Inside this issue:

• Notes & Notices
  
• Problem Gambling and Overspending: Pre-commitment and Harm Minimisation
  Richard Brading and Wayne Warburton
  
• Depression and Spending
  Wayne Warburton
  
• The Law Matters:
  
• Cost Orders and Bankruptcy
  
• Tricky Contracts
  Richard Brading
  
• Bankruptcy Up date
  Jan Pentland
  
• External Dispute Resolution Schemes Merge
  Jan Pentland
  
• NSW Fair Trading Minister Launches Hardship      
  Variation Fact Sheet
  
• When is a Centrelink Payment Protected From a Garnishee or Attachment Order?
  Richard Brading and Wayne Warburton
  
• ASIC Acts on GE Money’s Insurance and Debt Collection Practices
  
• Vale John Haywood
  
• Round-Up
  
• News, views and information about financial counselling around Australia
  
• Vale Reverend Canon Dr Christopher Newell

   Notes and Notices

Telstra migration begins

Robert Morsillo, Telstra Group Manager (Consumer Affairs), has reminded us that Telstra’s new billing and customer care systems are coming online now, and the migration of Telstra customers from the old system to the new has now begun. Selected customers are starting to receive notification letters with their final old system bill advising them of upcoming changes from their next bill.

Telstra have put online a range of pages providing information, Frequently Asked Questions pages, and  examples of the new bill formats. These include:

• http://telstra.com/billchanges
  
• http://www.telstra.com.au/telstrabilldemos
  
• https://telstra.com/myaccount/helpinfo.jsp
  
• https://telstra.com/myaccount/helpinfo.jsp and click on Account & Bill Changes

Financial counsellors may benefit from browsing these pages to become familiar with the changes.

Women Understanding Money Kit

The Financial Literacy Foundation has recently launched a kit of 14 information sheets called Women Understanding Money. It is available by Phone (02 6263 2111) or by email to the following address:                  financial.literacy@treasury.gov.au. More information is available from: http://www.understandingmoney.gov.au.

More contact details for bank hardship teams

Here are the contact details for the hardship teams for some major banks. Sharkwatch thanks Elizabeth Terry from Wesley Gambling Counselling Services for sending in the ANZ number. Remember that most numbers are for financial counsellors only, and are not to be given to clients or others without specific bank approval.

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.

ANZ Bank Financial Hardship Team.
Telephone number is 1800 351 548 (option 2)
Fax number is 1800 010 057.

Westpac Bank Solutions Team
Previously only contactable by appointment.
Now financial counsellors have a dedicated number to ring: 1800 011 313

Westpac Bank Assist Team
For clients who are in difficulty but are not yet past due on their Westpac payments, then the Assist team are the best group to contact, on 1800 067 497.

Commonwealth Bank Solutions Team
These contact details are for both financial counsellors and CBA customers experiencing hardship.
Telephone: 1300 720 814
Fax:           (02) 9841 6670
Email:        ccsolutions@cba.com.au
Hours of operation
8.00am to 9.00pm Monday to Friday
9.00am to 2.00pm Saturday

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.

Citibank Debt Management Solutions Team
This is the team that looks after customers experiencing financial difficulty. All issues related to hardship should be directed to them.
Telephone: 1300 662 030
Fax: 1300 550 218
Address: Citibank, GPO Box 3913, Sydney NSW 2001

Citibank Customer Advocacy Unit
Complaints must first go to the area of the bank you were first dealing. If they are not resolved at this level they can be taken to the Customer Advocacy Unit
Telephone: 1300 308 935 
Fax: (02) 8225 5131 

   Problem Gambling and Overspending: Pre-commitment and Harm Minimisation

Richard Brading
Principal Solicitor, Wesley Community Legal Service

Wayne Warburton
National Financial Counsellors’ Resource Service

The vast majority of people know that they will lose money gambling, yet paradoxically, 82 per cent of Australian adults gamble, and average gambling   expenditure is $20 per adult each week. Some people don’t gamble at all, and others are gambling more than they can afford. We are a nation of losers! 

