Predatory companies are flourishing in a regulatory void. The current laws don't prevent dangerous financial harm.
We know that many Australian families are doing it tough: last year a report by the University of NSW showed that only 35.7% of Australians are financially secure. In this climate, debt management firms thrive when they prey on people in financial difficultly and sell them a false sense of hope. We're so concerned about them, we call these companies, "Debt Vultures"
Debt Vultures use highly targeted and emotional marketing to promise a life free from debt, but the reality is that all too often they charge exorbitant fees, can't deliver on mnay of their promises and leave many families with even less money for the essentials like paying bills or putting food on the table.
Consumer Action wants to see these businesses properly regulated, with a ban on upfront fees and charges, and an obligation to act in their client's best interests. These businesses have so far escaped this basic level of oversight and scrutiny that other types of financial or credit services have been under for years. Similar reforms have already been implemented in the UK.
There are also no minimum educational or ethical requirements to provide this so-called "debt management" advice. This can lead to even worse outcomes for people and government-funded financial counsellors and community legal centres have to pick up the pieces.
All Australians can access free and confidential financial counselling from the National Debt Helpline on 1800 007 007.
Please read and share our Debt Vultures Explainer, with stories from five Australians, to learn about the harm caused by so-called “debt management” companies.
UPDATE: 1 September 2017
We did it!
We wanted Debt Vultures on the agenda of the Consumer Ministers meeting and it was. Now Ministers have committed to action, and we will hold them to it.
It’s because of the help of everyone who wrote to their Member of Parliament that we have achieved this. Thank you very much.
“Ministers acknowledged that addressing the conduct of debt management firms will require a coordinated Commonwealth policy approach. Ministers noted the Commonwealth will commence work in 2018 to determine the merits and feasibility of debt management firms coming into the financial services regulatory framework. States and Territories will provide full assistance to identify data to support this work.
Ministers also noted a consumer education campaign would be developed as an interim measure to raise awareness of the costs and potential risks involved in using debt management firms and raise awareness of alternatives to debt management firms for consumers.”
In other words, we are several steps closer to forcing these rip-off Debt Vultures to play by the same rules as everyone else.
We will also work with Ministers to promote the fantastic work of Financial Counsellors, who provide free, independent and expert advice to Australians struggling with debt issues.
Now we have a path forward, we will re-set our campaign, and be back with more ways you can help soon.