The 'bookup' system of credit in Aboriginal communities has been ruled a valid practice by the High Court.

The Australian Securities and Investments Commission (ASIC) had asked the High Court to find the practice unconscionable in a case against the owner of Nobby's Mintabie General Store in far north South Australia.

Key points: 'Book-up' is an informal type of credit used in many remote Aboriginal communities

'Book-up' is an informal type of credit used in many remote Aboriginal communities The Federal Court previously found the owner of a Mintabie store engaged in unconscionable and unlicensed conduct

The Federal Court previously found the owner of a Mintabie store engaged in unconscionable and unlicensed conduct But the High Court has ruled 'book-up' is a valid means of providing credit to Aboriginal people

Store owner Lindsay Gordon Kobelt ran the system for those people living in the surrounding Anangu Pitjantjatjara Yankunytjatjara (APY) Lands, which allowed them to buy goods on the spot and pay later by providing their account information.

Under the system, he held their debit cards and PIN, withdrawing the money as it was paid in from wages and Centrelink.

But the bulk of Mr Kobelt's business was second-hand car sales.

'Book-up' in the store was interest free, but the second-hand car sales attracted a steep credit charge.

The Australian Securities and Investment Commission (ASIC) took Mr Kobelt to court saying he had engaged in unconscionable conduct by running the scheme.

The corporate watchdog also claimed breaches of the national consumer credit protection law when he withdrew just under one million dollars from the accounts of 85 people who had bought second hand cars on 'book-up' between July 2010 and November 2012.

ASIC said Mr Kobelt failed to keep good records of what customers owed him and made deductions well in excess of what people had spent.

Debate over whether local people benefit from system

The Federal Court found him guilty in 2017 of unconscionable and unlicensed conduct, indifferent and defiant to his obligations under the National Consumer Credit Protection Act.

Mr Kobelt was fined $100,000 for the breaches of the ASIC laws and $67,500 for more than 50 breaches of the credit protection law.

The case against him did not suggest dishonest record keeping or that he had exerted any pressure.

It found there was evidence local people found the system useful because they were not financially literate and many could not read or add up.

An appeal by the Full Bench of the Federal Court threw out some of the charges relating to unconscionable conduct, and findings that Mr Kobelt had engaged in predation and exploitation, although it upheld the breaches of the National Consumer Credit Protection Act.

The Full Bench found the 'book-up' system had been based on local cultural norms and practices in the APY Lands and that excused otherwise unconscionable conduct.

Three of the judges in the High Court did not agree.

Justice James Edelman said the system would not be accepted in mainstream Australia.

"It is made less acceptable because it was the only form of credit offered and thus accepted in remote communities of highly vulnerable person in need of credit," he said.

But Chief Justice Susan Kiefel and Justice Virginia Bell said 'book-up' had a long history in Indigenous communities.

"The basic elements of Mr Kobelt's 'book-up' system were understood by Mr Kobelt's Anangu customers, and those who chose to enter into 'book-up' credit contracts with him appear to have done so beacuse it enabled them to purchase goods which they valued and which otherwise they may not have been able to acquire.

"No feature of Mr Kobelt's conduct … took advantage of the customers' lack of education and financial acumen."

The breaches of the national consumer credit protection laws were not tested in the High Court.