In January 2016 the Australian Securities and Investments Commission (ASIC) released its report ‘Paying to get out of debt or clear your record: The promise of debt management firms.’ In the 18 months since the report, the Federal Government has ignored the report’s findings that debt management firms have engaged in misleading, and at times predatory, conduct in relation to vulnerable people experiencing financial hardship.
The report found that fees for these types of services were high, and payable before services provided, and that sales techniques used could create a high pressure sales environment for consumers. ASIC also found that some firms had a poor understanding of the relevant law and consumers were rarely referred to free alternatives such as financial counselors or ombudsman schemes.In contrast to Australia’s lack of regulation of this industry, UK debt management services are required to be licensed under the Financial Services and Markets Act 2000 (UK).
Since the release of the ASIC report, consumer advocates and industry bodies have released a joint statement calling for government regulation of the sector. This too has been ignored.
“Consumer advocates have significant concerns about the conduct of debt management firms, including the charging of high up-front fees for services of little value, poor or inappropriate services that can leave the consumers worse off” – Roundtable Communique (February 2016)
The communique calls for a new regulatory framework to bring debt management firms into line with other financial services in Australia. You can read the full communique here.
If you have engaged with a debt management firm or credit repair agency and would like advice call CCLSWA for a free, confidential discussion on (08) 9221 7066. Our telephone advice line is open Monday to Friday (except public holidays) between 9am and 4pm.