ASIC action against debt vulture preying on people in financial hardship welcomed
Consumer Action Law Centre has welcomed news that corporate watchdog the Australian Securities and Investments Commission (ASIC) is taking legal action against Bakken Holdings Pty Ltd, also known as Solve My Debt Now.
Solve My Debt Now claims to offer help to people in financial hardship by negotiating with creditors to reduce their debts, but ASIC alleges that their services often leave their customers worse off, as Solve My Debt Now ‘solves’ very few debt issues, achieving a reduction in debts greater than the fees charged for just a paltry 5.3% of customers.
“ASIC’s allegations against Solve My Debt Now suggest that the company uses a classic debt vulture model, preying on vulnerable people who desperately need help with their finances, which is egregious especially during today’s cost-of-living crisis,” said Consumer Action CEO Stephanie Tonkin.
“That’s why we strongly support ASIC’s decision to sue Solve My Debt Now. As the facts suggest, it is rare, if ever, that engaging a debt vulture leaves people better off, and the allegations in this case are particularly shocking,” she said.
Companies like Solve My Debt Now are called ‘debt vultures’ because the business model aims to profit from people already in financial distress – people who cannot afford to fall further into hardship.
“Debt consolidation or credit repair services are inherently problematic because their goal is to get money out of a person already struggling to pay their existing debts,” said Ms Tonkin.
“We strongly urge anyone considering engaging a so-called ‘credit repair’ or ‘debt relief’ company to call the free National Debt Helpline first on 1800 007 007 for independent advice from a qualified financial counsellor. We hold real concerns about any company that asks clients to pay an upfront fee to negotiate debts on their behalf,” she said.
In most cases, a financial counsellor can provide all the services a debt vulture can, for free. Some debt management firms are now licensed and are subject to some obligations overseen by ASIC, but many companies in the industry still do more harm than good.
“Solve My Debt Now does not have a licence, and if these allegations are proven, my hope is that they never will,” said Ms Tonkin.
ENDS
Media Contact: Mark Pearce Tel :0413 299 567 E:Mark@consumeraction.org.au