At the same time, consumer debt has risen to an all-time high in Australia, and continues to rise steeply. We are a nation of debtors!

Both problem gambling and excessive spending/debt are serious problems in Australia, and, of course, there are many ways in which the two are linked. Given the near impossibility of winning consistently, excessive gambling expenditure can be thought of as an example of deficient financial literacy. Simply put, problem gamblers often spend more than they can afford to fund a consistently losing enterprise. To fund this enterprise, problem gamblers often accrue debts that they struggle to repay. Indeed, borrowing money “to relieve a desperate financial situation” is one of the diagnostic criteria for pathological gambling in the DSM-IVR1.

Gambling and over-spending are also similar in that they both involve a failure of impulse control. Such a failure is particularly likely during periods of anxiety, stress and depression, whether one is an excessive spender or a problem gambler (see article on spending when depressed, page 7 this issue). In recognition of this pattern, the DSM-IVR has a further diagnostic criterion for pathological gambling that involves gambling “as a way of escaping problems or of relieving a dysphoric mood (i.e., feelings of helplessness, guilt, anxiety, depression)”1.

It is interesting, given this overlap between excessive gambling and excessive spending, that pathological gambling is considered to be a psychiatric disorder in the DSM-IVR, but that compulsive spending is not. Perhaps the DSM-V, which is currently being put together, will take problem spending more seriously.

It is fortunate that the same pattern is not repeated in Australian public health responses, which have paid increasing attention to debt, overspending and    financial literacy, as well as giving significant consideration to issues surrounding problem gambling. Over the past decade there have been a range of public health responses to problem gambling, and these can be grouped into three categories:

Primary interventions such as pre-commitment strategies that attempt to protect people from problems before they develop;

Secondary interventions that attempt to limit the degree of harm once a problem has developed; and

Tertiary interventions such as specialist counselling for those problem gamblers who may have reached a crisis before seeking help. 

This set of categories is also useful for thinking about strategies for dealing with debt and over-commitment. Primary interventions would include financial literacy training and education, secondary interventions would work at the level of strategies that protect consumers and limit spending, and tertiary interventions would include specialist financial counselling services for those experiencing a financial crisis.

Until now, most resources have been allocated to tertiary interventions.  The problem with tertiary interventions (such as gambling counselling) is that when gamblers have lost their savings, job, marriage and family, there is only so much that can be done to help them on the road to recovery.

In the future it is likely that greater resources will be dedicated to pre-commitment and harm minimisation strategies to help gamblers and consumers to better manage their spending on all items, including gambling. 

Pre-commitment strategies

There are surprising similarities between the direction of primary prevention strategies for problem gambling and financial literacy strategies recommended for  general financial wellbeing. 

A recently published literature review of the research into prevention of problem gambling2 illustrates the move towards the development of preventative and harm minimisation strategies, and away from the current emphasis on treating those who are seriously addicted to gambling.  The research considered the options for improving general community attitudes and reducing misconceptions about gambling, improving knowledge about gambling, improving gambling behaviours, and general coping and problem resolution skills. The researchers recommended school-based education for students aged between 12 and 14 years old by a combination of video, activity and lecture. The students would be provided with information about gambling, particularly the risks associated with gambling, and helped with the development of coping and problem-solving skills when faced with high-pressure gambling situations.

As well as school education, there is also interest in  developing warning messages and educational workbooks as primary intervention strategies. 

The recommendation of schools-based responsible gambling education corresponds to the recommendation of the Consumer and Financial      Literacy Taskforce to the Federal Government in 20043. The Taskforce recommended the integration of general financial literacy into the school system.  Gambling is a form of consumer expenditure, so the responsible    gambling education training could be incorporated into a wider educational strategy.

The National Framework on Problem Gambling 2004-084 includes “public awareness, education and training – to promote a greater understanding of the nature of the gambling product, the potential for harm and the availability of help and support.” In practice this has meant:

• Most States and Territories have had media campaigns highlighting the dangers of problem gambling;
  
• All States and Territories have produced a range of printed materials such as brochures and posters for placement in gambling venues with information about responsible gambling;
  
• South Australia has introduced a school-based gambling education program on the risks and impacts of gambling called “Dicey Dealings”. Other States and Territories will also be considering school-based gambling education.
  
