RAMS Will Pay $29.6m Over Terminated Franchises. $7.8m of That Is Trail It Withheld at 25%

Two numbers came out of the Federal Court this week, and brokers should read them together. The first is $29,624,397.67 — the sum RAMS Financial Group has agreed to pay to settle a class action brought by 15 former franchisees. The second is $7,783,183.14 — the portion of that sum attributed to trail commission the lender withheld, at 25 per cent, after it terminated their agreements.

The second number is the one that matters to anyone writing loans under somebody else’s credit licence. It puts a court-tested dollar figure on a question most brokers never examine until they need the answer: what happens to the trail on loans you have already written when the entity above you decides your agreement is finished.

What the court actually did

Justice Michael Lee made orders in the Federal Court in Sydney on 18 September recording a proposed settlement deed in proceedings brought by former RAMS franchisees. The lead matter is Top Ryde Financial Services Pty Ltd v RAMS Financial Group Pty Ltd (NSD671/2024), filed in May 2024.

A class action cannot be resolved privately. As the Federal Court’s own Class Actions Practice Note (GPN-CA) puts it at paragraph 14.1: “A class action may not be settled or discontinued without the approval of the Court (see s 33V(1) of the Federal Court of Australia Act 1976 (Cth)).” The Adviser reports the matter is listed for a final approval hearing on 19 October. As at publication, that hearing has not yet taken place.

The itemised breakdown has been published by The Adviser, which reported it on 23 September; Lawyerly reported the $29.6 million headline figure on 22 September. According to The Adviser, the deed provides for:

• $7,783,183.14 (including GST) for 25 per cent trail commission withheld from the affected franchisees after their agreements were terminated
• $1,042,234.01 in interest
• $20,798,980.52 as a further payment

The 15 group members share the total. The Adviser also reports the court ordered RAMS to offer group members a buyout of their future trail commission entitlements within five business days of settlement-approval orders being made. The action was funded by Court House Capital.

The former franchisees alleged RAMS breached contractual and statutory duties of good faith by ending their franchise agreements without proper cause, and challenged the decision to withhold 25 per cent of their trail, arguing the lender’s regulatory review unfairly affected businesses that had complied with its requirements. RAMS has not admitted liability or wrongdoing as part of the proposed settlement. Nothing in the deed is a finding that the terminations were wrongful, and nothing here should be read as one.

A separate franchisee proceeding brought by Sech Finance and Daniel Lubarda was heard alongside the Top Ryde matter and remains before Justice Lee.

How a supervision problem upstream became a commercial problem downstream

To understand why the trail was withheld at all, you have to go back to what RAMS was dealing with as a licensee.

In ASIC v RAMS Financial Group Pty Ltd (Penalty) [2025] FCA 1304, delivered by Shariff J on 24 October 2025, the Federal Court ordered RAMS to pay a $20 million aggregate pecuniary penalty. RAMS admitted contraventions of the National Consumer Credit Protection Act 2009 across conduct between 3 June 2019 and 30 April 2023.

The judgment sets out the obligations at paragraph 24. A licensee must:

“(a) do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly; and (b) have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives; and (d) comply with the credit legislation; (e) take reasonable steps to ensure that its representatives comply with the credit legislation.”

That last limb — section 47(1)(e) — is the engine of everything that followed. It is also the limb that sits over every aggregator and every licensee that authorises credit representatives in this country.

The conduct was serious. ASIC’s media release (25-248MR) records failures including dealing with unlicensed referrers, deficient conflict-of-interest arrangements and inadequate supervision of representatives. The court considered instances in which franchise staff submitted false payslips from non-existent employers, or altered customer liabilities and expenses, to support loan approvals. Shariff J described RAMS as having “an immature risk culture, a deficient control environment” with “insufficient oversight of its non-standard methods of business.” ASIC Deputy Chair Sarah Court said “financial entities must adhere to their obligations under the law and consumers must be protected from lending practices which can expose them to harm.”

None of that is in dispute. RAMS admitted it.

The asymmetry brokers should notice

Here is the part worth sitting with. The same judgment records, at paragraph 31, that there were “a total of 73 RAMS Franchisees from time to time within the RAMS Franchise Network during the course of the Relevant Period.” At paragraph 140, it records that the 84 contraventions of section 31(1) occurred “through the conduct of nine representatives of RFG who had an ownership interest in, or were employed by, five RAMS Franchises.”

