Regulatory update

ASIC sues Oak Capital alleging unconscionable conduct to avoid the National Credit Code

ASIC has sued Oak Capital, alleging two non-bank lenders engaged in unconscionable conduct by structuring home-secured loans to avoid the National Credit Code.

6 November 2024

Updated October 2026 to reflect current law.

The Australian Securities and Investments Commission (ASIC) has sued Oak Capital Mortgage Fund Ltd and Oak Capital Wholesale Fund Pty Ltd (together, Oak Capital). They are two non-bank lenders in the Oak Capital group.

ASIC alleges Oak Capital engaged in unconscionable conduct by structuring loans to avoid the National Credit Code. These are allegations only. It is up to the Federal Court to decide whether they are proven.

Update (October 2026): The case has not yet been decided. On 22 May 2026, both Oak Capital companies were placed into liquidation. On 30 July 2026, the Federal Court gave ASIC permission to continue the case against the companies in liquidation and listed it for hearing on 8 February 2027. These updates are set out in ASIC’s media release.

What does ASIC allege against Oak Capital?

In its concise statement filed in the Federal Court of Australia, ASIC alleges that:

• Oak Capital engaged in unconscionable conduct, in breach of section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). It did this by setting up and keeping systems designed to avoid regulation under the National Credit Code (NCC).
• Between March 2019 and October 2023, Oak Capital made up to 47 loans totalling more than $37 million. Each was secured by residential property. ASIC says each loan should, or likely should, have been made under the NCC, or should not have been made at all.

ASIC says that as a result:

• borrowers missed out on the protections of the National Consumer Credit Protection Act 2009 (Cth), the NCC and other consumer protection laws
• Oak Capital avoided proper accountability and gained more power over borrowers, especially when loans went into default
• Oak Capital charged more than $3.3 million in interest and more than $2 million in fees, and
• some borrowers who repaid their loans ended up worse off, while others who could not repay lost everything.

What is unconscionable conduct?

Unconscionable conduct is behaviour in business that goes against good conscience. It is more than just being unfair or driving a hard bargain. Section 12CB of the ASIC Act bans it in connection with financial services.

Why does the National Credit Code matter?

The NCC is in Schedule 1 to the National Consumer Credit Protection Act 2009. It mainly protects individuals who borrow for personal, household or domestic purposes, or to buy or improve residential investment property. It generally does not apply to loans made to companies.

When the NCC and the wider Credit Act apply, borrowers have important rights. These include:

• responsible lending, which means the lender must check the loan is not unsuitable for you
• the right to ask for a hardship variation if you cannot keep up with repayments
• protection from excessive fees and interest, and
• rules about enforcement, such as notice before the lender can take your property.

ASIC alleges Oak Capital used company borrowers to keep its loans outside these rules.

How did Oak Capital structure its loans?

According to ASIC, the loans made between March 2019 and October 2023 followed a similar pattern:

• A company was named as the borrower.
• One or more individuals, usually the company’s director or the owner of the property, were named as guarantors. This happened even where the company had no real interest in the deal, was not trading, had no assets, or was set up only days before the loan.
• The average loan was about $790,000.
• The loans were short term, usually around 12 months and never more than 24 months.
• Interest rates were high, averaging 11.60% at the lower rate and 23.22% at the higher rate.
• Fees ranged from 2.2% to 50.1% of the amount borrowed.
• The loans were interest only. Many had interest prepaid or added to the loan, so no regular repayments were needed. The full amount was due at the end of the term.
• The loans were secured over real property, usually owned by the guarantor.
• Brokers referred and arranged the loans. Oak Capital rarely dealt directly with applicants.

What did ASIC say about the Oak Capital case?

ASIC Deputy Chair Sarah Court said:

“As a result of loans being treated as unregulated, we allege Oak Capital deprived its clients of important consumer protections, including responsible lending obligations, the right to make a hardship application and protection from being charged excessive fees and interest.

These protections are critical in the current financial climate where borrowers are more likely to be at risk of serious financial hardship. ASIC will continue to take action where we consider business practices are designed to avoid consumer credit protections.”

What orders is ASIC seeking?

In its concise statement, ASIC asks the court to make:

• declarations that the law was broken
• injunctions
• orders that certain contract terms are void
• civil penalties
• publicity orders, and
• other related orders.

What can lenders learn from the Oak Capital case?

The court has not yet decided the case. Even so, there are some clear lessons for lenders:

1. Substance over form. Structuring loans to avoid regulation can harm consumers and lead to legal action. Make sure your loan documents reflect what the transaction really is.
2. Follow consumer protection laws. ASIC is continuing to crack down on predatory lending. If a loan is really for an individual’s personal or residential investment purposes, using a company borrower to sidestep the NCC can be challenged, as ASIC alleges here.
3. Manage your risk. Assess whether borrowers can repay. Avoid practices that are likely to lead to defaults and the loss of people’s homes. These can damage your reputation as well as your finances.
4. Watch your brokers. Where loans come through brokers, check how applications are being structured and why.

Frequently asked questions

This article is general information only and is not legal advice. It reflects the law and information available at the date of publication. Please contact us for advice about your circumstances.

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