Australian Court Orders Sunshine Loans to Pay $3.8 Million Over Illegal Fees

Key Takeaways

• $3.8 Million Penalty: Australia's Federal Court ordered Sunshine Loans to pay approximately $3.8 million (AUD 5.5 million) in civil penalties for charging fees prohibited under the National Credit Code.
• Thousands of Illegal Charges: The lender included a prohibited $24 (AUD 35) amendment fee in more than 670,000 credit contracts and collected almost $207,000 (AUD 300,000) from consumers.
• Deliberate Contraventions: Justice Derrington found the misconduct serious and deliberate, emphasizing the need for substantial deterrence where financially vulnerable consumers are exploited.
• Compliance Culture Criticized: The Court found that Sunshine Loans' unmeritorious legal arguments prolonged the proceedings and indicated, in part, a poor culture of compliance.
• Civil Penalty Restrictions: Civil penalties applied only to contraventions occurring from March 13, 2019, during which Sunshine Loans collected approximately $78,000 (AUD 113,000) in prohibited fees.

Deep Dive

The Federal Court of Australia has ordered Sunshine Loans to pay approximately $3.8 million (AUD 5.5 million) in civil penalties for charging thousands of consumers illegal fees, following a four-year legal battle that included unsuccessful appeals to the Full Federal Court and High Court.

The penalty, announced Friday by the Australian Securities and Investments Commission (ASIC), follows an April 2024 judgment finding that Sunshine Loans breached the National Credit Code by charging borrowers a $24 (AUD 35) fee to reschedule loan repayments, even when they were not in default.

Between July 2016 and November 2020, Sunshine Loans entered into more than 670,000 small amount credit contracts containing the prohibited fee. The company charged consumers the fee more than 12,000 times and received payment on more than 8,000 occasions, collecting almost $207,000 (AUD 300,000).

Justice Derrington found the contraventions were serious and deliberate. He also criticized Sunshine Loans' conduct throughout the proceedings, finding that many of its legal arguments lacked merit and reflected, in part, a poor culture of compliance. The Court ordered the lender to pay ASIC's legal costs in addition to the penalty.

ASIC Commissioner Alan Kirkland said the unlawful charges had placed additional financial pressure on borrowers who were often already struggling to meet essential expenses.

"People who rely on small loans are often already under financial pressure, using them to meet essential or unexpected expenses. Unlawful fees only add to that pressure," Kirkland said.

According to ASIC, customers had sought loans to cover funeral expenses, vehicle registration, school fees, medical procedures and Christmas presents. Many had overdrawn bank accounts when they took out the loans.

Under the National Credit Code, providers of small amount credit contracts are restricted to specified fees and charges, including establishment fees, monthly fees, default fees and certain government charges. The amendment fee imposed by Sunshine Loans was not permitted.

Sunshine Loans was one of Australia's largest small amount credit providers during the period of misconduct. The company stopped charging amendment and rescheduling fees in November 2020, shortly after ASIC intervened, without admitting liability.

Years of Litigation and Unsuccessful Appeals

ASIC commenced proceedings against Sunshine Loans in June 2022 after conducting a targeted review of the small amount credit market during the COVID-19 pandemic. In April 2024, Justice Derrington found that Sunshine Loans had contravened the National Credit Code by imposing, charging and accepting the prohibited fees.

A penalty hearing was initially scheduled for July 2024, but Justice Derrington recused himself from determining the penalty. ASIC appealed the recusal decision, while Sunshine Loans separately appealed the finding of liability.

The Full Federal Court ruled in ASIC's favour on both appeals in March 2025. Sunshine Loans subsequently challenged the recusal ruling in the High Court, which unanimously dismissed its appeal in March 2026. The matter then returned to Justice Derrington for determination of the penalty.

In assessing the appropriate sanction, the judge took account of Sunshine Loans' approach to the proceedings, describing many of its arguments as "devoid of merit to the point of being potentially disingenuous."

The Court found that the company's arguments had prolonged the litigation and substantially increased its costs. Justice Derrington considered the conduct indicative, in part, of a poor compliance culture that warranted consideration in determining the penalty.

"Sunshine Loans fought this case at every turn, including through highly technical legal arguments and appeals," Kirkland said.

"The Court indicated that Sunshine Loans' many unmeritorious arguments prolonged the litigation and significantly increased the costs associated with it."

Justice Derrington also emphasized the importance of substantial general deterrence where conduct has the purpose or effect of exploiting financially vulnerable consumers or worsening their hardship.

Penalty Exceeds Unlawful Fees Collected

The approximately $3.8 million (AUD 5.5 million) penalty is substantially greater than the amount Sunshine Loans received through the prohibited charges. Although ASIC said the unlawful fees had been charged for more than seven years, civil penalties were available only for contraventions occurring from March 13, 2019, when the relevant provisions of the National Credit Code became subject to civil penalties.

Sunshine Loans received approximately $78,000 (AUD 113,000) from the prohibited fees during that period, according to ASIC. The Court's penalty was therefore nearly 49 times the amount collected during the period covered by the civil penalty provisions.

In determining the penalty, Justice Derrington considered the seriousness and deliberate nature of the contraventions, the need for general deterrence and the company's conduct during the proceedings. Sunshine Loans remains a significant participant in Australia's consumer credit market and currently offers loans of up to approximately $2,415 (AUD 3,500), according to ASIC.

The regulator has identified protecting financially vulnerable consumers from serious harm as an enduring enforcement priority.

"These consumers should not have been charged fees prohibited by law, and lenders who disregard these protections should expect ASIC to take action," Kirkland said.

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