Inside this issue:

Notes & Notices
Release of Revised Bankruptcy Handbook
Merry Christmas from Jennifer, Wayne and Richard
Mobile Phone Debt and Mobile Premium Services
Silvia Superina 
Housing Industry Association Calls for $30million to Fund Mortgage Stress Counselling
The Law Matters:
Obtaining Financial Advantage by Deception
Richard Brading 
AFCCRA Update and Bankruptcy Update
Jan Pentland 
Systemic Change With Centrelink, Fraudulent Debt and Bankruptcy
Kit Hauptmann 
Financial Counselling and Assisting with the Statement of Affairs
Jennifer Gracie 
Round-Up
News, views and information about financial counselling around Australia
In the Media
Snippets of interest and information found in the media regarding issues around financial counselling 

Notes and Notices

MFAA include hardship provisions in Code of Practice

The Mortgage and Finance Association of Australia (MFAA) have recently amended their Code of Practice to require non-deposit taking lenders to “actively assist   borrowers in financial hardship”. It should be noted that the majority of members of the Credit Ombudsman Scheme (COSL) are “contractually bound to comply with the MFAA Code of Conduct”, according to a recent COSL press release.

Under the new provisions,

• Members of COSL who are lenders or mortgage  managers are under a positive obligation to assist  borrowers experiencing financial hardship;
• Lenders must have regard for the borrower’s financial circumstances and consider in good faith and within a reasonable time borrower’s request to vary their repayment obligations;
  
• While considering the borrower’s request, the lender must suspend any action to recover payments from the borrower and refrain from listing the borrower’s default with a credit reporting agency;
  
• A lender must not require a borrower to apply for the early release of superannuation or obtain funds from family members, friends or other third parties.

For more information, visit the COSL website at www.creditombudsman.com.au.

BFSO, FICS and IOS likely to merge in 2008

There has been an agreement in principle for three large External Dispute Resolution (EDR) schemes to merge — the Banking and Financial Services Ombudsman (BFSO), the Financial Industry Complaints Service (FICS) and the Insurance Ombudsman Service (IOS). Between them, these 3 services deal with more than 90% of all disputes related to the provision of financial services.

The date put forward for the merger is 1 July, 2008, but this has not yet been formally agreed. Currently an   Implementation Advisory Committee (IAC) comprising   members of the three Boards has been meeting to    address any problems and facilitate the merger. It should be noted that there is equal industry and consumer representation on the IAC.

From the consumer perspective, the primary issue is the ‘no detriment’ principle — that consumers should be no worse off because of the merger. Indeed, that consumers should be better off under the merged scheme. Other consumer issues that should underpin the scheme include

• High priority for access by low income consumers;

  Financial assistance for this Project was provided by the New South Wales Government from the Responsible Gambling Fund. The views expressed in this publication are solely those of the authors and do not represent the views of the Responsible Gambling Fund or of the New South Wales Government.

  
  
• Equal consumer and industry representation in any advisory or consultative bodies;
  
• An expanded presence outside Melbourne;
  
• Scheme openness and accountability.

Although plans for the merger are moving forward quickly, it is not guaranteed that the merger will occur. If the parties cannot reach an agreement, it is probable that the government would set up a statutory scheme.

We note that the COSL scheme remains separate and continues to grow, with almost 8,000 members, who are mostly mortgage brokers, but who also include mortgage originators, non-deposit taking lenders, aggregators, mortgage managers, loan writers and finance brokers. COSL dealt with 338 complaints in the last financial year, with 17% being about predatory lending, 13% about inappropriate finance, and 5% about hardship.

Wesley Community Legal Service gratefully acknowledge the sponsorship of LexisNexis, whose assistance has enabled our solicitors to have  access to the Butterworths Direct Online package.

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Revised Edition of The Bankruptcy Handbook Released

The long-awaited revised edition of The Bankruptcy Handbook will be released this December.

It is nearly 10 years since the first edition was published, and a lot has changed in bankruptcy since then. The revised edition provides up to date information on changes to the bankruptcy laws, and the way that ITSA   interprets those laws. In addition there is a new chapter on Family Law and Bankruptcy. The   chapters on Part IX Debt Agreements and Financial Counselling for Potential Bankrupts have been significantly augmented as a response to the proliferation of Debt Agreement Administrators and recent reports that financial counsellors are seeing growing numbers of clients who are very distressed.

The 2nd edition of The Bankruptcy Handbook also provides a practical guide to  filling out the Statement of Affairs, a directory of resources and web resources, case studies, information on most situations a financial counsellor will be faced with when working with clients contemplating bankruptcy, and a clear and concise overview of all of the key bankruptcy processes.

Although it is written for financial counsellors, the revised         Bankruptcy Handbook is a valuable resource for anybody contemplating bankruptcy, or  anybody who works in the insolvency or credit management fields, because it is written in plain English and is reasonably priced.

The book, which received financial support from the Commonwealth Financial Counselling program (CFC), will be sent free of charge to all CFC-funded financial counsellors.

Others who are interested in the book can find more detailed information on the website of the publisher, Federation Press, at http://www.federationpress.com.
au/bookstore/book.asp?isbn=9781862876217.
The book is modestly priced at $29.95, and is even less ($25.00) if purchased direct from the publisher (just go to the website or call (02) 9552 2200).

Betty, Wayne and Richard are delighted with the book, and believe that     financial counsellors will find it  provides valuable practical assistance.

Merry Christmas from Jennifer, Wayne, Richard and the Sharkwatch team

Jennifer, Wayne and Richard would like to wish all our readers a very merry Christmas. We hope that 2008 is a terrific year for you all, and we look forward to catching up with as many of you as possible in the new year.

