Australian Loans Management has agreed franchisees can be released from their agreements and issued refunds following a failure by the franchisor to comply with the Franchising Code of Conduct.

The Australian Competition and Consumer Commission chairman, Graeme Samuel, said “Australian Loans Management (ALM) promoted and sold licence agreements for a finance broking business called Active Money (AM). ALM claimed these licence agreements were not franchising agreements. ALM also failed to comply with the Franchising Code of Conduct.”

A failure to comply with the mandatory industry code constitutes a breach of the Trade Practices Act 1974. The ACCC raised concerns that Australian Loans Management had failed to provide prospective franchisees with a copy of the Code, a disclosure document and a copy of the franchise agreement 14 days before entering the agreement or making a non-refundable payment, had neglected to provide franchisees with a seven day cooling off period, and had not obtained statements from the franchisees prior to signing their agreement that they had been given independent legal or business advice or had been told by ALM to obtain the advice but chosen not to seek it.

Both Australian Loans Management and Active Money have agreed to implement measures to ensure future compliance with the Code and ALM has advised the ACCC that Active Money will become the franchisor.

Graeme Samuel said “The Franchising Code provides important safeguards to help ensure prospective franchisees are fully informed about what they are buying. The disclosure requirements are a key feature of the Code and failure to provide a disclosure document is unacceptable and unlawful conduct.

“Franchisors cannot circumvent the Code by simply claiming that the agreement is not a franchise agreement.”

A copy of the court enforceable undertaking will be available on the ACCCÕs website at www.accc.gov.au