Sharkwatch magazine December 2011

Inside this issue:

Notes and notices

Do you have any cases with big telco bills?

I am very keen to hear about cases where financial counsellors have clients with very large telco bills, especially if the size of the bill deterred the client from seeking assistance from the Telecommunications Industry Ombudsman (TIO).

As a consumer representative on the TIO council, I am often asked for input and advice from Australian financial counsellors, who are seen by the TIO as the key consultation group on matters related to low income and disadvantaged consumers. At the moment the TIO is keen to acquire information that can help them decide whether their ‘monetary limits’ are appropriate.

What are the TIO ‘monetary limits’?

The TIO constitution sets the monetary limits at which the TIO can operate. The TIO has the authority to make Binding Decisions or “Determinations” (decisions the telecommunications company is legally obliged to implement) up to the value of $30,000. The TIO can also make ‘Recommendations’ (which are not binding) up to the value of $85,000.

How can financial counsellors help?

From the consumer perspective, financial counsellors have seen a huge increase in the dollar amount of high end telco bills since the advent of the next generation mobile broadband network, and the move of low income clients away from fixed line phones to mobile phones. Sometimes these exceed the TIO limits.

What I need to know from financial counsellors is how many clients they have with very large telco bills (i.e., that exceed $30,000).

I am especially interested in cases where the financial counsellor and/or client have decided not to approach the TIO with a complaint because their claim exceeded either the $30,000 determination limit or the $85,000 recommendation limit. That is, cases where you and/or a clients have not approached the TIO with a telco problem because the TIO monetary limits were too low.

The strongest evidence to extend the TIO monetary limits would come from evidence that some consumers are not able to access assistance from the TIO because the TIO monetary limits are too low.

If you have such a case (or cases) could you PLEASE email me at (wayne.warburton@mq.edu.au) as soon as you can with details?

Thanks everyone.

Wayne Warburton
National Financial Counsellors’ Resource Service

Department of Human Services to administer early release of superannuation

From November 1st, 2011, the Department of Human Services (DHS) took over the administration of the early release of superannuation benefits on compassionate grounds from the Australian Prudential Regulation Authority (APRA).

Although there is a new email address (ERSBenquiries@humanservices.gov.au) and a new fax number (1800 228 455), applications will continue to be assessed on the same grounds, and applicants still use the same phone number (1300 131 060). Although there have been some changes, the net effects will be minimal for our clients and applicants do NOT need to take any action - DHS notes that all applications continue to be processed as normal.

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.

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.

Victims compensation in NSW

Faith Boehm
Rural Financial/Gambling Counsellor
North & North West, New England region

Many thanks to Terri King solicitor for her Legal input to this article:

Victims compensation

Victims Services is a part of the Department of Attorney General and Justice in New South Wales. Victims Services aim to provide support and information to victims of crime in NSW.

Often victims of violence also experience financial hardship. This may be a result of medical expenses, damaged property and relocation costs. In matters of domestic violence, the perpetrators regularly accrue debts the victims may find themselves responsible for; such as telephone bills, joint personal loans and credit cards.

Who is eligible?

lf a person has been injured by an act of violence in NSW, they may be eligible for an award of compensation. The Victims Support and Rehabilitation Act 7996 provides a schedule of injuries under which a victim of an act of violence can make an application for compensation.

There are many varied injuries detailed in the schedule, including the unique categories of domestic violence, sexual assault and psychological injury. Other injuries vary from burns, scarring, sprains, fractures and loss of vision to loss of limbs or eyes. Each injury is assigned a standard amount of compensation. To be eligible to make a claim an Applicant's injuries must amount to at least $7,500. A maximum amount of $50,000 may be payable to an Applicant for an individual act of violence. Special compensation is also available for immediate family members of a homicide victim.

Are there Limitation Periods?

A victim of an act of violence must make an application for Victims Compensation within 2 years from the date of the act of violence occurring. However the legislation acknowledges that victims of domestic violence and sexual assault are unlikely to disclose the incident within this time frame due to the nature of the violence. Consequently an application can be made to seek leave to apply out of time: that is, lodge the application outside of the limitation period.

How can an application be made?

An application can be lodged online, by fax or post. An applicant is able to complete an application on their own or they may seek the assistance of a legal practitioner. Most Community Legal Centres in New South Wales will take carriage of a Victims Compensation Matter. All services provided by CLCs are at no cost to the client.

What if the violence wasn't reported to the Police?

A victim of an act of violence is able to make an application for Victims Compensation regardless of the matter having been reported to the Police, although a Police Report will dramatically strengthen an applicant's claim.

What happens after an Application is lodged?

Once the application is lodged, Victims Services will allocate the Applicant an approved counsellor. Each Applicant is eligible to an initial 10 hours of counselling. Upon application this may be increased to around 20 hours, dependent on the Applicant's needs. Dependent on the injury claimed the applicant may be required to attend an appointment with an Authorised Report Writer, who assesses the psychological impact of the violence on the Applicant.

Do you need to support your claim with evidence?