• There have been limited initiatives in responsible gambling education in the workplace such as the Oz Help Lifeskills program for apprentices and workers in the building and construction industry.

General advice provided in brochures and websites for gamblers recommend such basic strategies as:

• Setting a budget including an amount for gambling expenditure
  
• Leaving the ATM card at home
  
• Limiting time spent at the gambling venue
  
• Reducing the frequency of visits to the gambling venue
  
• Take someone with you to the gambling venue/tell others where you are going
  
• Never borrow to gamble

Using a similar approach, many financial authorities issue periodic warnings to consumers about the dangers of overspending.  The Federal                  Understanding Money office and the State Fair Trading offices produce a range of materials in print and on-line to assist consumers better manage their money. The Consumer and Financial Literacy Taskforce recommended the inclusion of consumer and financial literacy into school and vocational     education programs and employer information channels.  Indeed, the current Federal government has made a significant financial commitment to a  primary intervention for debt and overspending, by allocating an additional $10million to financial literacy programs over the coming 4 years. Issues such as setting a budget and avoiding debt apply to general consumer spending as much as to gambling expenditure, so responses to gambling are increasingly in line with responses to general money management concerns.

Secondary interventions for gambling – implications for consumer over-consumption issues

The National Framework on Problem Gambling considered strategies to disrupt the process whereby recreational gamblers become problem gamblers.  The National Framework identified the following:

• Restrictions on the expansion of existing gambling
  
• Responsible gambling practices for gambling venues, such as restrictions on credit and inducements
  
• Venue-based interventions for problem gamblers
  
• Strategies to enable gamblers to limit their expenditure or time spent in the venue

There are loose comparisons that can be made between these harm minimisation strategies and general consumer protection strategies. 

The recent book “Affluenza”5 identifies a link between anxiety, depression and the high value placed by modern Western society on money, possessions, appearances and fame (see also article on depression and spending, p. 7).  

A strong desire for these things is also common to gamblers, who may suffer depression and anxiety when their desires remain unfulfilled, and may respond to these feelings with patterns of over-consumption, including excessive gambling and excessive spending.

This issue of over-consumption is well-recognised in the health area where there are a multitude of health messages about limiting consumption of alcohol, fatty foods etc. Concerns about childhood obesity have led to coercive responses, such as restrictions on what can be sold by school canteens, demands for restrictions on junk food advertising and proposals for             compulsory weighing of children.

As noted above, excessive gambling can also be viewed as a form of over-consumption, which becomes a problem when a person gambles more than they can afford. Similarly, general overspending can be viewed as a form of over-consumption that often leads to people borrowing more than they can afford. Thus, many who over-consume get into trouble by increasing their debt levels.  

This situation is not helped by an Australian credit industry that has been criticised for lending people more than they can afford. In a consumption-driven society that overvalues possessions and money, people will borrow what they can to buy the many things that they want, or to gamble. There is little consumer protection in this regard. The Consumer Credit Code does not provide any effective protection against credit over-consumption. In addition, ATMs located in most gambling venues around the country make it too easy for gamblers to get into debt.

Secondary intervention strategies for problem gambling and overspending

The response to the problem of excessive alcohol  consumption has been a public health approach based on the principle of harm minimisation. This            incorporates the training of bar staff to identify intoxication and then require them to cease supply of alcohol to intoxicated patrons.  While it is easy to spot a drunk, it is harder to identify a problem gambler or excessive spender.

Currently gambling venues in most Australian jurisdictions have no legal obligation to restrict the supply of gambling to problem gamblers because    established wisdom is that it is impossible to identify a problem gambler from behavioural characteristics. Gaming venue staff are currently taught that “it is not possible to identify a problem gambler by physical characteristics or behaviour alone”7 and that this requires “professional psychological assessment”.