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Mobile Phone Debts and Mobile Premium Services

Silvia Superina

Policy and Research Manager, Office of the
Telecommunications Industry Ombudsman

Mobile phone debt is becoming an increasing issue of concern. Young users seem to be particularly vulnerable, partly because mobiles are attractive to younger uses, and partly because many mobile services, such as mobile premium services, are often marketed towards younger users.

Mobile premium services

Mobile premium services (MPS) are information and  content services that are available via mobile phones and internet enabled devices. Mobile premium services are delivered to mobile phones via an SMS or MMS or via a content portal run by a mobile telephone company. The type of content you can obtain though mobile premium services include ringtones, games, chat services, horoscopes, news, and weather.

On 28 October 2006, the Mobile Premium Services Industry (MPSI) Scheme came into effect. The scheme was developed by the industry in response to a Determination made by the Australian Communications and Media Authority (ACMA). The scheme’s key objective is to establish a framework to implement appropriate community safeguards in relation to the use of mobile premium services. The scheme sets out rules about each of the following areas:

• informing customers about costs and terms and conditions of mobile premium services
  
• opt-out mechanisms which deal with how consumers can stop receiving mobile premium services
  
• assessment of content
  
• chat room protective measures
  
• advertising
  
• complaint handling rules
  
• take down arrangements - removal of content.

If consumers have a complaint about mobile premium services that they can not resolve directly with their mobile telephone provider or content provider, the TIO is able to investigate. Further information on the MPSI Scheme can be found at:
http://www.commsalliance.com.au/Activities/Mobile_Premium_Services/customer_information.

The TIO began dealing with complaints under the MPSI Scheme in December 2006. From 1 December 2006 until 30 June 2007, the TIO recorded 7086 complaints about mobile premium services, with a total of 10,083 issues (one complaint may have multiple issues).

Debt issues

While the MPSI Scheme sets out rules for most of the issues about which the TIO receives complaints, in some instances it appears that providers haven’t complied with the scheme. Some specific scenarios that can result in consumers incurring a significant amount of debt through using mobile premium services, often in a short period of time, are set out below.

Subscription services
Many MPSI services are subscription services - once a subscriber has requested a mobile premium service, they continue to regularly receive texts and are charged accordingly. Customers may not realise that by requesting one service, or responding to a free offer, they are       entering into a subscription. This information may be contained in the fine print of an advertisement or worded ambiguously. In other circumstances, consumers deny that they requested a mobile premium service at all. If consumers don’t believe they have requested a service, they are less likely to read any related texts, therefore  allowing the service to continue. Two thirds of the mobile premium service complaints the TIO receives relate to claims that consumers did not request a mobile premium service.

Opt-out difficulties
Another common complaint is where a consumer claims to have requested to opt out of service, but the request has not been actioned. When a consumer subsequently tries to contact the content provider by telephone, they often claim they can’t get through to speak to a person.

Services aimed at children
There are numerous mobile premium services that are aimed at children. While children are advised that they must gain the permission of a parent, this doesn’t seem to be checked by the content provider.

Chat services
Chat services are conversational in nature - people can keep responding without realising how much debt they are incurring.

Inability to bar only mobile premium services
Most providers are only able to bar all SMS - not just mobile premium services. This means that consumers either have to forgo all access to SMS, or retain access to mobile premium services.

TIO position statements

When investigating complaints about mobile phone debt, the TIO may have regard to any number of TIO position statements. The three position statements that the TIO is most likely to consider are discussed below. The TIO’s position statements set out the TIO’s approach to      investigating and resolving particular types of complaints. They apply equally to complaints from residential and small business complainants.

Use of marketing terms such as ‘capped’, ‘unlimited’ or ‘free’
The TIO developed this statement in response to the proliferation of ‘capped’ plans. In complaints investigated by the TIO, it seemed that people did not understand the way these plans worked and sometimes incorrectly assumed that the amount of the cap could not be        exceeded. As a result, the TIO was receiving complaints where people had unwittingly incurred large debts.

Capped plans generally involve a customer paying a fixed amount to obtain service value for a higher amount (e.g., pay $50 for $300 worth of calls). It is sometimes not clear that the deal only applies to certain kinds of calls. If you use services not included in the cap, additional charges are incurred. If the TIO finds that a consumer was given unclear or misleading information about a capped plan, the TIO may ask that any resulting debt be waived or reduced, and the customer be released from the contract. For more information, see: http://www.tio.com.au/policies/Contracts/UseofMarketingTerms.htm.

Unlimited credit and financial over-commitment
Telecommunications services share similarities to credit cards in that customers often pay in arrears. Unlike credit cards, however, telecommunications companies do not always conduct credit checks on customers and do not as a rule impose any credit limit. This can result in     consumers incurring debts that they are not capable of paying - placing them in a situation of financial over   commitment. When investigating complaints about over-commitment, the TIO considers the law, good    industry practice, and what is fair and reasonable in the circumstances. If a TIO investigation finds that a provider has not taken adequate steps to prevent a customer from being in a position of financial over-commitment, the TIO may request that the debt be reduced (see http://www.tio.com.au/policies/Billing/Unlimited%20Credit%20-%20Financial%20Over-Commitment.htm).

Financial hardship
The TIO’s view is that credit management processes should be reasonable and accommodate the customer’s individual circumstances. When trying to negotiate a payment plan on behalf of a consumer, the TIO will advise consumers of their option to see a financial counsellor. The TIO will ask the consumer to make a realistic offer as to what they can afford. While the TIO will provide guidance as to what needs to be taken into account when working out what they can afford, the TIO will not work out the amount for a consumer (http://www.tio.com.au/policies/Credit%20Management/Hardship.htm).

The TIO

The TIO is an independent body that investigates complaints from residential and small business customers about telephone and internet services. The TIO is a free service to consumers. The TIO can be contacted on 1800 062 058 or by email at tio@tio.com.au.