Following this it is necessary to gather evidence to support the Applicants claim. The duty lies with the Applicant or their legal practitioner to establish that the Applicant has been a victim of an act of violence, and that a compensable injury has been sustained. The evidence can include Police Reports, Court Reports, Medical Reports, Counsellors Reports, Statutory Declarations from family and friends, a Victims Impact Statement, Education Records and so on.

Who decides if your application is successful?

The matter is listed for determination by Victims Services, whereby written submissions and evidence are considered by the Assessor. The Assessor provides their decision in writing to the Applicant. The Applicant may accept the determination or appeal within, specified time frames.

Does the Perpetrator have to pay the compensation?

If the perpetrator of the act of violence was convicted of an offence relating to that act and the Applicant's claim is deemed successful; Victims Services will try to recover that sum from the perpetrator. This process is known as restitution.

Pay day lending: The debate hots up

Wayne Warburton
National Financial Counsellors’ Resource Service

Just three months ago, Richard Brading noted two practices by pay day lenders that he had encountered at Wesley Community Legal Service (Sharkwatch Vol 12, No. 3). Both were practices that seemed designed to take transactions outside of current consumer credit laws (and thus bypass interest rate caps), one involving an undisclosed cheque cashing fee and the other the mandatory purchase of very expensive DVDs, the purchase of which also attracted interest.

Shortly after Richard’s story, a number of other stories about pay day lenders selling these DVDs surfaced, and then other practices have also come to light. Before looking at the response of financial counsellors and of Financial Counselling Australia, let’s examine three recent stories from the mainstream press that provide an interesting background.

Stories 1 & 2: by John Rolfe & Rosemarie Lentini (‘The Public Defender’) Daily Telegraph, 27.10.2011

Payday lenders Cash Converters and City Finance fight Shorten reforms

THE country's biggest payday lender has hired a lobbying firm chaired by a former federal treasurer as it seeks to prevent or at least tone down a looming law change.

Cash Converters has engaged GRA Everingham -- led by John Dawkins, treasurer in the Keating government -- ahead of a vote on changes to the National Consumer Credit Protection Act.

We have an email from GRA Everingham to a federal senator saying the changes "would, if not amended, have a detrimental effect on Cash Converters' personal lending business".

Cash Converters shares fell 40 per cent after Assistant Treasurer Bill Shorten proposed capping charges at a 10 per cent up-front fee plus 2 per cent a month. At the moment some states, such as WA, don't have a cap. In NSW, it's 48 per cent a year. The market fall has reduced the 140-store chain's worth by nearly $100 million.

The email says: "Cash Converters are keen to brief you on the impact of the proposed legislation on its business."

It then sets out the general manager's availability during a visit to Canberra.

Cash Converters wants the up-front fee raised to 28 per cent, along with other changes that would deliver higher returns. The company is struggling in NSW because this state has the toughest restrictions on payday lenders. Victoria also presents problems. There, a disability support pensioner has alleged in court Cash Converters broke the Act when it gave him at least 64 short-term loans over three years.

Whether or not Mr Dawkins' team manages to persuade his Labor kindred in Canberra remains to be seen.

Mr Shorten seems to have little time for the industry -- his office has no record of a meeting with Cash Converters.

We know the company got a hearing from the Coalition, but the office of Liberal Senator Mathias Cormann, who has carriage of the issue, wouldn't say if he had met with the general manager recently. Nor would independent MP Tony Windsor say who he'd met. Other crossbenchers didn't return calls.

Cash Converters would not comment on its lobbying.

Public Defender is not suggesting it or GRA Everingham has done anything wrong.

Our opinion is that all payday lenders do more harm than good.

No credit in firm's forced DVD deal

A Sydney pensioner who sought an $800 loan from payday lender City Finance to buy Christmas presents was forced to pay an extra $400 for Manage Money DVDs.

In April she went back to City Finance to borrow $1000 for a trip to the Gold Coast. She had to fork out another $400 for the same DVDs.

Both times City Finance levied the maximum 48 per cent interest rate -- not just on the loan but also the DVDs.

The DVDs feature Trevor Russell saying he used to have big credit card debts and owed thousands in parking tickets. Then he learned the secrets of planning and "good self-talk". It was news to Mr Russell when Public Defender told him the DVDs were being sold to City Finance customers. He thought they were free. He was also surprised to learn they were being sold for $10,000 a set at managelife.com.au.

Calls to City Finance were not returned. There is no number for ManageLife.

Financial Counsellors' Association of NSW CEO Michael Bailey said: "These ... companies are out of control. It's gobsmacking they would charge consumers $400 for these DVDs. That they purport to be about managing money adds insult to injury." Mr Bailey said the Shorten reforms would stop practices such as the DVD deal.

City Finance this week began a campaign arguing the reforms are "not workable" and it is "time to listen to the stories of the vast majority who value this credit option".

A spokesman for Mr Shorten said: "We do think that payday lending is a legitimate and necessary part of the economy, but for the status quo -- where payday lenders can be charging customers up to 1000 per cent interest -- to continue is just plain wrong."

Story 3: by Annette Sampson. Sydney Morning Herald, 19.11.2011.

A stronger hand needed to stop debt traps

If there was ever any doubt that a big regulatory stick needs to be taken to the pay-day lending industry, it was well and truly quelched by a recent landmark decision in the Queensland Civil and Administrative Tribunal.

