Consumer Action Law Centre (Consumer Action) says that, if implemented, the recommendations in the final report from the Senate Inquiry into credit and financial services targeted at Australians at risk of financial hardship would provide vital protections to millions of Australians struggling with debt.
CEO Gerard Brody says the Inquiry’s recommendations would be a positive step forward toward ensuring that debt management firms, payday lenders, ‘rent-to-buy’ providers, short-term credit providers and buy now pay later companies play by the rules and put customers above their profit margin.
“These businesses, which escaped the scrutiny of the Banking Royal Commission, are adding to the unmanageable debt problems of many Australians. This Report provides a blue-print to stop the rip-offs and exploitation that is rife within this dark corner of the finance industry,” says Brody.
Mr Brody was particularly scathing of debt management and credit repair firms. “Too many Australian families are wooed by these ‘debt vultures’ with promises of fixing your credit report, wrangling your debts and taking away your financial worries. And too often, these promises are pure fiction,” says Brody.
Brody says that holding debt management and credit repair firms to higher regulatory and ethical standards is essential. Brody applauds recommendations to implement a regulatory framework for all credit and debt management firms, including an obligation to act in the best interests of their clients. Other positive recommendations related to debt management firms include:
- Compulsory membership of the Australian Financial Complaints Authority;
- Strict licensing or authorisation by regulators;
- Banning unsolicited sales; and
- Prohibiting upfront fees for service.
Further recommendations welcomed by Consumer Action included those to remove the ‘point of sale’ regulatory exemption for retailers that sell credit, introducing strong anti-avoidance provisions to capture new and emerging credit products and introducing long-awaited reforms to payday lending and consumer leases.
Brody credits the many community organisations and individuals who provided evidence during the Inquiry for sharing stories of people across Australia experiencing financial hardship.
“Many organisations that help people affected by dodgy providers spoke up about their experiences in submissions prior to the Inquiry and during the hearings,” he says.
“We urge the Federal Government to make implementing these recommendations a priority.”
Proceedings filed in Federal Court against debt management firm J Daniels & Associates
The recommendations made in the Senate Inquiry report are a breath of fresh air to Consumer Action’s legal service, who yesterday commenced proceedings in the Federal Court of Australia on behalf of a Melbourne woman against debt management firm, J Daniels & Associates (J Daniels).
The claim states that the client engaged J Daniels’ services under a number of contracts so that she could reach a long-term solution to her financial difficulty and to prevent the National Australia Bank taking possession of her home.
The claim alleges that:
- J Daniels knew about her financial position and did not advise her that it was unlikely that she could achieve a long-term solution to maintain her home loan payments due to her financial circumstances, and that it was unlikely that she would be able to refinance her home loan on terms that were affordable.
- J Daniels agreed to provide services which would remedy any defaults, writs or judgment on her credit file but did not advise her that the removal of small defaults would not improve her circumstances to allow her to refinance her home loan.
- The client ultimately had to sell her home in 2017 and pay $9,829.50 to J Daniels to discharge the caveat that it had lodged against her home.
The claim alleges that J Daniels did not supply services that were fit for purpose or with due care and skill and have engaged in misleading and deceptive conduct and unconscionable conduct in its dealings with the client.
Consumer Action CEO, Gerard Brody states that the case against J Daniels further emphasises the importance of creating a robust regulatory framework and increasing accountability for debt management firms.
“Unfortunately, this is not an uncommon scenario for our lawyers and financial counsellors. They regularly speak with people who have turned to these types of firms for help, only to be left in a worse situation than before.”
“The recommendations made in this report, if implemented, would provide a much-needed safeguard for Australian families in their time of need.”
Please note that our client is not available for comment.
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