. The absence of alternative credit systems.


In a majority decision (4:3), one of the High Court majority judgments of Kiefel CJ and Bell J held that no feature of the lender’s conduct in the supply of book-up credit exploited or otherwise took advantage of the lack of education and financial acumen of the Anangu customers. Kobelt was found not to have abused the book-up credit system and the long history of the system in remote Indigenous communities was not out of the ordinary.

Gageler J found the system had functioned consensually over a lengthy period of time, without bad faith on the part of the lender and that the vast majority of the Anangu customers had a rudimentary understanding of it.

Nettle and Gordon JJ dissented, with Edelman J agreeing in powerful judgments finding that the unconscionability was that the 117 Anangu customers were at such a special disadvantage relative to the lender as to be unable to make a decision in their own interests and the lender knowing or having constructive knowledge of such incapacity, took advantage of that disadvantage to get them to agree to his terms. They found that the power imbalance, the lack of transparency and the customers’ lack of proper understanding resulted in them being unable to hold him to account.

Edelman J observed that the system was the only form of credit offered in remote communities of highly vulnerable persons in need of credit. A feature of the system was the sale of cars on credit at up to three times the market rate for unsecured credit, with the effective interest rate concealed from the customers. The Anunga customers were unable to ascertain even an account balance.

Authors: Louise Gehrig and Rob Norton


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