With Federal Parliament's joint committee on corporations and financial services due to report next week on its inquiry into consumer credit, the decision sends a reminder not only of the need for consumer protection from these lenders but also the difficulty in making the protections work.

The Queensland case involved a couple, Rachael Carter and Michael Sinclair, who had two children and had fallen substantially behind with their rent. In 2009, they approached Fast Access Finance (Beaudesert) to borrow $1,000 using their car (valued at $2,000) as security. They signed an agreement that resulted in $1,000 being deposited to their bank account and in return they were required to repay $2,000 at $98 a week for about five months.

The lawyer who acted for Rachael Carter, Bridget Burton of the Caxton Legal Centre, says the charge of more than 300 per cent was well in excess of the 48 per cent interest rate cap imposed by the Queensland government.

Fast Access Finance argued this was not a loan but a contract for the sale and purchase of diamonds. The company argued that the couple had deliberately entered into an arrangement to buy $2,000 worth of diamonds, sell them back for $1,000 and pay off the remaining $1,000 in instalments. As such, it would not be covered by the interest cap. The company claimed it did not provide consumer loans but was a diamond retailer that occasionally provided business loans.

Carter told the tribunal she would not have approved the transaction if she had understood its real nature. It was only later she realised it was not a simple loan agreement.

Evidence before the tribunal showed she and her partner had signed an agreement to buy eight ''loose modern brilliant cut diamonds, 0.10 carats, colour 'H', clarity P1'' at a price of $2,000. They had also signed a document agreeing to sell diamonds with exactly the same description.

But documents were also produced showing that their details had been taken down on a loan application. They had signed a privacy consent form because they had applied to borrow money from the company and a loan forecast report showed the $2,000 loan with $98-a-week repayments and no interest. Security documents had charged their car and the company had obtained a consumer credit report for a $1,000 chattel mortgage from a credit-reporting agency.

According to the decision, both sides conceded the sale of the diamonds wasn't mentioned before signing and no diamonds were shown to the couple. They said they were simply told where to sign and emphasis was placed on the amount payable and the minimum weekly repayments. The couple were not given the documents at the time.

A month after getting the $1,000, Sinclair lost his job and Carter again had trouble meeting rental payments. She eventually broke her lease and incurred a $3 000 debt to the real estate agent and was forced to move in with relatives while she tried to get on top of her debts.

According to Caxton Legal Centre, with default charges and other amounts it cost $2,500 in total to repay the $1,000 ''loan''.

The adjudicator, William LeMass, found in favour of Carter and awarded her $1,500. He said the proposition that this transaction involved the sale and purchase of diamonds was ''so highly unlikely, improbable and implausible as to be a complete fiction''. ''It is ridiculous that a person would wish to enter into a business premises in order to buy a product no matter what it be, to sell it immediately and make a loss,'' he said. Fast Access Finance has said it intends to appeal the decision.

Caxton Legal Centre has forwarded the decision to the Australian Securities and Investments Commission and wants it to stop this sort of practice.

Submissions to the parliamentary inquiry have pointed to apparent lease agreements in which clients are asked to volunteer goods they already own as security for a loan, while the paperwork shows them as leasing the goods from the lender.

Consumer Credit Legal Centre (NSW) provided a case study of a borrower who wanted to borrow $1,000 and was required to ''borrow'' a DVD set on money management for which another $400 was added to the contract. She was then charged the maximum interest on $1,400 rather than $1,000. National Legal Aid cited a borrower who took out a $1,000 loan over nine months. At the end of the first month, she was told she would have to take out a new loan and pay a $150 application fee to keep the loan current. This continued eight times during the next 10 months and meant the loan was not paid off two years later. These are just a taste of the practices cited.

Pay-day lenders argue that they provide a valuable source of finance for low-income earners and Assistant Treasurer Bill Shorten's proposed interest rate cap of 10 per cent upfront plus 2 per cent a month is uneconomic. They say the reforms would force legitimate players out of the market and increase the opportunities for loan sharks.

But credit counsellors, who presumably see more of the fallout from these loans than most, are adamant [these reforms] are needed, to the extent of protesting at Cash Converters' annual meeting in Perth this week.

The question isn't whether a bigger stick is needed but whether it will be big enough.

When financial counsellors report such stories, they are sometimes met with disbelief. However, the word is starting to get out, and, more importantly, financial counsellors are starting to speak out in a coherent way, coordinated by Financial Counselling Australia (FCA).

FCA recently took the important step of surveying over 300 financial counsellors about their experiences with pay day lenders. As Fiona Guthrie, the FCA CEO notes, the level of agreement amongst respondents was simply extraordinary.

Not one of the 310 financial counsellors surveyed believed that pay day lending ‘often’ or ‘always’ improved their client’s situation. In contrast, respondents consistently portrayed clients of payday lenders as generally on low incomes (often Centrelink benefits), desperate for help to meet day-to-day expenses, and vulnerable to exploitation. After borrowing once, many struggle to make the repayments and must borrow again soon after. In this way, many end up trapped in a cycle of debt, and the pay day loan, rather than solving the financial crisis, eventually worsens it. Overall, 99% of respondents noted that the impact of pay day lending on their clients was negative.

