Rick Otton has been fined $6 million and his company We Buy Houses fined $12 million for misrepresentation. Both are record amounts.
We Buy Houses Pty Ltd, of which Rick Otton is the sole director, has been in operation for some years. Mr Otton would give free seminars, and conduct paid “boot camps” to teach people about how to invest in real estate.
Among the promises made were claims that people could:
- Buy a house for $1, without a deposit, bank loan or real estate experience
- Create passive income streams through property investments, and quit their jobs
- Build a property portfolio without investing their own money, and without bank loans or real estate experience
- Start making profits immediately and create or generate wealth
In March of 2015, the Australian Competition & Consumer Commission (ACCC) instituted proceedings against Otton and his company following a coordinated investigation with New South Wales Fair Trading.
In August 2017 the Federal Court found the above claims to be false or misleading, breaching the Australian Consumer Law.
At the time, Justice Gleeson said the free seminars were a waste of time, and the boot camps were an expensive waste of time.
Between 2011 and 2014, We Buy Houses brought in some $20 million with its training programs.
In addition to the fine, the Federal Court has also banned Mr Otten from managing corporations in Australia for 10 years, and permanently banned him from any further involvement with supplying or promoting services or advice pertaining to real estate transactions or investment.
In a statement the chairman of ACCC, Rod Sims, warned against preying on consumers.
“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 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.
“These record penalties demonstrate the determination of the ACCC to take strong and effective enforcement action against businesses and individuals who prey on consumers using the false hope of creating financial success. The judgment signals the Court’s condemnation of false and misleading property spruiking and get rich quick schemes.
“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.”
Industry professionals had a few things to say.
Peter Koulizos, chairman of the Property Investment Professionals of Australia, said he was happy Mr Otton and his company were “used as an example of what happens when you don’t do the right thing by your clients and consumers”.
“It’s one thing to come in with a diploma or advanced diploma or a degree, but then you need to continue to maintain your qualifications and skills, and then of course we need penalties to back up people that do the wrong thing.
“At the moment, we just have a code of conduct which we hope everybody abides by, but what we need is actual legislation which has some serious ramifications behind it if you do the wrong thing.”
CEO of the Real Estate Institute of NSW, Tim McKibben, echoed that sentiment.
“When you look at a huge fine for doing something wrong, in my view, that is, in part at least, a failure of government not to have had the right regulatory framework and enforcement protocols to prevent that problem.
“You don’t want a problem; you want to address issues before they become problems, so unless there is some licensing regime brought in, and unless there is some minimum education standards to qualify for a licence, then we are going to be fining people and dealing with problems, which is a reactive position, rather than taking a proactive position where we will address problems before they become such as to deliver poor consumer outcomes.”
The previous record fines were $660,000 for an individual and $10 million for a company.
Propertynerd.com.au, 15 November 2018