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Avco - a history of consumer dispute - 3.3 back to contents Avco’s reluctance to change its practices A number of aspects of the license hearing and civil penalty cases in Victoria raise concerns about Avco’s preparedness to change its practices. During the hearing of the civil penalty cases discussed above, the issue of whether or not Avco was continuing to breach the Credit Act by requiring consumer credit insurance to be taken out as a condition of the loan was raised. The Ministry for Consumer Affairs lead evidence about the insurance penetration rates that had been reported to the Ministry. Those reports showed that on average two thirds of all credit contracts entered into included consumer credit insurance. This is an extremely high insurance penetration figure as most finance companies tend to find that only one third of credit contracts entered into include consumer credit insurance. The Ministry of Consumer Affairs submitted that these figures indicated that insurance forcing was continuing to occur, although the Tribunal did not make a finding to this effect. The issue of the practice of “upselling” was also raised before the Tribunal. As stated earlier, the Victorian Credit Licensing Authority had obtained an undertaking from Avco that it would cease the practice of upselling and to ensure that this practice had been stopped. Further Avco was to report to Consumer Affairs on the number of credit contracts which involved amounts lent of less than $350.00. The report tended into evidence by the Minister of Consumer Affairs showed that there had been 121 instances where, under a loan contract, there had been a small advance made to a consumer of $100.00 or less. The Ministry of Consumer Affairs pointed to these cases as evidence that the practice of upselling was continuing despite the undertaking made previously to the Credit Licensing Authority. Finally, during the course of the hearing of the civil penalty cases it emerged that it was likely that the failure to disclose commissions had also occurred in jurisdictions other than Victoria. Indeed it was suggested by the Ministry of Consumer Affairs in the course of the proceedings that the only reason the application had been brought in Victoria was because this issue was highlighted by the license hearing. Avco responded to this criticism by stating that it was now aware that the error had also occurred in New South Wales and it was in the process of filing applications with the Commercial Tribunal of New South Wales to deal with the issue. In fact Avco took approximately another year to lodge an application in New South Wales. Not surprisingly, the Commercial Tribunal took a serious view of the question of delay when it came to consider this application. The Tribunal stated in its judgment: “The delay between discovery of the primary error and filing of the original application (May 1993) is unacceptable. In defence, the applicant submitted that its resources were tied up in Victoria on a licence application and on an important case being held in the same jurisdiction and referred to earlier in this decision as “Abschinski”, supra. The Tribunal cannot believe that an applicant of its size could not have commenced, if only in a gradual way, to investigate or undertake a preliminary review of the contracts to locate, at least, the column 1 primary error.” [Avco Financial Services Limited v Various Debtors (1996) ASC 56-350, at 56,867.] These matters, together with the complaints received by advisers from consumers, suggest that legal action taken to date has had very little effect on the way Avco carries out its business. |
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