It is not surprising then, that financial counsellors are generally highly supportive of the proposed interest rate caps for pay day lenders and others in this sphere. To this end, FCA has sent an open letter to Assistant Treasurer Bill Shorten supporting the proposed Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011, that will have the effect of regulating payday lending. This letter is authored and endorsed by the chairs of every one of Australia’s financial counselling associations, and by 218 individual financial counsellors.

Apart from supporting stronger regulation of pay day lenders and a capping of interest rates, the FCA letter notes the underlying cause—poverty—and argues for welfare reform, continued and increased funding for free and independent financial counselling services and No Interest Loans Schemes (NILS), and for Centrelink benefits to be paid weekly rather than fortnightly. In addition, more flexible Centrelink advances, better industry hardship processes, and the extension of concessions (such as those applying to electricity, gas, water and public transport) to people receiving Newstart, Austudy and Youth Allowance were also suggested.

The pay day lending campaign by FCA and Australian financial counsellors is both timely and important. It is crucial that the caps be made law. However, other issues are less easily solved. How does one solve the loopholes? The DVDs, the diamonds, the undisclosed ‘fees’? This is just the start of what will be a long and drawn out skirmish between government and those who profit from society’s poorest and most vulnerable.

t and those who profit from society’s poorest and most vulnerable.

The law matters: Defence force debt and the security clearance

Richard Brading
Principal Solicitor
Wesley Community Legal Service

Australian Government Security Vetting Agency

Australian Defence Force (ADF) personnel are required to have a security clearance from the Australian Government Security Vetting Agency (AGSVA), which commenced operating on 1st October 2010 (see http://www.defence.gov.au/agsva/).

The AGSVA is located in the Department of Defence but is responsible for all Australian Government security clearances. There are 170,000 active security clearance holders at Confidential or above in Australia, including a wide range of Commonwealth government employees and employees of companies that service the ADF, and workers in other sensitive areas such as airports and wharves.

Security Clearance Inquiries

A security clearance requires an inquiry into, and corroboration of, a person’s background, character and personal values. AGSVA will make the decision about granting a security clearance in accordance with the standards identified in the Australian Government Protective Security Policy Framework.

Holders of a security clearance must report changes in their circumstances to AGSVA, including changes in their financial circumstances. This includes possible financial hardship and court proceedings being brought against them. They must report a change in circumstances using the SVA 003 Change of Circumstances Notification form.

Changes in financial circumstances that must be reported include court debt collection action, and bankruptcy or a debt agreement. It also includes “possible financial hardship”.

Financial Considerations

AGSVA will apply the Personnel Security Adjudicate Guidelines to the information it receives. It is concerned about a person’s failure to live within one’s means, satisfy debts, or meet financial obligations which may indicate poor self-control, lack of judgment, or unwillingness to abide by rules or regulations. Gambling and other addictive behaviours are of particular concern.

However, the AGSVA will take into consideration mitigating factors such as conditions beyond a person’s control. These might include medical problems, relationship breakdown or death in the family.

Guideline C16 identifies counselling for the problem as a mitigating factor, as well as efforts by the debtor to repay overdue creditors or otherwise resolve debts.

Adverse decisions

The consequence of reporting a change of circumstances could be an adverse finding by the AGSVA. The Australian Government Personnel Security Protocol states that the assessing officer must advise the person of the concerns and give them an opportunity to respond in writing. The AGSVA will then decide what to do with the security clearance, including:

Withdrawing the security clearance;
Downgrading the security clearance;
Applying conditions to the security clearance;
Continuing the security clearance.

The person must be notified of any decision to withdraw or vary the security clearance, and any procedures for seeking a review of the decision. While a decision to withdraw or downgrade a security clearance is being considered, the AGSVA will advise the person’s employer (if the employer is a government agency) or the relevant government agency (if the person is contracted to a government agency) to ensure that the person’s access to security classified information is limited.

It is possible that the person’s employer might take disciplinary or other appropriate action in response to events that led to the withdrawal or downgrading of a clearance. Enquiries with the ADF indicated that there was no general policy regarding this. The AGSVA advised that ADF security clearance holders do not automatically lose their clearance if declaring bankruptcy.

Government employees who are dissatisfied with the decision of the AGSVA should first seek a review by the AGSVA. If still dissatisfied, they should appeal to the Australian Public Service Commissioner or the Commonwealth Ombudsman.

Practical considerations

Financial counsellors should check with clients who are ADF employees, or other holders of a security clearance, whether they have lodged an SVA 003 Change of Circumstances Notification form. If not, they should be advised to do so, as soon as it is clear that they are in financial difficulties. The form should disclose that they have sought assistance from a financial counselling service. The financial counsellor should seek an authority from the person to discuss their affairs with the AGSVA.

The fact that the person has consulted a financial counsellor will be viewed favourably by the AGSVA.

The person should be warned that the AGSVA have extensive investigatory powers and will be thorough in their investigations. The client should be informed that the AGSVA will view their efforts to meet their financial obligations favourably.

Bankruptcy should, as always, be the last resort. If bankruptcy does result eventually, then loss of their security clearance is not automatic. It will always depend on the client’s individual circumstances.

