ACCC action stops pyramid scheme in home loan industry

10 July 2002

The Australian Competition and Consumer Commission has successfully obtained final orders in the Federal Court restraining Guardian Finance and Insurance Consultants Pty Ltd and its sole director, Mr Peter Martin James (also known as Peter St James) from promoting Guardian’s Reducible Home Loans Introducers program and Rate Reward program to consumers.

In proceedings instituted in the Federal Court of Australia in 2001, the ACCC alleged the Guardian Reducible Home Loan Introducers program and Rate Reward program constituted an illegal referral and pyramid selling scheme and their promotion by Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James contravened provisions of the Trade Practices Act 1974.

The ACCC alleged Guardian Finance and Insurance Consultants Pty Ltd’s promotion of the scheme induced or attempted to induce consumers to enter into home loans through Guardian Finance and Insurance Consultants Pty Ltd and participate in the Guardian Reducible Home Loan Introducers program and Rate Reward program by representations that participating consumers would receive:

  • a 0.1% reduction in their interest rate for each customer they successfully referred to Guardian Finance and Insurance Consultants Pty Ltd

  • various benefits from Guardian Finance and Insurance Consultants for each customer successfully referred thereafter.

In June 2002, Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James consented to orders in which the Federal Court of Australia: -

  • declared that Guardian Finance and Insurance Consultants Pty Ltd had breached sections 61 and 57 of the Trade Practices Act in promoting its Guardian Reducible Home Loan Introducers program and Rate Reward program

  • declared that Mr Peter Martin James was knowingly concerned in the contravening conduct

  • granted injunctions preventing Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James engaging in future contraventions

  • ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to implement a trade practices compliance program

  • ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to refund application fees paid by participants in the illegal scheme

  • ordered Guardian Finance and Insurance Consultants Pty Ltd and Mr Peter Martin James to contribute to the ACCC’s legal costs.

"This outcome provides protection for consumers who may have been about to enter into one of the largest financial transactions of their lives", Acting ACCC Chairman, Mr Ross Jones, said today. "Pyramid schemes prey on people's desire to 'get rich quick' but usually only the promoters, or those at the very top of the 'pyramid', benefit, not the sometimes thousands who join with the expectation of rich rewards. In a scheme involving such a large financial transaction the ACCC acted to ensure consumers were protected".

Release number: 
MR 169/02
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