A majority of the High Court has dismissed an appeal from the Full Court of the Federal Court of Australia, rejecting the proposition that the respondent’s provision of “book-up” credit to a remote Indigenous community was unconscionable conduct in connection with financial services pursuant to s12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act‘).

The “book-up” credit system

The respondent, Mr Kobelt, operated a general store in Mintabie, South Australia, called “Nobby’s Mintabie General Store”. The store sold second-hand cars, food, groceries and fuel. From 2008 onwards, Mr Kobelt supplied a form of credit to customers who were predominantly Indigenous Aṉangu people, most of whom lived in two remote communities, Mimili and Indulkana, within the Aṉangu Pitjantjatjara Yankunytjatjara Lands (‘APY Lands’). The customers were poor and had low levels of literacy and numeracy.

The credit system was called a “book-up” system. Payment for goods was deferred in whole or in part, subject to the customer supplying Mr Kobelt with the keycard and the PIN linked to the bank account into which the customer’s wages or Centrelink payments were credited. Very few transactions were documented carefully or at all. Mr Kobelt had no way of knowing what the balance of the customer’s account was. On the days when the customer had told him moneys were coming in, he would withdraw money in increments  until there were no funds left. He usually retained possession of the keycard until the debt was repaid. However, if the customer left APY lands, they were temporarily allowed to take their keycard on the condition that they would return it when they returned to APY lands. Most of the “book-up” credit was supplied in relation to the purchase of second-hand cars. Because the balance of their accounts was immediately removed when it came into the account, the customers could not buy groceries, but Mr Kobelt would let customers use a portion of what he had withdrawn during that particular pay period (up to 50%) to purchase groceries. Customers were therefore tied to using his store or other stores in Mintabie.  Continue reading →