Recent research6 suggests that there are many easily observed indicators of problem gamblers in gambling venues. These include gambling every day of the week, gambling for hours without a proper break, large bet size, gambling until all the person’s money is gone.  In fact the full list of observable indicators is such that it would make it pretty easy for gaming venue staff to identify those with a gambling problem.  It is likely that the way of the future will be to require gambling venues to use these indicators to identify those who are     gambling too much and intervene to stop them getting into trouble.  Perhaps a similar approach can be adopted for other forms of excessive consumer    spending.

In a recent report, the Productivity Commission8 is recommending a stronger general consumer protection including the elimination of unfair contract terms and improvements to the Consumer Credit Code.  This would be a step in the right direction but there is much more that can be done in terms of harm minimisation strategies for debt and overspending. These should  include a raft of further measures that make it difficult for lenders to give credit to those who cannot afford it and a system of affordable and well-managed credit for those on low incomes, thus reducing the need for pay-day lenders, loan sharks and the like.

Clearly, for both problem gambling and excessive spending/debt, pre-commitment and harm minimisation strategies are the way of the future.

References and notes

1. American Psychiatric Association. (1994). Diagnostic and Statistical Manual for Mental Disorders-IV Revised (DSM-IVR). Washington DC: American Psychiatric Association. Page 271.
2.  Gray K., Oakley Browne, M., & Radha Prabhu V. (2007). Systematic Review and meta-analysis of studies on early intervention and prevention for problem gambling. Gambling Research Australia.
3.  http://cfltaskforce.treasury.gov.au/content/home.asp.
4.  http://www.facsia.gov.au/internet/facsinternet.nsf/aboutfacs/programs/gambling-gambling_framework.Htm.
5.  James, O. (2007). Affluenza, Random House: London.
6.  Delfabbro, P., Osborn, A., Nevile, M., Skelt, L., & McMillen, J. (2007). Identifying Problem Gamblers in Gambling Venues. Gambling Research Australia Melbourne. (Table 7.1 at p.281).
7.  Delfabbro, P. et al. (2007). p. 46.
8.  Productivity Commission, Review of Australia’s Consumer Policy Framework, (2007). Draft report.

   Depression and Spending

Wayne Warburton
National Financial Counsellors’ Resource Service

In Western societies a great deal of our self-image is tied up in what we have, not just in what we are. When things go wrong in terms of our financial well-being, there are effects that flow on to our feelings and ultimately to our self image. As early as 1890, the prominent American psychologist, William James, noted that losing material possessions had the effect of “a sense of shrinkage of our personality, a partial conversion of ourselves to nothingness” (p. 293)1.

A couple of years ago Jennifer Gracie and I surveyed and spoke to a large number of financial counsellors across Australia. They told us that many clients who were experiencing financial hardship and/or facing bankruptcy seemed to be clinically depressed at early interviews, and often appeared to have a deep sense of shame and humiliation about their situation. On        average, the financial counsellors that we spoke to estimated that about 50% of their clients would probably meet criteria for clinical depression, and that around three quarters (or more) had some degree of depressed mood.

This raises the question of what people do to feel better when they feel depressed. If one were to ask one’s family and friends, the odds are that at least one person (and probably more), would suggest spending more money (retail therapy as my friends describe it), an activity that may bring short term pleasure but can potentially add to any financial troubles. Anecdotally, this seems to be true, but is there any real evidence? Well, as it turns out, there is.

Cynthia Cryder, Jennifer Lerner, and their colleagues, in a just-released paper, term spending when sad the ‘misery is not miserly’ effect2. They have tested this  effect over the past few years and have shown that when sadness is induced in an individual (by showing a very sad video clip), that person will spend 30% more for an item, on average, than someone who has not had sadness induced3. Presumably then, when people are depressed they spend more, and are more at the mercy of unscrupulous retailers and others who would sell us things we don’t need at exorbitant prices.

When trying to sort out why this occurs, Cryder and colleagues put forward a model that goes something like this. People experience an event that makes them sad (such as a financial crisis), and this increases their focus on themselves. The combination of feeling sad and  being more focused on one’s problems leads one to devalue the self (feel more worthless), and this triggers, unconsciously, a desire to enhance the self (i.e., to do something will make one feel better about oneself). When the person is in such a frame of mind, having more valuable possessions will enhance their own sense of personal value. For this reason, the sad person will spend more for items they are about to buy, and will thus spend more overall.

