IMAGINE being trapped in a loan that a judge said had a legal interest rate of 120 per cent a year.
A loan with "numerous" and "substantial" default fees and "enforcement costs" that multipled until a sheriff was ordered to seize the property that was security for the loan, and change the locks.
Or a commercial loan that started at $500,000 in August 2015 and metastasized to $7.3 million in a little more than two years.
The runaway loan was initially listed by a Hunter-based financier as having an interest rate of 24 per cent. Soon after a default rate of 48 per cent applied, with interest payments compounding daily.
A Newcastle Herald investigation can reveal the private dealings of a Newcastle-based loan shark company that was voluntarily placed in liquidation last year.
It is owned by prominent Hunter real estate industry figure Gavan Reynolds, a flamboyant property auctioneer and race-car driver.
The 39-year-old established Oakland York, which offered short-term, high-interest business loans, in October 2005.
While the interest rates are eye-wateringly high, there is no suggestion of any illegal activity by Mr Reynolds or his companies.
The Berry Park father-of-two competes in the national Toyota 86 Racing Series and also works as the director of real estate for Yogurtland Australia, the frozen yoghurt chain brought to Australia in 2013 by Mr Reynolds' long-term friend and business associate, Newcastle accountant Paul Siderovski.
Oakland York v SG Precision Coatings, a civil matter in the Victorian County Court over a high-interest loan dispute, paints a very public picture of Mr Reynolds' finance company's private dealings.
On a Wednesday morning in June 2017, the owner of SG Precision Coatings was facing a lawyer for Oakland York, a judge and an eviction order that would see a bailiff seize his Port Melbourne business premises.
The court heard the borrower was being charged an interest rate of 120 per cent a year by Oakland York. That is 80 times the Reserve Bank interest rate.
Judge Ted Woodward described the figure as "troubling" and said there was potentially a "wide range" of relief available to the borrower under Australian consumer law.
He also questioned Oakland York's use of "numerous and substantial default fees" and "enforcement costs", describing the basis for the charges as "far from clear".
"In my view, these matters, together with the broader question of whether the conduct by or on behalf of the plaintiff [Oakland York] in promoting the loan facility to the defendants and the terms of the facility itself - including the purported establishment and default charges, the 120 per cent per annum interest rate and the plaintiff's entitlement to charge compound interest - all warrant further investigation," Judge Woodward said.
When the court heard that Oakland York would settle the case at 48 per cent interest, the judge dismissed the offer as an "insufficient answer".
He said there was "real doubt" about the amount being claimed and detailed a chain of emails in May 2016 from the borrower trying to get an "accurate payout figure".
An email from Oakland York appeared to show what the judge described as a "discrepancy" in the amount being claimed, $384,458 versus $397,368.
After the judge said he would set aside a default judgment and require the claim to be determined by a trial, the case settled out of court.
Mr Reynolds said in seven years Oakland York had provided 70 businesses with short-term loans and this was the only time a default situation was ruled on by a court.
He said the matter was settled at a rate significantly less than the "ordinary rate" of 48 per cent.
"Oakland York operated in the non-bank lending sector, a sector which plays a significant role in commercial life in Australia," he said.
Oakland York is one of many private lenders that focus on consumers struggling to get finance from mainstream institutions, or those who need cash fast.
It's estimated non-bank lenders account for at least six per cent of the financial system and the burgeoning shadow finance sector is shaping up as the next battleground for regulators.
While still in its infancy, the unregulated industry is experiencing a leap in growth that is expected to continue as the squeeze on regulated banks intensifies following the banking royal commission.
Lured by massive returns for short-term loans, there appears no shortage of providers of capital.
The Council of Financial Regulators observed in December that as banks pulled back, lending by non-banks had picked up significantly.
The council vowed to more closely scrutinise the sector.
Lenders that provide commercial loans, like Oakland York, are not required to have a credit licence and don't have to be members of the Australian Financial Complaints Authority.
According to ASIC, Oakland York ceased trading in August last year when it voluntarily appointed liquidator Sule Arnautovic, of Jirsch Sutherland.
A liquidator's report obtained by the Herald revealed the company has two unsecured creditors, SiDCOR Chartered Accountants - founded by Mr Siderovski - listed as owed $5500, and a Newcastle law firm owed $2000. Mr Reynolds is also listed as owed $15,000 in holiday pay.
Before its demise, Oakland York alleged it transferred the only asset it had, a loan, to another one of Mr Reynolds' companies, Blue Capital Investments.
Mr Reynolds declined to answer questions about how the loan allegedly blew out from $500,000 to $7.3 million.
He said the liquidation was part of a "restructure recommended by external advisors".
"Oakland York and Blue Capital have satisfied all applicable laws and regulations," he said. "Customers of Oakland York and Blue Capital are required to seek independent legal and financial advice prior to entering into the agreement and in all cases do so."
Mr Arnautovic said it appeared Oakland York was being liquidated to "get rid of any risk that might come down the track".
"I'm not aware of anyone with a claim against the company at the moment," he said. "Sometimes people do liquidate for what they don't know is out there."
A week before Oakland York was placed in liquidation, Mr Reynolds resigned as director, a position he has held since the company's inception in 2005.
He was replaced by Tane Necakovski, of Elermore Vale, who is the father of Mr Siderovski's wife, Valentina. There is no suggestion Mr Necakovski had any involvement in the company's practices before his appointment.
Seven days later Mr Necakovski, who did not return the Herald's call, voluntarily placed Oakland York in liquidation.
The 69-year-old approved remuneration for the liquidator up to $25,000. Oakland York's unsecured creditors were listed as owed $7500.
Mr Arnautovic said the liquidation would be finalised within 30 days.
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