Case studies

1. Mobile premium service advertising

In order to understand the type of experience a customer might have when using mobile premium services, the TIO responded to a randomly selected advertisement in a magazine.

The advertisement read Live Tarot Text - 3 free. The fine print at the bottom of this advertisement stated: “14+. Messages sent charged at your standard network rate. Tarot Text: three free msgs per mobile number, subsequent msgs, photos or inactivity msgs received are charged at $4. Chat responses may be up to two msgs long ($8). Photos received charged at one msg. To stop the service, text ‘stop’ to the advertised shortcode.  We may send you free promotional service msgs. All charges inc. GST.  Services provided by (..), Cust. Service +(..)”

The TIO received a total of 12 separate text messages from the service. None of the messages contained instructions to opt out of the service. Only the twelfth message we received gave pricing information. No advice was provided that the three free messages had been used and that any subsequent messages would be charged to the mobile account. 

While the advertisement stated that chat responses may be up to two messages long and thus incur charges of $8 instead of $4, only four of our interactions with the service comprised one message only. In most other   complaints the TIO has investigated where copies of texts have been provided, messages were worded in a type of text shorthand. In this case, the texts contained virtually no abbreviated language.  

Of the 12 messages received, only two interactions (comprising four messages) contained a tarot reading. All messages included a request that we provide additional information. The TIO did not respond after the fifth  interaction. The TIO received a further three messages after that time, the last of which stated that it was a ‘free message’.

2. Mobile premium services complaints

• A 17-year-old incurred $3,800 in premium SMS charges over four months
  
• The father acknowledged that his son had requested a  premium service, but said that he thought there would be a one-off fee rather than ongoing charges.
  
• The provider produced copies of the internet site where the son had subscribed to the service, confirming that the terms and conditions of the service, including pricing information, were available when the son requested the service.
  
• The provider offered a goodwill gesture of $500 off the disputed premium SMS charges.
  
• Evidence from the provider demonstrated, that ’stop’ had been texted to the content provider several times, the first being less than one month after the service was initially requested. 
  
• On the evidence that an opt-out request was sent, but not actioned, the TIO believed the son should not be liable for the entire debt. The provider   reduced the charges to $400. The father was willing to pay for charges incurred prior to his son sending an opt-out request.

TIO position statement: Use of marketing terms such as capped, unlimited or free

• The customer signed a contract for a two-year $29 monthly “capped” plan, which included $120 worth of calls. The phone was used for connecting to the internet as well as for making calls.
  
• The customer was told that internet access was included in the cap.
  
• A $1,700 bill was incurred. This consisted of $29 for calls and the rest for internet usage, charged at $4 a megabyte.
  
• When the bill wasn’t paid, it was sent to a debt collection agency and an additional $500 debt was incurred for phone installments.
  
• The provider did not dispute the customer’s claim that he was misled as to what would or would not be included in the capped plan.
  
• The provider applied a $129 mobile broadband plan to the account, which reduced the bill from $1,700 to $129.
  
• The handset fees were waived upon return of the handset.

TIO Position Statement: Unlimited credit - financial over commitment

• A consumer entered into six mobile contracts with one provider over a six-day period.
  
• The consumer claimed to be suffering from depression at the time
  
• The provider default listed the consumer for $4,803 relating to early cancellation fees for the six services
  
• In the investigation, the TIO found no evidence that:
     - credit checks had been conducted
     - the provider had taken any steps to limit expenditure
  
• The provider subsequently agreed to waive the debt and remove the default listing.

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HIA: Fund Mortgage Stress Counselling!

At Sharkwatch we were interested to find the following article reported by ABC News.
“The Housing Industry Association wants the Federal Government to spend $30 million on a financial counselling program for people suffering mortgage stress.

“The Association says yesterday's interest rate rise will mean around 650,000 Australian households will now have trouble budgeting for their housing repayments.

“HIA spokesman Chris Lamont says the Government and banks should work out a plan to offer basic financial planning at a very low cost, or even for free.

“ "What we're talking about through the mortgage assistance plan is providing financial advice to would-be home buyers, advising them of the impact of further interest rate rises, should they occur," he said.

“[It would work with them on] how to manage household budgets, in light of the current interest rates that prevail, and [how] to plan for uncertainties.”
[Reproduced from ABC News, 8/1/07]

The HIA press release also showed that the number of families experiencing mortgage stress increased substantially in every Australian state between 2006 and 2007, with increases ranging from 14.5 to 56.1% !!

The bottom line is that rising interest rates are already sending more clients to financial counsellors. More and more people are struggling to repay their home loans, and the number of homes being sold by mortgage lenders has risen alarmingly over the last year. Clearly, any funds would be better spent on expanding existing financial counselling services, rather than expanding  existing financial literacy programs as the HIA suggests (the full HIA proposal can be seen at: http://hia.com.au/hia/news/article/MR/National/EC/HIA%20calls%20for%20Mortgage%20Assistance%20Plan.aspx). Financial counsellors already have the expertise, and can provide comprehensive assistance that goes well beyond simple budgeting and mortgage advice.

If you agree, we suggest you email Ron Silberberg (r.silberberg@hia.com.au) or Chris Lamont (c.lamont
@hia.com.au) from the HIA to let them know that this sort of funding would be best spent in our sector.

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The Law Matters

Obtaining A Financial Advantage by Deception

Richard Brading
Principal Solicitor
Wesley Community Legal Service

The sting

Your client is under a lot of pressure from the Demon Debt Collectors to pay a debt.  In a moment of weakness the client agrees to pay $200 and then sends a cheque off to Demon Debt Collectors knowing that her account has no funds.  Demon Debt Collectors ring up the client a week later to say that the cheque bounced and threaten criminal prosecution for obtaining a financial advantage by deception.  Has your client committed a crime?