In their laboratory test of this theory, Cryder and colleagues found that those who were sad and self-focused were willing to pay more than $2.50 for a ‘sporty, insulated water bottle’, but those with neutral feelings or who were sad but less self focused would pay less than $1.00 for the same item. It turns out that the key determinant of spending when depressed is the  degree to which the depressed individual focuses on themselves.

All very high falutin’, but what does it mean for us? Well, the take home message for me is that clients who are depressed will probably spend less money if they think less about themselves and their own troubles, and start to think about other things. For example, I have found that volunteering has a very positive effect for clients. When a sad client starts to volunteer, they      usually become less self-focused and depressed, tend to spend less money, and enjoy the benefits of a wider  social network as well as the satisfaction of helping another person.

All food for thought. $63.00 for a hamburger anybody?

—————————————————————
1. James, W. (1890). Principles of Psychology. New York: Holt.

2. Cryder, C. E., Lerner, J. S., Gross, J. L., & Dahl, R. E. (2008). Misery is not miserly: Sad and self-focused individuals spend more. Psychological Science, 19 (6), 525-530.

3. Lerner, J. S., Small, D. A., & Loewenstein, G. (2004). Heart strings and purse strings. Carryover effects of emotions on economic decisions. Psychological Science, 15, 337-340.

   The Law Matters

Richard Brading
Principal Solicitor
Wesley Community Legal Service

   1. Cost Orders and Bankruptcy

A court order requiring the losing litigant to pay the winning party’s legal costs is a separate and independent debt to the main debt.

In most court cases where a defence is not filed, the creditor will obtain judgment for costs as part of the overall judgment.  In such cases it is acceptable for the debtor to simply list the global judgment debt including costs as a single unsecured debt in the Statement of Affairs.

Where judgment is entered against a debtor for an amount plus “costs”, the costs are provable in bankruptcy even if they are not yet quantified by       assessment or agreement.

However, in cases where the original judgment does not include an order for costs, but a costs order is made later after bankruptcy, then that costs order is not provable in the bankruptcy.

In the recent case of Foots v Southern Cross Mine Management1 Mr Foots lost his case in the Queensland Supreme Court and was ordered to pay $2.46 million. At the time of the judgment, the court did not make a costs order. 

Following the judgment, Mr Foots promptly filed a debtor’s petition.  Four months after Mr Foots became bankrupt, the judgment creditor applied to the court for a costs order. Mr Foots opposed the costs application, arguing that because he was a bankrupt, s. 58(3) Bankruptcy Act prevented the creditor taking further court action in respect of a provable debt. However, the Supreme Court judge held that the costs order was not a debt provable in Mr Foots’ bankruptcy, because it was not in existence at the time he filed his debtor’s petition. The judge then made an order that Mr Foots pay the judgment creditors costs. Mr Foots could not include the costs debt in his bankruptcy because it did not exist at the time he filed his debtor’s petition.

Mr Foots appealed to the High Court and lost. The conservative majority judges of the High Court confirmed that a costs order is a separate debt to the main judgment debt. 

Costs are not awarded automatically against the loser - the judge always has discretion about whether or not to make a costs order. It is even possible for judges to make costs orders against the winner of a court case. The High Court confirmed that a costs order can be sought against a bankrupt without the need to get leave from the Federal Court or Federal Magistrates Court under s.58(3).

The majority judges said that if the costs order had been made before Mr Foots filed his debtor’s petition, but the amount of the costs was not quantified until after bankruptcy, it would still have been provable in the bankruptcy2.

In a dissenting judgment, the liberal Kirby J. pointed out that the unsuccessful litigant, Mr Foots, was described by the Supreme Court judge as “thoroughly dishonest” and therefore it would “border on the fantastic” to suggest that he would not be ordered to pay the winner’s costs. He took the view that it is inconsistent to include in a bankrupt’s estate a judgment debt, but not the costs accrued in the proceedings that gives rise to the judgment.