Five franchises. Seventy-three franchisees across the period. RAMS stopped accepting new lending through its franchise network in 2024, and ASIC records the network being wound down on 6 August 2024.

This is not an argument that the supervision was wrong. A licensee that finds falsified payslips in its files has a statutory obligation to act, and the remedy available to it under section 47(1)(e) is necessarily network-wide: tighter referrer accreditation, more file review, tougher authorisation standards. The obligation is owed in respect of all representatives, not only the ones who created the problem.

The observation is narrower and more useful. When a licensee tightens, the regulatory duty is discharged network-wide, but the commercial cost is distributed by contract — and the contract was drafted by the licensee. That is why the franchisees’ grievance went to the Federal Court as a contract and good-faith case rather than a regulatory one. ASIC’s jurisdiction ran to RAMS’ conduct as a licensee. It did not run to how RAMS treated the trail of the businesses it cut loose. That question was answered by the agreement.

Why this reaches brokers who have never seen a franchise agreement

Most Australian brokers are not franchisees. They write under an aggregator agreement, or as a credit representative authorised under someone else’s Australian Credit Licence, or under their own licence with an aggregation services agreement sitting alongside it.

The structures differ. The exposure rhymes. In every one of those arrangements, some other entity carries section 47(1)(e) in respect of you, and in every one of them the answer to “what happens to my trail if this ends” lives in a document rather than in the Credit Act. The RAMS franchisees were still paid 75 per cent of their trail after termination. The entire dispute — the one that took more than two years and produced a $29.6 million proposed settlement — was about the other 25 per cent.

Most brokers could not say, without opening a file, what their own percentage would be.

Five clauses worth finding this week

This is a reading exercise, not a legal project. Pull your aggregator, franchise or credit representative agreement and locate the following. If you cannot find them, that is itself the finding.

1. Termination triggers. Separate termination for breach from termination on notice. Is there a termination-for-convenience clause, and what notice period attaches to it? A clause that lets the other side exit without cause is not unusual — but it changes how you think about concentration risk in your book.
2. Trail after termination. Does trail continue, stop, or continue at a reduced rate? If reduced, by how much, and for how long? Knowing your number before you need it is the entire point of this exercise.
3. What “for cause” means. Many agreements treat trail differently depending on why the relationship ended. Find the definition, and read it against the conduct standards you are actually held to.
4. Book buyout mechanics. Is there a formula, an agreed multiple, a valuation process, or nothing at all? Note that the buyout offer in the RAMS matter was reported as a court-ordered element of the settlement, not a pre-existing contractual right. Do not assume one exists for you.
5. Dispute resolution. Where does a disagreement go first — internal escalation, mediation, an industry code process, or straight to court? For franchise agreements specifically, the ACCC states that under the Franchising Code of Conduct “parties must act in good faith in their business dealings with each other”; the current Code (F2024L01605) commenced on 1 April 2025, with some rules applying from 1 November 2025 — after the RAMS terminations.

Then do one more thing: work out what proportion of your trail income sits with a single counterparty. Diversification of lender panel is a conversation the industry has constantly. Diversification of the agreement your income depends on is one it almost never has.

What to watch next

Three things sit on the calendar. The final approval hearing, listed for 19 October according to The Adviser, will determine whether the deed becomes binding — a settlement recorded is not a settlement approved. The Sech Finance and Lubarda proceeding remains live before Justice Lee. And the RAMS loan book itself has moved on: Westpac completed the sale of the residential mortgage portfolio on 3 August 2026 to a consortium of Pepper Money, KKR and PIMCO, with Pepper Money servicing the loans. The portfolio was worth approximately $15.4 billion at completion, down from $21.4 billion when the binding agreement was signed in November 2025, as loans ran off through repayments. Westpac’s managing director for home lending, James Hutton, said the completion “further simplifies Westpac and reflects our ongoing focus on becoming a simpler, stronger bank delivering great outcomes for our customers.”

The takeaway

The RAMS matter will be remembered as a franchising dispute, and in a narrow sense that is what it is. But the mechanism that produced it is not specific to franchises. A licensee faced a supervision problem it was legally required to fix. It fixed it at the level of the network. The people underneath discovered that their claim on income they had already generated was governed by a clause rather than by their own conduct record.

Brokers spend a great deal of time on the quality of individual files and comparatively little on the quality of the agreement that determines what those files are worth to them in five years. The $7.78 million line in this deed is a reminder that the second question has a dollar value too — and that it tends to be asked at the worst possible moment.

Read the clause now, while nothing is happening.