On the facts, your client has committed the fraud offence of obtaining a “financial advantage” or “pecuniary advantage” by deception.  In some states there is an additional offence of passing a valueless cheque.  But has the client really obtained any financial advantage by foolishly sending a dud cheque off to the creditor? 

The crime of obtaining a financial advantage by deception

The crime of obtaining a financial or pecuniary advantage by deception can be found throughout Australia1. In the old days, criminal courts didn’t get involved much in fraud matters but left it to the civil courts to sort out.  With the increasing complexity of financial activity and the speed at which commercial activity occurs, this offence has become a very popular basis for prosecution by police.

The problem is the broad interpretation that has been given to notion of “obtaining a financial advantage” by some judges. These judges have decided that a penniless debtor really does obtain a financial advantage by drawing a cheque simply to delay being pursued by a creditor. 

The Victorian cases

In the case of Matthews v Fountain2, Matthews promised to pay his employee a salary of $100 per week and paid her with a cheque for $200 knowing that there was no money in his account.  He was convicted of dishonestly obtaining a financial advantage and appealed, arguing that he was a ‘penniless man’ who could not have evaded a debt that he could not pay.  The court rejected that argument and held that a financial advantage could be obtained in one of three ways:

by getting the debtor extra time to pay;
reducing harassment of the debtor, at least for a while; or
the avoidance of the financial detriment involved in actually paying the debt.

Judge Nettle of the Victorian Court of Appeal approved the Matthews approach in the case of Vasic3.  Mr Vasic had made a number of purchases on credit and gave a cheque for $32,000 to the supplier after  repeated demands for payment.  He knew the cheque would be dishonoured.  Judge Nettle said:

“For in reality, in the society in which we live, there are no penniless men.  Widespread and deep though poverty may be in some sections of our society, all men in it have some money or at least the ability to obtain some money, by work or by the realisation of assets or by borrowing, even at exorbitant rates, or perhaps even in the form of social security entitlements.  To that extent, all men obtain a financial advantage by deferring the payment of a debt; no matter how poor they may be.  They are relieved of a claim upon such money or ability to generate it as they may have, for the period of the deferral.”

The A.C.T. case

However, in the Australian Capital Territory, in the case of Fisher v Bennett 4, a penniless debtor handed over a worthless cheque after repeated demands from the creditor merely to reduce the harassment.  The court in that case rejected the prosecution’s argument that getting extra time to pay or reducing harassment was a financial advantage.  The court agreed that gaining extra time or reducing harassment are advantages, but the benefits of time, peace and quiet are not financial advantages. 

Academic commentators have praised the decision in Fisher v Bennett and criticised the Victorian judgments5.  They point out that the crime requires proof that there is a financial advantage to be gained by passing a valueless cheque.  They emphasise that extra time or reduced harassment cannot be exactly measured in  financial terms, and are not considered financial advantages by the general population.

So there is a divergence of opinion between the A.C.T. and Victoria over this issue.  In the current climate of legal conservatism, it is likely that courts will follow the Victorian approach.

Situations where a dud cheque was not a crime

A person who draws a cheque in reasonable expectation that the cheque will be paid when presented does not commit a crime. For example, an employee who drew a cheque the day before payday did not commit a crime simply because the pay office failed to deposit her pay when expected.

The result was similar for a retailer who bought $20,000 worth of wholesale stock and gave a post-dated cheque in payment.  The wholesaler waited until the date on the cheque came around and then called the police after it failed to be paid on presentation.  The police did not prosecute the retailer because the cheque was post-dated and it was understood that the money was not in the account at the time the cheque was drawn.

In the case of R v Hart 6, Mr Hart was running a commercial party and paid for a large quantity of soft drink by cheque a few hours before the party.  He had a reasonable expectation of selling enough tickets at the door to enable him to have funds in his account when the cheque was deposited the next day.  Unfortunately the Licensing Police shut down the party due to breaches of the licensing laws so he didn’t make any money.  The court held that his expectation of having the money in the account when the cheque was deposited the next day was both realistic and reasonable so he did not commit a crime.  Of course he still owed the money as a civil debt.

The financial advantage must be legal

The law is quite complex where the financial advantage obtained relates to gambling.  In R v Rosar 7, the Tasmanian Supreme Court considered the case of a gambler charged with dishonestly obtaining a financial advantage from the Totalisator Board of Tasmania.  Mr Rosar falsely represented to the TAB agent that he had access to $10,000 and got her to accept credit bets in his name for that amount.  The Tasmanian Racing and Gaming Act 1952 makes it illegal for a TAB agent to  accept credit bets so the TAB agent was breaking the law by accepting Mr Rosars’ wagers.  If Mr Rosar had won, the TAB agent would also have broken the law by paying him a dividend.  Because the law does not recognise an illegal benefit as a financial benefit, there was no legal financial advantage to be gained by Mr  Rosar by deceiving the TAB agent, and he was not guilty of the crime.

Returning to the original scenario, let me make a couple of suggestions that may concern you.  Firstly, in many debt collection situations the debt collector has been informed that the debtor has no money.  If the debt collector then seeks or receives a cheque from the debtor, it will be no surprise if they cheque turns out to be a dud.  Secondly, having been paid a dud cheque by a debtor, will the debt collector use the threat of criminal prosecution as a lever to extract more money from the debtor at the expense of other creditors?  I don’t think either of these possibilities have come before the courts, but when they do, it will test the liberal interpretation of the law that the courts have so far given to this crime.