Possibly Mr Foots could have filed a second debtor’s petition after he lost his High Court case. If he did so, he would risk it being rejected by ITSA on the grounds that it was his second bankruptcy within 5 years.

———————————————————————
1 [2007] HCA 56
2 See para 7 of the judgment

   2. Tricky Contracts

Consumers are often annoyed at the way that many businesses send them mass-produced letters changing the terms of their contract, without asking them if they consent.

Sometimes consumers think that they do the same thing back to the business, but this is rarely the case.

I recently had a client who had a debt to a bookmaker. Bookmakers are one of the few remaining gambling providers who are legally allowed to provide credit for gambling. Traditionally a punter would go to the races towards the end of the week and place a few bets.  The punter might well be too inebriated or otherwise indisposed to settle the bets after the races, so the   following Monday became the traditional “settling day”, when the punter would pay for his bets or possibly collect his winnings.

The provision of credit by bookmakers has become a bit of a scam.  I recently received a message on my  mobile phone from a Northern Territory bookmaker offering me $60 in free credits if I opened an account.  This would give me access to credit to wager.

Coincidentally, a client was being sued by the same bookmaker in the Local Court at Darwin. He didn’t have the money to pay his gambling debt, let alone pay for the fare from Sydney to Darwin.  Although he actually was in Sydney when he placed his bets, he was initially sued by a Victorian debt collector in the Melbourne Magistrates Court. He objected to the   jurisdiction of the Victorian court, so the debt collector discontinued the Melbourne proceedings, and started again in Darwin. The bookmaker is licensed in the Northern Territory, where tax and regulation are lower than the big states.  However, the bookmaker is really located in Melbourne. Since my client only dealt with the bookmaker via telephone or internet, there was no problem until the collection process began.

My client actually read the fine print terms and conditions for his internet credit facility and noticed that the bookmaker reserved the right to “vary these   Conditions at any time by notifying the Member of any changes to these conditions. Any bet placed by a Member after he or she has been notified of the changes will be considered as an acceptance by the Member of the changed Conditions.”

The bookmaker gave my client a $3000 credit limit, which he promptly spent on a lot of slow horses. He couldn’t pay by the settling day, and the bookmaker put the debt in the hands of Dun and Bradstreet.

The client then sent the following letter to Dun and Bradstreet:

“As you may already know I am having short term financial difficulty at the moment. I wish to offer you a final payment of $300.00 to settle the account.

By your company accepting the cheque attached for $300.00, you will accept this as the final payment to your account, and you or the bookmaker will not be taking any further legal action or  pursuit the outstanding balance against me.

You may choose not to accept this as final payment to the outstanding account, please do not deposit this chq and return to sender.”

Dun and Bradstreet banked the cheque and threw out the letter.  The bookmaker then commenced the court proceedings for the outstanding balance.  My client filed a Defence on the grounds that by banking the cheque for $300, the bookmaker (by its agent Dun and Bradstreet) had accepted the amount of $300 in full and final settlement. The client then contacted our service and requested assistance. 

Sadly, we had bad news for the client. He was not the first debtor to try this tricky manoeuvre.  We referred him to the case of Amos v Citibank Ltd [1996] QCA 129.  In that case, Mr Amos sent a cheque to Citibank for $1200 claiming it was “in full and final settlement of payment of the sum of $4866.31.”  Citibank banked the cheque but went on to claim the balance.

The Supreme Court of Queensland in Amos v Citibank followed a number of old English cases which dealt with cases such as this. The court held that payment of a lesser amount than an existing debt is not good         consideration and in this case there was no active acknowledgment by Citibank that it would accept the lesser amount in full satisfaction of the debt.   

In addition, the court took the view that the debtor knew that the creditor would not intentionally accept the offer, but simply bank the cheque and lose or throw out the letter. 

So my client was going to lose his case. He found the money to pay the balance of the debt and settled the case.

   AFCCRA Bankruptcy Update

Jan Pentland
AFCCRA representative on the Bankruptcy Reform Consultative Forum

Bankruptcy Reform Consultative Forum

A meeting of the Consultative Forum was held in Melbourne on 7 April. Paul Gillett and I attended to represent consumer bankruptcy issues.

