IT’S TIME TO HOLD ‘DEBT VULTURES’ ACCOUNTABLE
We’ve all seen the commercials: So-called ‘credit repair’ or ‘debt relief’ firms promising to take your financial woes away, ‘fix’ your credit rating and wrangle your debts so you don’t have to.
While these promises of a quick-fix sound like a saving grace, they are too often far from it. Between conflicting advice, inappropriate debt solutions and high or hidden fees, many Aussie households are left in an even worse financial position and with more stress than before.
And our current laws allow it to happen.
The problem is these debt vultures operate in a regulatory black hole. Unlike other financial services, debt relief companies aren’t required to hold a licence or meet even the most basic competency and ethical standards.
Not only does this enable these companies to prey on people doing it tough, it leaves people with little access to justice when things go pear-shaped.
It’s time to stop debt vultures mid-flight.
Australians have some of the world’s highest levels of household debt, but more can be done to help. With a Senate Inquiry shining the spotlight on debt vultures’ dodgy practices, we have a glowing opportunity to make sure these debt ‘relief’ companies are held to higher standards.
The solution: Create a robust regulatory framework for all debt vulture companies that includes:
- Licensing or authorisation by ASIC with a high bar for entry – predatory debt vultures need not apply
- Ban upfront fees to stop the fees-for-no-service rip-offs, incentivise timely services that actually help, and prevent additional financial stress on people already struggling to make ends meet
- Membership of the Australian Financial Complaints Authority to resolve customer complaints, as recommended by the Ramsay EDR Review (a recommendation accepted by the Government but not yet implemented)
- Duty to act in client’s best interests not in the interests of the sales rep or company’s bottom line
- Ban unsolicited selling to overcome 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’. Once engaged with a company, consumers are ‘susceptible to influence or may make choices that are not in their best interests.’
- Client money obligations to pull firms in line with other financial service providers and protect client’s money
- 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.