1. s.81 Crimes Act 1958 (Vic),  s.252A Criminal Code Act 1924 (Tas), s.178BA Crimes Act 1900 (NSW), s. 408C Criminal Code 1899 (Qld), s.139 Criminal Law Consolidation Act 1935 (SA), s.134.2 Criminal Code Act 1995 (Cth) and s.333 Criminal Code 2002 (A.C.T.)
2. [1982] VR 1045
3. (2005) 11 VR 380
4. (1987) 85 FLR 469
5. Steel A., Money for Nothing, Cheques for Free? The Meaning of “Financial Advantage” in Fraud Offences [2007] UNSWLRS 58
6. [1984] 3NSWLR 641
7. [1999] TASSC 7

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AFCCRA Update and Bankruptcy Update

Jan Pentland
Victorian AFCCRA representative

AFCCRA Council will meet in Canberra for a planning meeting on 10 and 11 December. The AFCCRA Annual General Meeting will be held on 11 December.

Among considerations in Canberra will be AFCCRA’s priorities including:

• To build capacity in the financial counselling
  
• To enhance Financial Counselling professionalism.
  
• To continue to work on national policy issues:

AFCCRA’s current work includes:

Review of the Diploma of Community Services (Financial Counselling)

The Community Services Training Package of which our Diploma is a small part is being reviewed (July 2006 to July 2008). AFCCRA’s working group convened by Jillian Fletcher has worked hard  over the last 15 months, meeting three times for intensive workshops. Feedback on AFCCRA’s submissions to the review have been very positive. Congratulations to Jillian and the team for a highly professional piece of work.

In summary the outcome will be an improved Diploma with:

• a greater focus on financial counselling skills and practice including legal and technical knowledge;
• removal of duplication in the counselling units and the communication units;
• a stronger emphasis on the community development/social justice philosophy which underpins financial counselling;
• additional electives and a skills cluster on financial literacy have also been proposed.

Sydney 2008

AFCCRA was involved in three forums held in Sydney in late July 2007: the External Disputes Resolutions Forum; the AFCCRA Conference; and the AFCCRA Financial Literacy and Inclusion Forum. All were well attended with participants coming from across Australia including remote areas.
Feedback on the forums has been very positive and planning for the 2008 forums is underway. They will again be held in Sydney in late July 2008. Information as it becomes available can be accessed at www.afccra.org.

Partnerships with industry and the issue of conflicts of interest.

The focus of AFCCRA’s Conference in 2007 was a workshop on conflict of interest in partnerships with industry. This was part of a national discussion in 2007 with presentations at all state association   conferences as well as the workshop at the AFCCRA Conference.

Thanks to Fiona Guthrie and Peter Kell for facilitating that workshop; and to Fiona for her work in compiling the input of financial counsellors. A draft report for sector comment will be available early in 2008.

Pilot project to establish an independent Foundation

AFCCRA has appreciated the partnerships it has formed with industry in recent years. These partnerships within AFCCRA’s Industry Funding     Policy (available at www.afccra.org) have provided conference sponsorship and project funding.

A project to research the viability of an independent foundation/trust as a conduit for industry support of the financial counselling sector is underway. Seed funders for the project are the four major banks and the credit union peak body. Victorian financial counsellor, Anna Mandoki is working for AFCCRA on the project.

Research on models of financial counselling

AFCCRA has just signed a contract with Monash University to compare the models of financial counselling in Australia with overseas models. The project will commence before the end of the year with a report anticipated by the end of March.

We hope that a follow on project will undertake a costs and benefits analysis of financial counselling in Australia. While we know the value of our work, evidence based submissions are essential to progressing our case for additional resources.

Reconciliation Action Plan

AFCCRA is committed to assisting the provision of financial literacy and financial counselling for indigenous communities. Priorities are the attendance of aboriginal workers to AFCCRA’s annual forums; connecting and supporting financial counsellors working with aboriginal people and in indigenous communities; and supporting indigenous financial counsellors. 

As part of the ‘close the gap’ initiative of Reconciliation Australia, AFCCRA has developed a Reconciliation Action Plan and will report its progress by the end of the year. Information is available on AFCCRA’s website (www.afccra.org).

Centrepay

While supporting the Centrepay payment system for payment of essential goods and services, AFCCRA is concerned at the apparent lack of policy and procedures for how providers of goods and services access the system.

Our concerns include the use of Centrepay to collect debts as well as sell dodgy goods and services to the most vulnerable consumers. Of particular concern is the inappropriate use of Centrepay in indigenous    communities. We continue to follow up with Centrepay about those processes.

Bankruptcy

The 2008 Bankruptcy Congress will be held in Sydney on 30 and 31 October 2008. Information is available at www.itsa.gov.au.

The next meeting of the Bankruptcy Reform Consultative Forum will be held in Sydney on 5 December 2007. Jan Pentland and Richard Brading will represent AFCCRA. Agenda items include the review of offences, and remuneration of trustees, as well as an up-date on debt agreements since the amendments to Part IX of the Act effective from 1 July 2007.

There have been some very interesting developments around bankruptcy recently. I’m sure you’ll find the article by Kit Hauptmann elsewhere in this edition most interesting.

The report on trustees fees which I am writing for my agency, Eastern Access Community Health is currently with the editor in preparation for publishing.

For information about any of the above please contact me at janpentland@hotmail.com or on 0407 042 483.

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Systemic Change With Centrelink, Fraudulent Debt and Bankruptcy

Kit Hauptmann
Financial Rights Counsellor, Victoria

The ‘Carroll’ Decision.

When can you go bankrupt on a fraudulent Centrelink debt?  It would appear that the answer is: when a court imposes a reparation order against a fraudulent debt. 

Centrelink and the Australian Solicitor General have  considered advice from a legal firm to an Incolink member in regard to a decision of Justice Wallace in Power v Kenney [1977] WAR 87 and the decision of the        Honourable Justice Mansfield in Gaffney v Commissioner of Taxation (1998) 81 FCR 574.  They agree that the act of requesting a reparation order from the court and registering it as a judgement debt has rendered his fraudulent debt to be a judgement debt and that the debt is extinguished by bankruptcy (the ‘Carroll’ decision). 

