Wizard compensates mobile lending manager for misleading conduct

Wizard Home Loans Pty Ltd will compensate a candidate for a Mobile Lending Manager position after admitting that it engaged in misleading conduct, following Australian Competition and Consumer Commission action.

The Federal Court has ordered Wizard, by consent, to compensate Mr David Cassar who responded to an advertisement and accepted the position.

Wizard has admitted that it breached section 52 of the Trade Practices Act 1974 by making representations to Mr Cassar, in an interview, about a level of commission that a good performing mobile lending manager may earn when there were not reasonable grounds to do so.

Following proceedings taken by the ACCC, including a representative action seeking compensation on behalf of Mr Cassar, Wizard has reviewed its recruitment practices. The court proceeding settlement provides for:

• a declaration that Wizard misled Mr Cassar in an interview for a position as a mobile lending manager with Wizard
• a compensation order for Wizard to pay a confidential sum to Mr Cassar representing lost earning opportunity, and
• costs.

In addition Wizard has agreed to give a section 87B undertaking to the ACCC that it will not, for a three year period, make representations to any mobile lending manager candidate about the annual commission that person may earn unless there are reasonable grounds, after considering:

• the average annual commissions earned by mobile lending managers at that time
• the average annual commissions earned by mobile lending managers engaged in the geographical area where that mobile lending manager will be or is engaged
• the level of residential sales and sale prices in the geographical area where that mobile lending manager will be or is engaged, and
• the number of mobile lending managers engaged at that time and to be engaged during the next 12 months in the same geographical area.

As part of this undertaking, Wizard will implement and maintain a trade practices compliance program for a period of three years designed to make Wizard personnel aware of their responsibilities and obligations with respect to section 52 of the Act in connection with the recruitment of mobile lending managers.

"Not only has the ACCC successfully obtained compensation for an individual who suffered significant financial loss as a result of Wizard's unlawful conduct, in addition the resolution is one which provides for an outcome that involves Wizard reviewing its practices and procedures so as to address the concerns raised by the ACCC", ACCC Chairman, Mr Graeme Samuel, said.

"Companies should exercise real care when discussing potential remuneration given the importance that element may have to persons in terms of career changes and choices.

"Consumers generally need to be aware that extreme care should be taken to understand and verify the basis of any representations made about the potential to earn future remuneration which depends upon a commission or bonus scheme, especially in circumstances where no base salary is on offer".

Background

On 22 September 2004 the ACCC instituted proceedings in the Federal Court, Melbourne, against Wizard Home Loans Pty Ltd, alleging breaches of the misleading and deceptive conduct provisions of the Trade Practices Act.

The ACCC alleged Wizard breached section 52 of the Act by placing advertisements for Mobile Lending Managers in newspapers in New South Wales, Victoria and Queensland which were liable to mislead people into believing the positions were employed positions when they were self-employment opportunities.

The ACCC further alleged that annual remuneration figures provided to the managers were likely to mislead.

The ACCC also took representative action seeking compensation on behalf of an individual who responded to an advertisement and accepted one of the positions.

Whilst in resolving this matter the ACCC has not pursued all its claims against Wizard, the ACCC is satisfied that the combined effect of the court outcome which provided for a declaration and a compensation order, together with a section 87B undertaking by Wizard and other changes made by Wizard to its recruitment practices, provide measures for enhanced future compliance by Wizard. In particular, the advertisement for the mobile lending managers' position now expressly states that the remuneration on offer is by commission only, which addresses one of the ACCC's key concerns.

This is the second occasion Wizard has been involved in conduct in breach of the Trade Practices Act. In October 2002 the Federal Court found that Wizard Mortgage Corporation Limited had engaged in misleading or deceptive conduct in respect of a television advertisement for its home loan products and the court made an order to restrain Wizard from publishing misleading advertisements for 18 months.