Sydney debt collector resists $3.25m fine

In arguing for the lower fine, barrister Aaron Weinstock said his client did not have the capacity to pay a multi-million dollar fine even under a payment plan with the Australian Securities and Investments Commission.

"Unless there were a payment plan going out very, very far into the future, the company wouldn't be able to pay its bills and that would be the end of the company," he told Justice Robert Bromwich.

ASIC brought the lawsuit against A & M Group, which trades under the Debt Negotiators name, in November last year. The regulator alleged the company used misleading, threatening and coercive behaviour against the six debtors. 

Threats, which included to launch legal action over bankruptcy or fraud, were untrue and were made without contact from creditors, ASIC said.

"The defaulting debtor representations were a tactic illegitimately used by A&M Group to pressure debtors to contact A&M Group and/or make payments under their debt agreements," the regulator said in documents filed with the court.

The matter went to a penalty hearing on Wednesday after Debt Negotiators made certain admissions and agreed to settle the dispute.

However, the parties still sparred over the size of the penalty to be handed down. 

ASIC's barrister Perry Herzfeld SC pushed for the $3.25 million amount, saying that revenue from the firm equalled many millions of dollars and that vulnerable people had been negatively affected by the deliberate, systemic scheme.

"The nature of the conduct is that it is apt to cause stress and embarrassment to vulnerable people," he told the court.

While a robust compliance system was now in place, this took a great deal of time to occur despite intervention by the Australian Financial Complaints Authority in 2019, Mr Herzfeld said.

"This is not a case of senior management becoming aware of the conduct, stamping down on it hard immediately, and the conduct stopping. In fact, the position seems rather to be the reverse."

The breaches were also encouraged by a bonus structure for customer service representatives, the barrister added.

In arguing for the $190,000 penalty, Mr Weinstock took a legal point that Debt Negotiators could not be fined for conduct after March 13, 2019 because of a law change on that date.

While Debt Negotiators had a revenue of several millions of dollars, most of this was paid off in dividends, leaving the company in a budget deficit, the barrister submitted.

This placed the firm in a precarious position if hit with a $3.25 million fine, the court heard.

"Whatever penalty is imposed, whether it's your figure or ASIC's figure … it's going to have an impact on profit, isn't it?" Justice Bromwich asked.

"Yes, of course, but that impact would be vastly different on the amount sought by ASIC from the amount sought by my client. Fatally different," Mr Weinstock replied.

ASIC had not proved that five of the six debtors had suffered any emotional loss, had failed to show Debt Negotiators financially benefited from the breaches, and had not produced evidence about the motivation of the firm's employees in misleading clients, the court heard.

Justice Bromwich has reserved his judgment.