You may have seen ads online or on TV promising a ‘life free from debt’ or a ‘clean’ credit report. Debt management firms target people concerned about bills, home repossession or the confusing credit reporting system.
They offer quasi-legal and quasi-financial advice on debt options, and services including debt negotiation, ‘repairing’ credit reports, arranging debt agreements (a form of insolvency), managing money, and everything in between.
Currently, these debt vultures operate in a regulatory black hole – they’re not required to hold a licence or meet even basic competency and ethical standards.
While the promise of a quick fix 'debt solution' is appealing at first, the reality is that these unqualified, unregulated firms charge exorbitant fees, can’t deliver on many of their promises, and leave financially struggling families with even less money.
Licensing or authorisation by the Government regulator ASIC with a high bar for entry to ensure high quality advice from qualified and suitable staff. Just like all other financial products.
Membership of the new financial complaints "one-stop shop", AFCA. Consumers should have access to the Australian Financial Complaints Authority to resolve their debt vulture complaints.
top up-front fees and high-pressure sales tactics. People experiencing financial stress are very unlikely to shop around for help with debt, and more likely to engage with the first organisation that offers the prospect of ‘making the problem go away’.
A duty to act in the client’s best interests would add another layer of ASIC oversight and treat debt vultures like other financial advisers.
Require firms to inform people of free options that can assist, such as hardship programs offered by creditors and utilities, ombudsman schemes and the National Debt Helpline for free, independent and professional financial counselling.
Consumer Action launches litigation against so-called “Debt Management Firm” J Daniels and Associates alleging multiple breaches of the law against our clients, including unconscionable conduct, misleading and deceptive conduct, failure to provide services with due care and skill and unlicensed credit activities.
ASIC ran a public education campaign warning of the dangers of debt vultures and promoting the National Debt Helpline.
The Federal Court ordered “credit repair” business, Malouf Group Enterprises Pty Ltd, to pay $1.7 million, including up to $1.1 million in consumer refunds, for breaches of the Australian Consumer Law.
Federal and State Consumer Affairs Ministers committed to investigating the merits and feasibility of debt vultures being included in the financial services regulatory framework at a meeting in September 2017.
ABC’s 7.30 airs a story about debt vulture victim Noelene Mayne. Ms Mayne had her debts negotiated down from $31,000 to $21,500, only to be charged a $7,930 administration fee.
Professor Ian Ramsay recommends that all ‘debt management’ firms be required to join an industry ombudsman scheme – the new Australian Financial Complaints Authority.
Sixteen high-profile consumer advocacy organisations, industry associations, ombudsman schemes, government agencies, regulators and academics sign onto a Communique supporting a new regulatory framework to bring debt vultures into line with other financial services in Australia.