Today the Australian Senate voted to establish an inquiry into debt management firms (known as debt vultures). Consumer Action Law Centre (Consumer Action) has long argued that debt vultures operate in a regulatory black hole leading to terrible outcomes for Australians struggling with debt.
The Inquiry, to be undertaken by the Senate Economics References Committee, will also tackle the impact of payday loans, rent-to-buy leases and “buy now, pay later” credit.
Debt vultures target people concerned about bills, home repossession or the confusing credit reporting system. They promise a quick fix ‘debt solution’ but the reality is that often these unqualified, unregulated firms charge exorbitant fees, can’t deliver on many of their promises, and leave financially struggling families with even less money.
In contrast, financial counsellors provide free, independent and expert advice to people in financial difficulty, helping them deal with their immediate financial situation and minimising the risk of future financial problems.
However, demand for financial counselling exceeds supply by a large margin, with wait times for Victorians trying to see a financial counsellor ballooning to over six weeks in some parts of the State.
It is also worth remembering that it almost 700 days—almost two years—since the Federal Government agreed to legislate recommendations from the Small Amount Credit Contract Review. Despite sensible recommendations and a draft Bill, we are yet to see legislative reform of these extremely expensive loans and leases that target low-income Australians.
Quotes attributable to Gerard Brody, CEO Consumer Action:
“Debt vultures advertise incessantly online and on TV promising a ‘life free from debt’. If you thought from watching the Royal Commission that the banks, insurers and superannuation companies have been ripping us of, they’ve got nothing on the unregulated debt management sector”
“This Senate Inquiry is an important initiative and will expose those financial services providers that have been left free to prey on financially struggling Australians for too long.”
“Financial counsellors are irreplaceable, supporting and advocating for Australians doing it tough. They are expert and trusted and with more Australians than ever at risk of financial stress, we need both Federal and State Governments to provide additional funding for financial counselling.”
Consumer Action provides email and telephone financial counselling to Victorians experiencing financial difficulty through the National Debt Helpline. Around 20 percent of callers are referred to face-to-face financial counsellors because they require ongoing advocacy rather than phone advice.
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