The ADF recommends that Financial Counsellors encourage their Defence Force clients to speak with their superiors as soon as possible when they present with financial problems (and therefore potential security clearance consequences). The earlier the ADF member's chain-of-command is alerted to a problem, the better the ADF member will be placed to receive the support of the ADF system (in addition to the counselling and/or advocacy being offered by the Financial Counsellor).

Too many ADF members wait until it's too late before discussing their situations with their superiors.

Also, financial counsellors can contact the ADF Financial Services Consumer Council if they would like guidance in how to deal with the particular circumstances of a client. The Council would be happy to assist them on a no-names basis. Counsellors should contact the Council via the "Contact Us" tab on the website www.adfconsumer.gov.au.

References

1. Fears vetting is political hush-up, The Australian, December 30, 2010.

FCA update

Fiona Guthrie
CEO, Financial Counselling Australia

Payday Lenders

The payday lending campaign continues at a furious pace. One of the highlights since the last edition of Sharkwatch, was the demonstration by FCAWA members outside the Cash Convertors AGM in Perth. Another was the finding by a Queensland Tribunal that the diamond scam, used by some payday lenders to avoid the law, was just that – a scam. The company in this case had to repay funds to the borrower. And the team at FCAN visited Canberra to talk to politicians to shore up support. They have also generated a number of media stories, illustrating the problems with payday loans.

FCA’s survey of the sector “What Financial Counsellors Think About Payday Lenders” was also released. The survey findings were unequivocal – payday loans are harmful. Over 200 financial counsellors, together with every state and territory association, also signed a joint letter to the Assistant Treasurer, Bill Shorten, supporting the current reforms.

Where to from here? The Bill is likely to be debated in the first sitting of 2012. Our focus has to be on making sure it is not watered down. There are two things that you can personally do to help, and both will make a big difference. First, send us a short case study for the www.debttrap.org.au website. Second, write to your local Federal Member of Parliament supporting the reforms. (Contact Peter Mott at FCA – he can help with a draft letter and campaign tips:
peter.mott@financialcounsellingaustralia.org.au).

Free Calls for All

If you ring a 1800 or 13 phone number from a landline the cost is either free or the cost of a local call (around 30 cents). But if you ring from a mobile it is a different story. In these cases, costs can be as high as $1.78 per minute. These costs quickly add up and are particularly tough on the people who can least afford it – those on low, fixed incomes. As financial counsellors know, more and more people rely solely on mobile phones and cannot avoid ringing agencies such as Centrelink or their bank.

That is why our sector has been working with ACCAN, the peak body for telco consumers and ACOSS, in the “Fair Calls for All” campaign.
We want to see change. We were delighted to hear just a few weeks ago that the campaign looks like being a big success. The telco regulator, the Australian Communications and Media Authority (ACMA), announced that it proposes to change the Numbering Plan so that the cost of ringing 1800 and 13 numbers would be equivalent to those from landlines. The ACMA is now consulting on the proposal and we are optimistic that the changes will take effect in about 12 months time.

A number of financial counsellors supported the campaign by sending a short email to the ACMA. You can sign up for email updates on the ACCAN website.

Finally, sincere thanks to the team at ACCAN for their hard work and persistence in this campaign. There is a lot of talk about cost of living pressures – this one decision, will make a big difference in this area for many, many people in the future.

Telco Roundtable

As advised in the last issue of Sharkwatch, the TIO hosted a roundtable of industry and financial counsellors in early November. This was a useful forum and there was a genuine dialogue and engagement from everyone involved. The industry has undertaken to look at its hardship policies and practices and we will meet again in the future.

Diploma

The legal topic in the Diploma was updated to reflect the new laws in 2010. The other units have been restructured and refreshed. This work will be finalised in the next few weeks. A Recognition of Prior Learning Kit has also been developed. This will assist in providing more consistency in these assessments.

FCA Annual Report and Plans for 2012

Our annual report is now available and can be downloaded from the FCA website. The FCA Board meet in early November for its annual strategic planning meeting. The challenge is to prioritise all of the many things that everyone wants to see happen – we’ll provide a fuller report in the next edition.

Do Not Knock

The Consumer Action Law Centre are running a “Do Not Knock” campaign. Go to www.donotknock.org.au to find out how to order Do Not Knock stickers and read about the law that underpins them.

FCA’s role is to focus on door knocking in Indigenous communities, which is the cause of significant detriment. A recent example was a company selling car first aid kits and water coolers that was targeting the Indigenous community in the Pilbara – Fran Manuela, a financial counsellor in the area, helped a number of clients exercise their cooling off rights and we understand the ACCC is now investigating.

FCA will be producing a number of resources for money management workers and financial counsellors.

Tools and Resources Website

Work on the resources website, to be launched early in 2012, is continuing. In one place, you’ll find lots of useful resources such as forms, calculators, standard letters and referral contacts. The task at the moment is to pull all this information together.

Fiona Guthrie
fiona.guthrie@financialcounsellingaustralia.org.au
Twitter: @FCAupdate

A debt-free Christmas?