Centrelink has agreed to reverse its previous decision regarding the Incolink Member, and to extinguish his $223,000 debt and return all monies they have collected from him after his bankruptcy ended. 

Given that we have now received recognition of the ‘Carroll’ decision officially in writing from Centrelink, I also intend to request that Centrelink pay interest and costs in regard to this matter and any others.

Using the Carroll Decision

John Hartnett and I met with two senior Centrelink people from Canberra and N.S.W. last month.  They have assured us that if financial counsellors have service users who have been charged with fraud, have a court imposed reparation order, and have then gone bankrupt, that this will extinguish their debt.  If it has not been extinguished and if monies have been collected they will apply the ‘Carroll’ decision and rectify this problem by extinguishing the debt and returning any monies collected. At this stage please contact John or myself in regard to this matter.

I had a second service user from my time as CEO of Financial Counselling (Vic) Inc. (then called Financial Rights Counselling and Consultancy).  She was charged with fraud, found guilty and given a reparation order after falsely obtaining $22,000 in Centrelink payments to support her son who had major psychological issues. 

She had gone bankrupt prior to her court case but had then gone bankrupt a second time to avoid having deductions made from her Centrelink pension.  After this second bankruptcy ended, Centrelink resumed deductions from her pension.  After tracking her down, getting her Centrelink number, date of court case, date of second bankruptcy and requesting that Centrelink apply the ‘Carroll’ decision, her debt was extinguished. Centrelink also returned all monies that they had        collected after the end of her second bankruptcy.  All this was done on the same day of receiving my e-mail.

Centrelink debt not proven fraudulent

It is also important to deal with Centrelink debt that Centrelink deems to be fraudulent when it has not been proven at court.  This process is set out in Malcolm Buchanan’s Devils Advocate Article dated 11 Oct 07 No. 180 and Peter Gartlan’s letter which is reproduced in that issue.

The official letter (e-mail) from Centrelink that recognises the ‘Carroll’ decision is reproduced below:

"This is to confirm our discussions when we were in Melbourne concerning the resumption of recovery on discharge of bankruptcy. Centrelink Legal Services Branch sought the input of relevant policy departments (including the Attorney General's Department (AGD)) with respect to the Australian Government Solicitor's (AGS) advice regarding bankruptcy, reparation orders and the social security law.

“As neither the AGD nor the policy departments have found an error in law in the advice received from the AGS, Centrelink will now implement a change in policy to the effect that:

• Where a customer has either a Reparation or Judgement Order in place; and
  
• The customer declares bankruptcy after the orders have been placed; and
  
• The customer is subsequently discharged from   bankruptcy; then
  
• No further recovery action will take place either:
       - during the period of the bankruptcy or
       - after discharge; and
  
• The affected debt or debts will be permanently written off as irrecoverable at law.

“Centrelink has liaised with the Insolvency  Trustee Service Australia (ITSA) to ensure that ITSA is aware of the change in Centrelink's  practice and is in the process of updating all reference material pertinent to the matter.”

[Eds Note: Centrelink has given permission for this letter to be reproduced in Sharkwatch]

Other Issues

It should be noted that this decision by Centrelink has also raised a number of other questions that we intend to obtain answers for, namely:

• How will Centrelink deal with the hundreds of Australians who must be out there in the same situation as set out above?
  
• Does the above ruling deal with other fraudulent debt other than Commonwealth debts, say bank debts or gambling debts?

In terms of the latter question, a recently obtained  legal opinion has suggested that the underlying argument that allowed the ‘Carroll’ decision is valid for any other fraudulent debt (i.e. for a bank debt obtained by fraud and a where a restitution order has been made).

I would like to thank John Hartnett who, when giving me an impromptu supervision session, pointed out that maybe I had not achieved the ‘best possible outcome for my service user given all their              circumstances’ when dealing with this case. This stimulated me to stop sitting on my hands and push for this major systemic change.

We will keep the financial counselling sector informed as we progress this matter.

—————————————————————-
Kit Hauptmann is a Senior Financial Rights Counsellor at Incolink in Victoria, and can be contacted at:

Kit Hauptmann, Senior Financial Rights Counsellor
Incolink
1 Pelham Street
Carlton, VIC, 3930
Phone: 0407 864 511
Email: kith@incolink.org.au

John Hartnett is a financial counsellor with Gamblers’ Help Melbourne, and can be contacted at

John Hartnett, Financial Counsellor
Gamblers’ Help Melbourne
Phone: 03 9653 3250
Email: john_hartnett@aus.salvationarmy.org

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Financial Counselling and Assisting With The Statement of Affairs

Jennifer Gracie
National Financial Counsellors’ Resource Service

Financial Counsellors around Australia are working under more pressure now than at any time in the past. Reduced funding, growing workloads and a dramatic increase in the complexity of the casework we are     dealing with can sometimes lead to cutting corners.

I know of Financial Counsellors employed on only a part-time basis who work many hours beyond their paid time and at least one full-time worker who is putting in six days per week and often works until 8.00 pm at night - regularly.

In the last 12 months or so, I have been discussing  bankruptcy issues with many financial counsellors around Australia. These discussions have brought up a number of concerns linked to the fact that bankruptcy clients have more debts, with more complications, than ever before.

As part of my work I have been involved in two training courses for about 40 new Financial Counsellors in NSW in 2007. In our training we teach that no bankruptcy should be completed at the first interview with a client. There should be an absolute minimum of two visits and preferably more. However, it has become apparent that a number of Financial Counsellors are quite often offering bankruptcy as a first or only option, and then assisting the client with that bankruptcy immediately.