The review of offences in the Act has been completed. ITSA will make a presentation to the AFCCRA Conference on 30 July on the outcomes of the review and proposed amendments to the Act.

The presentation will also report on increased prosecutions and what implications there may be for the clients of financial counsellors. and the issues paper on remuneration of trustees. An update was also given on the implementation of the changes to Part IX of the Act which came into effect on 1 July 2008.

Bankruptcy Congress

Planning for the seventh ITSA Bankruptcy Congress to be held in Sydney in October 2008 is well underway. The Congress will have keynote addresses involving all those attending, and at other times will break into two streams to better meet the interest of registered trustees dealing with complex bankruptcy matters; and financial counsellors and debt agreement administrators dealing with consumer bankruptcies.

I will be making a presentation on the experience of the financial counselling sector with Part IX debt agreements since the amendments to the Act became effective on 1 July 2007.

If you have any cases (either positive or negative) please contact me by phone on 0407 042 483 or at janpentland@hotmail.com.

More information about the Congress including a draft program is available at www.itsa.gov.au. There will be a discounted registration fee for financial   counsellors – more information as it becomes available.   

Trustees’ Fees

A review of trustee remuneration is underway. A discussion paper was released on 23 May and is available at www.itsa.gov.au. Submissions are likely from a number of consumer advocacy groups. If you have any comments I’d be happy to hear them.

The Eastern Access Community Health (EACH)   report ‘Homes at risk: using bankruptcy to collect small debts’ is now available on the EACH website and at www.afccra.org.  This report explores the effect of trustees’ fees on consumer bankrupts with assets, usually the family home. There is a working group discussing the recommendations and how they can be progressed.

If you would like to discuss any of the above, please ring me on 0407 0424 483 or email me at janpentland@hotmail.com. 

   External Disputes Resolution Schemes Merge

Jan Pentland
Consumer Director BFSO Board

As many of you are aware, the three big schemes in external disputes resolution for the financial services industry are taking steps to merge into one scheme, the Financial Ombudsman Scheme (FOS). There is broad support from the consumer movement, the financial services industry, the Federal Government and ASIC.

The Boards of the Banking and Financial Services Ombudsman Scheme, Insurance Ombudsman Scheme and the Financial Investments Complaints Service have resolved in principle to merge the schemes by 1 July 2008. A transitional FOS Board with representatives from the Boards of BFSO, IOS and FICS will hold office until 30 June 2009.

What will FOS deliver for consumers? The aim is that it will be more streamlined and efficient with greater capacity to resolve disputes quickly and fairly. With heightened awareness, FOS will be more accessible for consumers.

You can hear more about FOS at the EDR Forum in Sydney on 29 July, and the AFCCRA Conference on 30 July. Presentations will also be made at state       association conferences.

If you would like any further information, please contact me at janpentland@hotmail.com.

   NSW Fair Trading Minister Launches Hardship Variation Fact Sheet

The NSW Fair Trading Minister, Linda Burney, has released a timely initiative that will be of benefit to NSW consumers — the Consumer Credit Hardship Variation fact sheet. Ms Burney launched the fact sheet as part of her  opening address for the Financial Counsellors Association of NSW (FCAN) annual conference.

The fact sheet describes what a hardship variation is and describes
the steps a consumer should take to apply to the Consumer, Trader
and Tenancy Tribunal (CTTT) in NSW for a hardship variation to a
credit contract.

NSW Fair Trading Minister, The Hon Linda Burney, MP. Ms Burney has been very supportive of  financial counselling in NSW and delighted  everyone by speaking individually to every FCAN delegate after opening the conference. Photo from www. youth.nsw.gov.au/__data/page/1106/Linda_Burney_web_ready.jpg.

Although this fact sheet describes a process specific to NSW, it is
clear that a similar initiative in other Australian states and territories
would be valuable.