How can we help our low income and disadvantaged clients to have a joyful Christmas that doesn’t send them into further debt? Saskia ten Dam, a veteran financial counsellor from Townsville Community Legal Service (and the current FCAQ President), has put a lot of thought into this, and suggests the following when shopping for gifts:

Make a list of recipients;
Create a budget with available funds to determine how much you will spend for each recipient;
Think of appropriate gifts before leaving home and write a list of what you think you will buy;
Eat something before going to the shops and take a bottle of water (Christmas shopping can be very stressful and the queues can be very long);
Stick to the list and the budget (using some flexibility to ensure that you remain within budget);
Do NOT hire goods through the furniture rental companies and then give them as gifts;
Avoid using credit if you cannot afford to repay it in the next billing cycle, and do NOT get cash advances on the card for shopping.

Below is the card Saskia and TCLS hand out in the street every year to encourage people to 'give the gift of time'. People who have no cash are encouraged to think about 'giving the gift of time' by mowing someone's lawn, inviting them for a dinner or lunch in the new year, doing some baby sitting, driving someone to an appointment or perhaps going on a picnic together. Saskia notes that everyone can make a gift certificate to use for this purpose.

By planning ahead and perhaps giving the gift of time, many of our clients might be able to avoid the debt traps related to Christmas while still having a joyous festive season.

Wishing you a debt free Christmas

ITSA: Bankruptcy amounts and limits

Description	Limit
Tools: Can keep tools up to this total value if they are used to earn an income	$3,500
Vehicles: May keep vehicles (cars or motorbikes) up to this total amount. Refers to the amount of equity in the vehicle[s] - the vehicle value less the sum owing under finance	$7,050
Credit Limit. The amount bankrupts can borrow without disclosing bankruptcy*†	$5,040
Part IX Debt Agreement Eligibility: Maximum unsecured debts	$94, 530.80
Part IX Debt Agreement Eligibility: Maximum divisible property	$94, 530.80
Part IX Debt Agreement Eligibility: Maximum income level (net income)	$70, 898.10
Registered Trustee Minimum Fee: This fee becomes recoverable if there are insufficient funds from the sale of a bankrupt’s assets or their income contributions	$1,660
Bankruptcy notice: The minimum judgment debt on which a bankruptcy notice can be based	$5,000
Base Income Threshold Amount (BITA) - No Dependents: Bankrupts earning less than this net amount do not have to pay income contributions. The threshold amount increases with the number of dependents, based on a formula linked to the BITA.	$47, 265.40
Official Receiver Allowances: People who travel to meet an ITSA Officer to give evidence or information are entitled to this allowanceτ	$21

Using the Bankruptcy Contribution Calculator

Step 1. Select appropriate column
Use the column for the correct amount of dependents

Step 2. Obtain gross income.
Calculate the client’s gross income.

Step 3. Calculate net income
Calculate the Tax Payable and the Medicare Levy using the guidelines in the tables at the bottom of the page, and work out how much child support or maintenance the client is paying (if applicable). Subtract those amounts, as well as any other legal deductions, from the gross income to obtain the person’s net income.

Step 4. Calculate assessable income (B)
Add any assessable income items that would increase the person’s net income (e.g., fringe benefits), and then calculate the client’s assessed income for bankruptcy contribution purposes.

Step 5. Calculate income in excess of Actual Income Threshold Amount (AITA) (C)
Subtract the AITA amount (A) from the clients assessable income (B)

Step 6. Calculate likely contribution towards bankruptcy.
ITSA will take 50 cents in the dollar of any excess above the AITA. Divide the income in excess of AITA amount (C) by two. This will give the amount of the contribution towards the bankruptcy that ITSA is likely to ask for.

For further assistance, there are actual examples in Sharkwatch Vol. 5 No. 4 - November 2004. This issue can be found at: www.wesleymission.org.au/centres/creditline/sharkwatch.asp

#Disclaimer: Sharkwatch cannot guarantee these figures are correct at time of printing. Call ITSA to verify calculations.

Bankruptcy contribution calculator:
Figures as at October 14, 2011

Base/Actual Income Threshold Amounts (BITA/AITA)
Number of Dependents	0	1	2	3	4	4+
BITA/AITA Per Year	$47, 265.40	$55, 773.17	$60, 027.06	$62, 390.33	$63, 335.64	$64, 280.94
Est. Gross† Per Year	$60. 460	$72, 880	$79, 090	$81, 854	$83.390	$84, 928
Est. Gross† Per Week	$1,163	$1,402	$1,521	$1,574	$1,604	$1,633
Est. Net Per Week	$909	$1,073	$1,154	$1,200	$1,218	$1,236
Contribution Calculator
Total Gross Income (Year)
LESS
Medicare levy
Taxation
Child Support
Maintenance
Other deductions
= Net income
PLUS
Fringe Benefits
Other
B = Assessed Income
C Income over AITA (B-A)
D Likely contribution (C/2)

τ Dependents’ Allowable Income is $3,071 € These amounts are higher for senior Australians and pensioners (see ATO)
† Corresponding gross income if the only deductions are tax and Medicare levy and there are no other assessable benefits
* Levy may increase to 2.5% if client’s income is above Medicare Levy Surcharge threshold, plus no private health cover.
threshold and the client does not have private health cover (see www.ato.gov.au for more details)
insurance cover

Base Tax Rates (from July 1 2011; less Medicare levy)

Taxable Income	Tax	% on excess
0	0	0
6,000	0	15.00%
37,001	4,650	30.00%
80,001	17,550	37.00%
180,001	54,550	45.00%

Medicare Levy* - 2010-2011 rates

Income€	Medicare Levy (%)
<18,838	0
18,839-22,163	Reduced-ATO calculate
>22,163	1.5%*

See ATO website www.ato.gov.au for full details about Medicare levy exemptions and surcharges

Round up

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

New South Wales Update (FCAN)

New CEO
Six weeks ago, I started as FCAN’s first CEO. So far, I’ve found the experience both immensely rewarding and very challenging.