Of course, clients will sometimes come in to see us   having made the decision that they want to go bankrupt. They may tell us that ITSA has told them they have to see a Financial Counsellor first, but they only want to go bankrupt. Even with this intention I believe that we need to still assist the client to consider all other options and then ask them to go away and think about it before  making the final decision.

The client may tell us that the Sheriff has visited them and completed a Notice to Custodian (the old Writ of Execution) and is going to come back and take some of their possessions, or the possessions may have already been seized. In this situation, it is still possible to complete a 7 day Declaration of Intention to Present a Debtor’s Petition (Form 5) which will give both you and the client time to look at the situation more clearly.

Many times, the Sheriff is prepared to delay their action if he/she knows the client has an appointment to see a Financial Counsellor and may be going bankrupt.

If the client is insistent that they want to complete the bankruptcy right there and then, the Financial Counsellor always has the option to tell them that they do have the right to do so, but the Financial Counsellor cannot help them. You might suggest that your agency has a policy that a bankruptcy needs a minimum of two appointments.

I am aware that a few years ago, a particular agency put aside a day every fortnight for people to come in to  complete bankruptcy papers. It was like a production line. There was very little discussion about the person’s situation and even if the Financial Counsellors gave   information about the advantages and disadvantages of bankruptcy, it is unlikely that the people attending were able to understand what it was all about.

Another issue that I have become aware of is the number of Financial Counsellors filling in the Debtor’s Petition and Statement of Affairs for the client. I can think of only two reasons why it would be necessary to do that. One is if the client is blind, and the other would be if the client is illiterate. Clients who say they can’t spell, or for whom English is a second language, still have the ability to complete the papers themselves. You can spell out every word for them if necessary. Financial Counsellors usually justify such assistance as saving time, but this reason seems insufficient to justify an action that essentially involves the Financial Counsellor taking personal responsibility for the client’s paperwork.

In terms of the personal and rehabilitative aspects of bankruptcy (for example, dealing with the inevitable emotional responses and learning new ways of handling credit), it is very important for the client to take     ownership of the whole process, including making the decision for bankruptcy and filling out the forms. I would recommend going through the Bankruptcy Checklist with every client and getting them to sign it. Keep a copy on the client’s file. Also get the client to read the Prescribed Information and sign the Acknowledgement.

The client can contact ITSA to have the papers sent  directly to them at home, or you could phone ITSA while the client is in your office and have the papers sent to them. They can then read through the Prescribed  Information and Statement of Affairs at home and complete as much as they are able, themselves. If they are concerned they might make a mistake, they can answer the questions in pencil and then change them to pen when they come to see you.

Financial Counsellors should not be copying reams of bankruptcy papers to keep in stock, particularly if you are unable to get a reasonable supply directly from ITSA. Of course, it is OK to have a few on hand if the client’s copy is too dirty or too many mistakes have been made on their copy.

We often see clients whose bankruptcies seem to be very simple and straightforward – and sometimes this turns out to be the case. However, even bankruptcies that appear simple at first glance can have issues that are not immediately apparent, and these issues can turn out to be very significant. For example, there may be a compensation claim pending, or a possible inheritance.

One Financial Counsellor told me of a homeless client wanting to go bankrupt who appeared to own some indigenous art which may have been of considerable value.

In another case, a client had an interest in indigenous community land which needed to be sorted out before the client entered bankruptcy.

In the case of small businesses, a number of questions should be asked. Was it as a sole trader, partnership or company? Is the business still operating? Are there any possible complicating factors?

We also need to ask questions about gambling to establish whether that could have an effect on the client’s bankruptcy.

Case notes need to be detailed – more detailed than the notes for any other part of our work. If questions arise from our work with bankrupt clients it often won’t happen immediately. If you are asked questions two years or more after you have seen the client, will you remember what happened at the time? It is better to say, “Asked client if he has a vehicle and he said no”, (plus all the other questions you will have asked) rather than, “Explained the consequences of bankruptcy to client.”

As Financial Counsellors we need to be professional. As far as I am aware bankruptcy is the only area of our work which has caused clients to sue us or to threaten to sue us, and yes, a few Financial Counsellors have been sued. Most claims have had no substance, but one was settled out of court and I believe there is another one still outstanding. It will only take one Financial Counsellor to be successfully sued and all of us will lose our professional standing.

That is why it is so important that we are careful to make sure that clients contemplating bankruptcy are adequately informed by us, and are asked to take responsibility for making the decision to become bankrupt, and for filling out all of the paperwork relating to that bankruptcy.

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Round Up

CFCP News

At a recent National Financial Counsellors’ Resource Service (NFCRC) Teleconference, Sue Barrett, the Manager of Commonwealth Financial Counselling (CFC), discussed implications of the recent change of government with 16 CFCP teleconference participants.

Sue noted that the current FaCSIA will now incorporate the portfolio of Housing to become the Department of Families, Housing, Community Services and Indigenous Affairs. The new Minister for the Department will be The Hon. Jenny Macklin.

The Minister will be assisted by The Hon. Tania Plibersek, who will take responsibility for the specific portfolios of Housing and Status of Women. The Minister will also be assisted by The Hon. Bill Shorten, who will be her Parliamentary secretary.

Sue also noted that The Hon. Chris Bowen will be the Minister responsible for consumer affairs.

Sue provided participants with a timely reminder about providing detailed reports that give an indication of the complexity of issues faced by their services, that include details about specific local issues (including case studies), and that give an indication of the extent of need for  financial counselling services in their local area.

Western Australia

WA financial counsellor has multiple successes using TIO

We were delighted to read in the FCRP News that WA financial counsellor Audrey Turner has had a really positive outcome with a series of cases handled by the Telecommunications Industry Ombudsman (TIO). She notes that:

“I had a client with an intellectual disability who had managed to sign up for 7 contracts for mobile phones; 3 with Telstra, 2 with Optus and 2 with Vodafone (signed up on behalf of friends who were under 18 years old). A complaint was lodged with the TIO as a whole regarding the process of allowing people to sign for minors and listing the minor as the “main user”.

