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The Credit (Administration) Act 1984 (Victoria, Australia) required all businesses providing credit to consumers (apart from deposit taking institutions such as banks and credit unions) to apply for a credit provider’s licence.

WHEN ACT PROCLAIMED AND REPEALED, TEST OF FAIR, HONEST AND EFFICIENT.

In late 1987, objections were lodged in relation to an application for a credit provider’s licence by HFC Financial Services Limited (HFC). HFC had been operating in Australia for some years. This was HFC’s initial application under the new regime– and like all businesses that had lodged applications, HFC had been entitled to operate until (and unless) a hearing found that they were not fit to hold a licence.

The principal question with which the Authority has been concerned in this matter is whether it believes the Applicant, if licensed, will not perform the duties of a holder of a credit provider’s licence efficiently, honestly and fairly. If it has that belief the Authority must refuse the application, but any other belief requires it to grant the application.

It is not the function of the Authority to penalize the Applicant in any way for shortcomings in its past conduct. The Authority agrees entirely with the submission made by the Applicant (11111.2) that it would be wrong of the Authority, if it was not positively satisfied that the Applicant is not going to act efficiently, honestly and fairly, to refuse its application as a guise for giving the Applicant a quick short sharp shock, having in mind all the time that the Applicant could fix it all up and come back and apply later. We repeat that we must grant a licence unless we are positively satisfied that the Applicant will not act efficiently, honestly and fairly. (14-1)

In our opinion, the extent of the dishonest and unfair conduct engaged in by HFC must have instilled in the minds of HFC staff a clear understanding that such [unfair and dishonest] conduct was not merely acceptable but expected. The Authority, therefore considers that the new management of HFC, supported by a now concerned Household, faces an enormous task in eliminating the culture of dishonesty and sharp practice that has pervaded HFC for so long.

[Certain matters arising during the hearing] illustrate the size and difficulty of that task. These matters demonstrate that as late as December 1988, very senior executives deemed it appropriate to engage in the most serious and dishonest conduct and to enlist other staff for that purpose. These matters also illustrate the difficulty that the new management will have in detecting and eliminating such conduct, for no one within HFC volunteered any information as to those matters to Mr. Miller. He learned of them only as a result of action taken by former employees.

It is the Authority’s view that it will take some considerable time for the new management in HFC to secure acceptance and commitment by all its staff who deal with the public, and all those whose actions guide or affect staff dealing with the public, to honesty and fairness in all aspects of the selling of insurance, the selling of credit and the collection of accounts. For those reasons, the Authority has formed the belief that HFC would not, if granted a licence, carry on its business honestly and fairly, at least in the short term.

HFC Financial Services Limited (HFC)

At the time of the decision in September 1989:
HFC is incorporated in New South Wales and is a wholly owned subsidiary of HFC of Australia Limited. Household Group Australian, Inc, which is incorporated in Delaware in the United States of America is the holding company of HFC of Australia Limited and is part of the Household group of companies which the ultimate holding company is Household International Inc.

Objections lodged in Late 1987.

Hearing commenced May 1988
20 dec – 6 feb adjourned

17 april – 15 May 1989 adjourned for final submissions.

23 June 1989 indicated issues for submissions.

Submissions and closing addresses – adjourned on 29 June 1989.

Decision – September 1989

Credit Licensing Authority
In the Matter of the Credit (Administration) Act 1984
And
In the Matter of an Application for a Credit Provider’s Licence by HFC Financial Services Limited
Reasons for Decision

Part1-HFCFinancialServicesLimited
Part2-TheCourseoftheProceedings-FirstHearing
Part3-TheCourseofProceedings-SecondHearing
Part4-TheApplicableLaw
Part5-Insurance-5.1IntroductiontoInsurance

Part5-Insurance-5.2InsuranceasaConditionofCreditSellingPracticesEtc
Part5-Insurance-5.3ContinuingonCreditInsuranceAfterLoansHaveBeenRepaid
Part5-Insurance-5.4FailuretoMakeAnyRebateofInsuranceonEarlyTermination
Part5-Insurance-5.5IncorrectChargingofPremiumsandInsuranceRebateErrors
Part5-Insurance-5.6ResponsibilityofHFCfortheConductoftheHeritageCompanies
Part6-TrainingandSupervision
Part7-ImproperCollectionPractices
Part8-RealEstateLending-BalloonLoans
Part9-GuarantorsandCo-Borrowers
Part10-MattersArisingfromMrSwimbournsEvidence
Part11-MattersofLessImportancethanPart5toPart10Matters
Part12-RemedyingIndividualCases
Part13-ChangesinPracticesandManagement
Part14-Conclusions
Part15-AppendixA-StatementofMajorIssues
Part16-AppendixB-DecisiononaQuestionofBias
Part17-AppendixC-StatementofMajorIssues