Financial counsellors are a wonderful group of people to work with – they are extraordinarily hardworking, with a seemingly indefatigable determination to help people doing it tough. The FCAN membership, Executive Committee and office staff have all been incredibly supportive, and I’m looking forward to working with them well into the future.

I can think of no better way to earn a crust than by leading an organisation like FCAN. By publicly representing NSW financial counsellors, supporting their ongoing professional development, and training and accreditation new recruits, we play a vital role in helping the sector to grow, professionalise and stay focussed on serving our clients.

Payday lending campaign
During my first week in the job, a Federal Joint Parliamentary Committee conducted hearings on new reforms to payday lending laws. The proposed legislation would introduce a national cap of 10% upfront and 2% per month on payday loan fees and interest charges.

While we already have a 48% per annum cap in place in NSW, some payday lenders have developed quite sophisticated schemes for generating additional profits. With the help of Wesley Community Legal Service and CCLC, FCAN brought one such scheme – which requires borrowers to pay $400 for a set of ‘money management’ DVDs when they take out a loan – to public attention through The Daily Telegraph [Eds Note: See also Sharkwatch Vol. 12, No. 3 where this issue was first raised].

The proposed new laws would deal with these kinds of arrangements and other practices detrimental to financially disadvantaged people. We are therefore working hard to do our bit, joining with a multitude of other financial counselling and consumer advocate organisations to campaign for the proposed new laws.
On 2 December, the Parliamentary Committee released its final report. Early on, we had heard rumours the Committee was set to ditch the proposed cap. But after some intense lobbying from FCAN and other campaign partners, they effectively made no decision, recommending only ‘further consultation’. The ball is now in the Federal Government’s court. FCAN will keep up the fight.

Building FCAN
FCAN is very fortunate to have a large, diverse and active membership. One of my key goals as CEO is to build on this strength and get more members actively involved in the organisation. Thankfully, work on this was already underway well before I started.

In September, a successful conference in the Hunter Valley saw hundreds of financial counsellors from across NSW come together to share ideas and learn new skills. FCAN Members Nicole Hume and Kathe Lenehan then set up an FCAN Facebook Group. So far, 47 members have joined, and the Group is enabling members to privately seek information from each other and share ideas. Similarly, our Creditor Liaison Committee is making tremendous headway in building better connections with creditor organisations. So far, the Committee has met with representatives from the NAB, ANZ, CBA, Creditcorp and Citibank.

To build on this work, I’ve asked members to join newly-formed FCAN Subcommittees. This includes a Policy and Procedures Committee to drive governance reform, a Publications and Events Committee to put together a journal and organise events like our conference, and a Rural and Regional Committee to provide a voice for members who live and work outside of Sydney. The response to date has been great, and I’m really looking forward to getting these committees up and running in the New Year.

Some sad news
FCAN Training Manager Jennifer Gracie has decided to retire, and will finish up with FCAN on 16 December. Jennifer has been a key part of FCAN and her departure is a big loss for the organisation.

Jennifer, FCAN thanks you for your service and wishes you all the best in your future endeavours. It will be hard – if not impossible – to fill your shoes.

Mike Bailey,
CEO, FCAN

Queensland Update (FCAQ)

Consumers in Queensland are experiencing the best and worst of the three speed economy. Caseworkers are not seeing any slow down in demand and the matters presenting have certainly moved into the middle tier, with numerous clients seeking assistance to 'save their homes'. The increased cost of energy is also forefront in the mind of our sector, with energy affordability becoming a major issue as the Queensland Government provide no concessions to anyone other than pensioners and seniors card holders. This means that anyone living on an allowance from Centrelink in Queensland receives no concession for energy or transport other than what is provided by the Federal Government.

The ongoing issue of funding in Queensland poses great risks to our sector and we await a commitment from the State government to provide recurrent funding to this sector. Organisations currently funded by the State government need to be assured that they can retain the staff who are undergoing training to attain the Diploma, and offer job security into the future. The State government also needs to extend funding to areas of high need that are currently un-serviced on a regular basis. The Queensland State election is due early in 2012. At this time it is generally believed that there will be a change of government and the FCAQ will by lobbying both major political parties to make a long term commitment to funding for the Financial Counselling sector as part of their policy platform.

