Yahoo Finance Property spruiker fined record $18 million
The Federal Court has slapped We Buy Houses and its sole director with a staggering $18 million penalty, after it was found to have “peddled false hope” and taken advantage of Australians desperate to enter the property market.
We Buy Houses and its sole director Rick Otton received respective $12 million and $6 million penalties; the highest-ever penalties imposed for breaches of the Australian Consumer Law by a corporation and an individual.
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“We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future,” the chair of the Australian Competition and Consumer Commission, Rod Sims said today.
“The record penalties imposed against both We Buy Houses and Mr Otton reflect their egregious conduct.”
“They have also effectively been permanently banned from any further involvement in real estate in order to protect consumers.”
Here’s the background:
Through its mentoring programs, We Buy Houses told clients they could buy a house for $1 without needing a loan or deposit and without using any of their own money.
The property spruiker also told people they could start making profits from property immediately and could build a property portfolio without investing any of their own money or borrowing.
The company generated most of its $20 million revenue by conducting training programs between 2011 and 2014.
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The Federal Court found these claims to be false or misleading in August 207 and in breach of consumer law.
“The judgement signals the Court’s condemnation of false and misleading property spruiking and get rich quick schemes,” Sims said.
Otton and We Buy Houses also offered free seminars and paid ‘boot camps’, which offered little value. Additionally, the Federal Court found Otton’s claims that he had successfully implemented the strategies he taught to be false or misleading. A book, authored by Otton and featuring testimonials from ‘students’, received the same verdict.
“In her judgement on liability, Justice Gleeson said the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time,” Sims commented.
“This outcome also reflects a recent trend of higher penalties for Australian Consumer Law breaches. We can expect this to continue following recent law changes to increase maximum financial penalties under consumer law.”
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Years of alarms
Victoria’s Consumer Action Law Centre raised the alarm on the scheme in 2012, warning consumers to be on the look-out for programs targeting their desperation to buy or sell.
“These transactions can be risky and some consumers may not be protected by consumer credit laws,” Carolyn Bond, co-chief executive of Victoria’s Consumer Action Law Centre told The Age.
“The houses may be overpriced, repayments high and, unlike a traditional mortgage, the buyer’s name is not put on the title of the property until they have purchased the house outright.”
Responding at the time, Otton said people were desperate for alternatives due to tougher lending requirements following the GFC.
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“It’s like Harvey Norman with his TV sets. Let’s make it easy for someone to buy; it makes it easy for me to sell the house,” said Mr Otton, who has trained nearly 10,000 students through his seminar system.”
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