Consumer Action has welcomed the news that Federal Treasurer Josh Frydenberg MP has made new regulations requiring debt management firms – also known as ‘debt vultures’ – to be licenced to provide services such as debt negotiation and credit repair.
“For far too long, debt vultures have had free rein to do their worst. These licensing reforms are a great first step to improve access to justice and finally close the regulatory loophole these firms exploit,” said Gerard Brody, CEO Consumer Action Law Centre.
Under changes made on Friday 30 April, all firms spruiking debt management or credit repair services will need to apply for an Australian Credit Licence by 1 July 2021. This means firms will need to act ‘efficiently, honestly and fairly,’ meet ‘fit and proper person’ requirements, and offer customers free dispute resolution through the Australian Financial Complaints Authority.
“It’s critical that our corporate cop the Australian Securities Investment Commission (ASIC) weeds out the predatory debt vultures from this regime – the bar to get a licence must be high,” said Mr Brody.
“Our Centre has helped many people who sought help from a debt management firm with their debt or credit report problems, only to end up in an even worse position from the bad advice or eye-watering fees.”
While consumer groups strongly supported the Federal Government’s licensing requirements, further reforms are needed to cover other debts like energy bills and introduce tailored conduct obligations that already exist in the United Kingdom.
“To complete the job, the Government should also introduce further reforms such as a ‘best interests’ duty and ban on upfront fees – licensing alone won’t prevent the harm,” said Mr Brody.
Media contact: Mark Pearce, Media and Communications Adviser, 0413 299 567, firstname.lastname@example.org