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Record $18m fines for Consumer Law breaches

Adam Zuchetti
Adam Zuchetti
15 November 2018 2 minute readShare
Record, money, coins, growth

The sole director of a property spruiking business has been personally fined $6 million, and his company a further $12 million – the largest fines ever issued for breaches of Consumer Law.

Rick Otton, the sole director of We Buy Houses, was personally fined $6 million by the Federal Court for making false and misleading claims about the purchase of property, including that a house could be bought for $1. We Buy Houses was fined a further $12 million.

According to the ACCC, which prosecuted the case, both set a new record for the size of a financial penalty handed down for breaching Australian Consumer Law (ACL) for an individual and a company, respectively.

A spokesperson for the ACCC told My Business that the previous record penalty for an individual director was almost one-tenth of that handed to Mr Otton - a $660,000 fine handed down in May 2016. The previous record penalty for a company was $10 million, which were ordered against Coles, Ford and Telstra in separate proceedings.

The court also banned Mr Otton from managing companies in Australia for 10 years and permanently banned both him and We Buy Houses from future involvement in services or advice pertaining to property transactions or investment.

“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,” said ACCC chair Rod Sims.

“The record penalties imposed against both We Buy Houses and Mr Otton reflect their egregious conduct.”

Mr Sims added: “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.”

Both Mr Otton and his business were found to have breached the ACL in a verdict handed down by the court in August 2017, but the penalties have only just been issued.

The ACCC said that the court agreed We Buy Houses did not have a reasonable basis for promoting statements and strategies claiming that consumers could:

  • buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
  • create passive income streams through property and quit their jobs
  • build a property portfolio without their own money invested, new bank loans or any real estate experience, and
  • start making profits immediately and create or generate wealth.

It said the court had determined a failure on the part of We Buy Houses to inform consumers such strategies “could only realistically be successfully implemented by a consumer who already owned real estate or who was able to finance a bank loan”.

“We Buy Houses sold a lie to vulnerable consumers that home ownership could be achieved easily through strategies taught by Mr Otton,” ACCC deputy chair Delia Rickard said following the original 2017 judgement.

“Around 2,000 consumers spent around $3,000 per ticket to attend Mr Otton’s bootcamps, and approximately 700 consumers participated in the mentoring program at a cost of up to $26,000.

“Today’s judgement sends a strong message to ‘property spruikers’ that they must not make false or misleading representations about the success and profitability of their ‘wealth creation strategies’ to induce consumers to pay significant sums to learn about them.”

Record $18m fines for Consumer Law breaches
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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