A recent audit of the State membership received a 60% response and of those respondents only 50% had attained the Diploma. Queensland needs more qualified financial counsellors and the State government needs to make a long term commitment to the sector to enable all organisations to retain and support staff appropriately. The FCAQ congratulates all its members on the hard work they undertake providing services to both their local communities and on an outreach basis to other communities (sometimes over 700 kms distant from their home base).

Saskia ten Dam
FCAQ President

Western Australia Update (FCAWA)

2011 has seen some highly significant developments for the Financial Counsellors’ Association of WA and its members.

The day to day operation of the Association includes the following:

Represent members’ interests at various relevant fora
Facilitate and oversee training programs
Establish, monitor, promote and improve practice standards for financial counsellors
Provide and maintain a locum service to support financial counsellors by way of the Financial Counselling Hotline
Lobby for the provision and maintenance of adequately funded financial counselling services
Raise recognition of the brand, raise awareness of the profile and strengthen influence to benefit financial counsellors

Significant activity for the year occurred in three main areas: Membership matters, funding and sustainability arrangements and branding, profile and influence.

The 2011 Conference held in September was widely regarded as a success. Using the Keepad Data System to gather information about our members further strengthened our lobbying capacity and we learnt, for example, that 32 % of the membership had one year or less experience. This reinforces the growing necessity for targeted ongoing training.

The Association was happy to sponsor 11 members to attend the Financial Counselling Australia Conference held at Coogee NSW in May. These members represented geographical areas of Western Australia and benefit from participation at national level and the opportunity to network with colleagues from other States.

FCAWA has experienced increased media presence and is now frequently asked for comment on financial hardship issues experienced in the community. The Association has had comment published nationally in the Financial Review and The Australian and locally in The West Australian, The Sunday Times and The Southwest Times. Radio interviews have been conducted on ABC Radio National, ABC 720 and ABC Regional. Television exposure has included ABC’s ‘The 7.30 Report’ and Channels 7, 9 and 10 News.

The ‘rally’ outside the Cash Converters AGM on Wednesday 16th November 2011 was highly effective and it was quite a surprise to discover how so few [less than 30] with the use of bright colour and noise could attract so much attention.

FCAWA looks forward to working with all the other States and FCA again next year. Much has been achieved already, although so much remains to be done. WA is up for these challenges.

In the media

Casino giveaway takes away

Story by Heath Aston

A WOMAN walks into the casino to pick up a free wok offered to her in a promotional giveaway. She leaves two days later having lost $30,000 in a 48-hour poker machine bender.

At one point, staff at The Star had to clear cash out of the machine she was playing because it could not accept any more $100 notes.

The 49-year-old woman, from Rosemeadow, in Sydney's south-west, was left ''devastated'' and with a ''gambling hangover'' when it dawned on her she had just thrown away a large part of her dead husband's financial legacy in her gaming binge.

The NSW government is now investigating whether inducements can be banned.

As well as taking home the MasterChef wok, the woman also came into the casino on another date to pick up a digital camera, valued at $229, and gambled again. The woman, a payroll officer, who spoke to The Sun-Herald but does not wish to be identified, continued to gamble at the casino after her heaviest losses last year. The next time she went to the casino, she stayed for the weekend, courtesy of a free hotel voucher.

Records kept by The Star's ''Absolute Rewards'' program reveal that the casino management knew exactly how much money she had lost since joining. Her ''play history'' showed she lost $3,269 in 2008, $16,438 in 2009 and $57,965 last year.

The casino's customer relations officer, Klara Bartos, recommended The Star's responsible gambling committee refer her to BetCare, Tabcorp's responsible wagering initiative. The Sun-Herald understands that she was assessed as not being a problem gambler.

The woman's story has made it all the way to the Minister for Gaming, George Souris. On Friday, he directed the Casino, Liquor and Gaming Control Authority to investigate whether the offering of inducements to get regular gamblers through the doors on certain days complied with the strict legislation governing the casino's operation.

In October, Mr Souris put a stop to NSW clubs offering cash as incentives to keep people in front of the pokies late into the night. St Johns Park Bowling Club at Fairfield had been handing out $100 bills from 2.30am to attract gamblers.

Mr Souris said he had asked the authority ''to investigate the specific example provided and report to me on whether there has been any breach or irregularity of the casino licence or responsible gambling practices''.''I have also asked the authority to investigate whether the casino generally is operating within its act regarding promotions,'' he said.

The use of free promotions to lure punters into the casino on specific days was implemented by The Star's new US-led management team. The casino chief, Larry Mullin, imported the idea from Atlantic City.

A spokesman for The Star said its rewards program was the same as loyalty programs at other casinos around the world to reward loyal recreational players and ''based on the same principle used by a range of businesses including airline and car rental companies''.

''While The Star does not comment on the circumstances of individual customers, responsible gambling is a fundamental priority,'' the spokesman said. He said the casino had two responsible gambling managers and more than 80 responsible gambling liaison officers, and was recently recognised as being an industry leader in responsible gambling by the Dow Jones Sustainability Index.

The anti-pokies campaigner Tim Costello said the free inducements to gamble were ''morally wrong [and] should also be wrong in regulation''.

''This is a highly dangerous product and offering inducements to use it should be illegal. Tobacco companies are not allowed to offer inducements any more, and for very good reason.''

The Sun Herald, December 4, 2011

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