ACCC Slams Guardian Home Loans & Mortgage Ezy prop

  1. 89 Posts.
    ACCC Action Stops Pyramid Scheme in Home Loan Industry 10/07/02

    The Australian Competition and Consumer Commission has successfully obtained final orders in the Federal Court restraining Guardian Finance and Insurance Consultants Pty Ltd and its sole director, Mr Peter Martin James (also known as Peter St James) from promoting Guardian’s Reducible Home Loans Introducers program and Rate Reward program to consumers.

    In proceedings instituted in the Federal Court of Australia in 2001, the ACCC alleged the Guardian Reducible Home Loan Introducers program and Rate Reward program constituted an illegal referral and pyramid selling scheme and their promotion by Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James contravened provisions of the Trade Practices Act 1974.

    The ACCC alleged Guardian Finance and Insurance Consultants Pty Ltd’s promotion of the scheme induced or attempted to induce consumers to enter into home loans through Guardian Finance and Insurance Consultants Pty Ltd and participate in the Guardian Reducible Home Loan Introducers program and Rate Reward program by representations that participating consumers would receive:

    a 0.1% reduction in their interest rate for each customer they successfully referred to Guardian Finance and Insurance Consultants Pty Ltd; and
    various benefits from Guardian Finance and Insurance Consultants for each customer successfully referred thereafter.
    In June 2002, Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James consented to orders in which the Federal Court of Australia: -

    declared that Guardian Finance and Insurance Consultants Pty Ltd had breached sections 61 and 57 of the Trade Practices Act in promoting its Guardian Reducible Home Loan Introducers program and Rate Reward program;
    declared that Mr Peter Martin James was knowingly concerned in the contravening conduct;
    granted injunctions preventing Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James engaging in future contraventions;
    ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to implement a trade practices compliance program;
    ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to refund application fees paid by participants in the illegal scheme; and
    ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to contribute to the ACCC’s legal costs.
    "This outcome provides protection for consumers who may have been about to enter into one of the largest financial transactions of their lives", Acting ACCC Chairman, Mr Ross Jones, said today. "Pyramid schemes prey on people's desire to 'get rich quick' but usually only the promoters, or those at the very top of the 'pyramid', benefit, not the sometimes thousands who join with the expectation of rich rewards. In a scheme involving such a large financial transaction the ACCC acted to ensure consumers were protected".

    Further information
    Mr Ross Jones, Acting Chairman, (02) 6243 1178
    Ms Lin Enright, Director, Public Relations, (02) 6243 1108 or (0414) 613 520
    MR 169/02
    9 July 2002

    BACKGROUND

    Information: Legal vs Illegal Schemes

    The ACCC cannot provide legal advice regarding pyramid or referral selling schemes, nor approve or disallow such schemes. It is ultimately up to a court to determine whether or not a scheme amounts to a pyramid or referral selling scheme.

    Pyramid Selling - Section 61 of the Trade Practices Act prohibits the promotion of, or participation in, pyramid selling schemes. The difference between acceptable multi-level marketing structures and pyramid selling is often confused. Both will exhibit a pyramid distribution structure, but there are some fundamental differences between the two. An acceptable multi-level marketing scheme will normally exhibit the following characteristics:

    participants will be rewarded for the sale of genuine products by themselves or by other people they have introduced or recruited into the system. The rewards will only be based on product sales and there will be no reward for merely introducing people.
    the products will be genuine products which are not grossly overpriced, and will normally be of the type which a consumer can be expected to buy time and time again.
    Schemes which involve products or services which will only be purchased once by each participant and therefore require ever expanding numbers of participants in order to generate income are unlikely to be legitimate multi-level marketing systems. Properly operated multi-level marketing systems allow income to be generated by continuous supply to a finite number of people.

    Many pyramid schemes are disguised by incorporating the sale of goods and services, which are over-priced, of poor quality, difficult to sell, or of little value into the scheme’s operation. Often the promotion and sale of these goods and services is of little importance and participants are not properly trained.

    Referral Selling - Section 57 of the Trade Practices Act prohibits referral selling. In simple terms, referral selling induces customers to purchase goods or services by representing that the customer will receive a reward for either giving the supplier the name of prospective customers or otherwise assisting the supplier to provide goods or services to other customers and where, in fact, receipt of the reward is contingent upon a subsequent event such as the purchase of the goods or services by referred customers.

    Penalties

    Heavy penalties can be imposed by the Federal Court including penalties of up to $220, 000 for individuals and $1,100 000 for companies and orders for restitution of monies received by those participating.

    Couldn't happen to a nicer guy :-)

    Source: ACCC Media Releases http://203.6.251.7/accc.internet/digest/view_media.cfm?RecordID=746

 
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