The complaints were separated and dealt with individually, and all have been granted waivers.” [Eds. Note: What a great result. Well done Audrey and the TIO)].




News, views and information on what’s happening in financial counselling around Australia.

New South Wales

Financial Counsellor Training Course begins in February

The Salvation Army’s financial counselling arm, Moneycare, will be running a financial counsellor   training course beginning February 6, 2008, and running for a day per week through to July.

The course, which has been made possible by a NSW Office of Fair Trading grant, is free of charge to participants and is based on the cutting edge, purpose-built, Financial Counsellors Association of NSW (FCAN) Training Package.

The course will be held in Sydney city (or the inner west) close to public transport, and positions will be limited.

Further enquiries should go to Tony Devlin on (02) 9266 9587 or at tony.devlin@aue.salvationarmy.org.

Dennis Borham goes rural

Veteran NSW financial counsellor, Dennis Borham, has abandoned city life for the more leisurely precincts of beautiful Bungonia. Dennis’s many friends can contact him at his new address:

Dennis Borham
78 Gumnut Crescent
Bungonia Heights, NSW, 2580.

Queensland

Mackay Regional Financial Counselling Service has a new financial counsellor who will be commencing work on 10th December 2007. Jenny Bye has previously worked in financial institutions and also has counselling skills. She will undergo a week’s intensive basic financial counselling training with Jennifer Gracie in January. We welcome Jenny to the CFC program.

SIRP News

Most SIRP-funded services are dealing with similar   issues at the moment. Foremost is the fact that funding ceases at the end of the current financial year, and so the services need to address current demand and community expectations whilst also winding back the service in preparation for the closure of this funding source. The SIRP funding has allowed key services in Queensland, NSW and WA sugar growing areas to provide outreach to previously unserviced areas, and community expectations regarding those services has increased correspondingly.

Another issue is that unseasonal rain in Queensland has created further financial pressures in affected areas and may also lead to a drop in sugar prices. If such a drop does occur, many workers in sugar and allied industries will be adversely affected.

In addition, sugar growers continue to be affected by the drift to the mines. The mining boom has meant that mining jobs are paying pretty good money, and it is thus hard to recruit workers to work on sugar farms.

Financial counsellors funded under the SIRP program are reminded that Jennifer and Wayne are available for assistance on 1800 647 409.

Other News

Contact details for new Westpac Hardship section

Westpac now have a new Hardship section that Financial Counsellors can contact on the following  numbers:

Financial Solutions
Phone 1800 011 313
Fax (08) 8177 7264

Or at the following address:

Westpac: Attention: Financial Solutions
GPO Box 1400
Adelaide SA 5001

The new service is for use by Financial Counsellors only. Financial Counsellors will need to send a completed ‘client authority to act’ to Financial Solutions. When this has been received, the Financial Counsellor can phone the section. Westpac’s aim is for matters to be resolved on the spot, rather than the financial counsellor having to make an appointment  or return calls.

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In the Media

Smokers go for broke while quitters save

Original story by Bellinda Kontominas

Quitting smoking might be hard but it keeps people from going broke, a study of almost 2000 Australians has found.

The study, by the Cancer Council Victoria’s Centre for Behavioural Research in Cancer, has for the first time measured the financial consequences of quitting smoking.

It found that those who quit were 42% less likely to experience financial stress than those who kept smoking.

The authors of the study, published in the American Journal of Public Health, suggest that quit-smoking campaigns should target poorer people who are hardest hit by the cost of cigarettes.

Using data from the Household Income and Labour Dynamics in Australia Survey (2001-04), researchers identified 1747 people aged 18 and over who smoked in 2001 and either quit or continued to smoke until the end of the study.

Financial stress was measured by whether they had difficulty in the previous six months paying bills, mortgage or rent on time; had pawned or sold something; went without meals; were unable to heat their home; or asked for help from friends or welfare.

Whether they could raise $2000 within a week in an emergency situation also determined if they were under financial stress.

Sydney Morning Herald 14.11.2007

Defaults on loans soar in rural areas

Original story by Jacob Saulwick

“Borrowers in NSW marginal electorates are defaulting on “dramatically” more loans than they did last year, indicating a rising tide of financial stress, credit check figures show.

The biggest increases in borrowers not being able to meet credit card, personal loan and mortgage payments are in drought-affected rural regions and the “mortgage belt” in Sydney’s west.

In the federal seat of Calare in the central west, there were 77% more defaults than last year, the figures, released by credit check company Veda Advantage yesterday, show.

The general manager of information services and solutions, Erica Hughes, said the figures highlighted an alarming trend towards credit difficulties and a growing debt divide throughout regions of Australia.

“This study demonstrates that a significant number of people living in regional NSW are struggling to repay the credit they owe – a rise in defaults of almost 60% over the previous year indicates the situation is getting desperate for some,” she said.

The number of registered credit defaults in Chifley, which includes the suburbs of Rooty Hill and Blacktown, rose by more than 50% on the previous year, with many homeowners grappling with the vexed combination of rising interest rates and falling property values.

In the marginal Liberal seat of Lindsay, held by 2.9% by the retiring Jackie Kelly, defaults climbed by more than 47%.

Across all national electorates, the average rise in   defaults was 35.5%.

As well as Calare, default rates in the rural seats of New England, Riverina, Page and Richmond in NSW all doubled or nearly doubled the average rate.

In western Sydney, the number of credit defaults jumped by more than 40% in Dobell, Macarthur and Prospect.

The default rate in Sydney as a whole rose by 35% in the 2007 financial year compared with the previous year.”

Sydney Morning Herald  31.10.200

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