The Australian Securities and Investments Commission has taken action in the Federal Court against a prominent mortgage brokerage business.
The corporate regulator has lodged an application against a number of companies trading as ‘Sample & Partners’- GMS Group (NSW) Pty Ltd, GMS Group (Vic) Pty Ltd, GMS Group (Qld) Pty Ltd, GMS Group Holdings Pty Ltd, director of the companies, Matthew Sample, and national operations manager of the Sample & Partners business, Craig Turrell, following allegations of misleading or deceptive conduct regarding the promotion of mortgage broking services.
ASIC alleges representatives of Sample & Partners cold called potential borrowers to arrange an appointment – usually at the potential borrower’s home.
According to the regulator, during this initial consultation, potential borrowers were asked to enter into a contract with companies trading as Sample & Partners.
ASIC alleges that the defendants have breached and continue to breach the ASIC Act by representing to potential borrowers that:
• by switching to a Sample & Partners arranged loan they would save money and pay off their home loan sooner but failed to explain that to obtain this benefit borrowers would need to make extra repayments;
• their financial circumstances are considered before making a recommendation and explaining the particular benefits a borrower will receive if they switch to a Sample & Partners’ loan. ASIC alleges that an individual’s actual expenses are not considered;
• Sample & Partners considers a potential borrower’s particular financial needs before recommending a lender from their panel. ASIC alleges that some consultants only receive training with regard to a limited number of panel lenders. This determines the lender which is recommended, rather than the potential borrower’s financial requirements; and
• Sample & Partners is independent from lenders despite Sample having an interest in World Home Loans which is on Sample & Partners’ panel of lenders.
ASIC also contends that in the past Sample, Turrell, and the companies trading as Sample & Partners have breached the ASIC Act by representing to potential borrowers that:
• certain named clients received benefits in switching to Sample & Partners’ loans when in fact those clients did not exist;
• the whole market of lenders will be reviewed to find an appropriate lender for a potential borrower, while Sample & Partners has a panel of no more than nine lenders; and
• Sample & Partners has expertise to offer insurance advice and has employed specialist staff such as financial planners when those staff are not authorised or engaged to provide financial advice.
ASIC is seeking declarations that Sample, Turrell, and the companies trading as Sample & Partners engaged in misleading or deceptive conduct or conduct that is likely to mislead or deceive.
The corporate regulator also wants orders restraining Sample, Turrell, and the companies trading as Sample & Partners from continuing to make the alleged representations; and orders that Sample, Turrell, and the companies trading as Sample & Partners notify borrowers of the alleged representations and implement an appropriate process so that any borrower who wishes to make a claim for any loss or damage caused by the actions of the defendants can do so.
Further, ASIC is concerned that at least some of the representations made by Sample & Partners are also being made by other mortgage broking companies associated with Sample. Accordingly, ASIC is seeking court orders to restrain Sample from making such representations in any mortgage broking business.
The matter will return to the Federal Court in Sydney today – Tuesday December 12, 2006.
By Nelson Yap
