All Australians looking to get their finances back on track should be able to trust the financial or debt advice they receive. Sadly, this trust has been broken by dodgy debt advisers and other poorly regulated fringe lenders who prey on the financially vulnerable.
In its submission to a Senate Inquiry into finance products targeted as Australians at risk of financial hardship, Consumer Action has urged the Government to crackdown on unregulated debt advisers, known as ‘debt vultures’. To rebuild trust, the consumer group said that a robust regulatory framework is needed. Consumer Action also pushed for increased investment in financial counselling and community legal services to help financially vulnerable Australians get on top of their debts.
Debt vultures are unqualified, unregulated and charge exorbitant fees. Often, they fail to deliver on many of their quick fix promises and leave financially struggling families with even less money to repay their debts.
A regulatory framework for debt vultures should include licensing, a duty to act in clients’ best interests, dispute resolution obligations and a ban on upfront fees and unsolicited selling.
The Inquiry also covers other poorly regulated credit and financial services, including payday loans, rent-to-buy leases and ‘buy now, pay later’ providers. It is almost two years since the Federal Government agreed to make payday loans safer and more affordable – reforms that we are still waiting for.
Consumer Action has urged the Government to close regulatory loopholes in the sector, which have allowed fringe financial products to lurk in the shadows. Consumer Action’s recommendations include:
- Legislating a 48% interest rate cap for all forms of consumer credit;
- Introducing reforms to payday loans and rent-to-buy products that were recommended by an independent review panel in 2016;
- Introducing anti-avoidance provisions in the National Credit Act to stop firms dodging the law, and extending the Act to cover ‘buy now pay later’ providers;
- Stopping rip-off rent-to-buy businesses from accessing and profiting from Centrepay, the Government bill paying service for Centrelink recipients.
Read a copy Consumer Action’s full submission to the Senate Inquiry here [LINK].
Quotes attributable to Gerard Brody, CEO, Consumer Action Law Centre
“Trust is in short supply in the financial services sector. The Banking Royal Commission is the tip of the iceberg. It is even worse in the debt vulture sector, where there is even less scrutiny and regulation.”
“Australia’s financial counsellors working at the National Debt Helpline and in community organisations are genuinely free, independent and expert. They are our unsung heroes helping to get families in financial difficulty or at risk of losing their home back on track.”
“Too many financial firms unfairly profit from loopholes in our credit laws and regulations. These loopholes hurt Australians who are lumped with more debt. The current system has been usurped by canny businesses and must be updated urgently.”
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