The fact sheet includes advice on:

• What a hardship variation is;
  
• Hot to apply for a hardship variation to a credit contract through
  the CTTT;
• When a consumer can apply;
  
• Thresholds for ‘financial hardship’;
  
• What sorts of ‘orders’ consumers should ask for;
  
• What should be brought to the hearing;
  
• Where additional help may be sought;
  
• Contact details for CTTT Registries.
  
• There is also an instructive case study.

Overall, the fact sheet is well-researched, well organised and
written in plain language. Copies can be downloaded from   http://www.cttt.nsw.gov.au/. 

   When is a Centrelink Payment Protected From a Garnishee or Attachment Order?

Richard Brading
Principal Solicitor, Wesley Community Legal Service

Wayne Warburton
National Financial Counsellors’ Resource Service

The law sometimes punishes the prudent and supports the spendthrifts.  This is the case with Centrelink payments.

A judgment creditor cannot garnish a person’s Social Security from Centrelink.  Section 60 of the Social   Security (Administration) Act 1999 states that “a social  security payment is absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise”.

But what happens when that lovely money passes into a client’s bank account, and sits there, waiting to be spent?  Can a crafty creditor drop a garnishee on the bank and swoop up the money before it is spent?

Well, it depends on the debtor.  A person who withdraws the whole of their Centrelink benefit each fortnight so there is nothing left is protected from the garnishee.  But someone who manages to save some of their Centrelink benefit is at risk of losing their savings.

Section 62 of the Social Security (Administration) Act 1999 offers this formula to financial institutions:

Step 1. Work out the total amount payable to the person in respect of the social security payment that has been paid to the credit of the account during the 4 week period immediately before the court order came into force.

Step 2. Subtract from that amount the total amount withdrawn from the account during the same 4 week period: the result is the saved amount.

That is, the total benefit is calculated, the amount spent (the ‘spent amount’) is determined, and then the ‘saved amount’ is calculated as the total benefit minus the spent amount.

Here is an example. If, in the 4 weeks prior to the arrival of the garnishee, an amount of $1,000 is deposited into the Centrelink recipient’s account (the total amount), but only $800 is withdrawn during the same period (the spent amount), then the saved amount will be $200 (i.e., $1,000 — $800). In this case, the   financial institution will leave the spent amount ($800) in the Centrelink recipient’s account, but will send the remainder (the saved amount; $200) to the creditor who has served the garnishee order. 

This is unfortunate, because the Centrelink recipient may have saved a few hundred or even thousand dollars towards a major expense (such as car       registration) that may be critical to obtaining health care or to their prospects of finding employment, .The garnishee will get all the person’s savings, other than the amount they have spent, even though the savings came from Centrelink income.

The moral of the story is that debtors on Centrelink benefits who anticipate a garnishee might prefer to keep their savings under their pillows. This is          particularly the case where the debtor’s income is paid into an account which is jointly held with their spouse or partner. The spouse or partner is at risk of losing their savings as well.

There are other exceptions. Where a debt is owed to a Commonwealth Government agency such as Centrelink, Child Support, or the Australian Taxation Office, then those entities can deduct money from the Centrelink payment.  There is no statutory rate prescribed for Centrelink.  It may be necessary to negotiate with Centrelink to establish a rate of deduction that still allows the client enough money to survive.  The Child Support Agency will deduct an amount between $1 and $6.14 per week (regulation 5E Child Support (Registration and Collection) Regulation 1998).

There is also the situation when the client’s account is overdrawn by accident.  The bank’s “Centrelink Code” provides that if a debt arises when the Centrelink recipient unintentionally overdraws their account, then the financial institution is permitted to take 10% of each Centrelink payment to reduce the overdrawn account. The client is entitled to 90% of their Centrelink payment even if their account is in the red.

   ASIC Acts on GE Money’s Insurance and Debt Collection Practices

From ASIC Press Release 08-106; May 22, 2008

Sharkwatch was interested to note that “ASIC has taken action over the sales and debt collection practices of companies in the GE Money group relating to the    advice provided by parts of its insurance advice and sales business and also, the debt collection practices of the GE Money consumer credit businesses”.

“ASIC has imposed conditions on the Australian financial services license (AFSL) of GE Money’s Hallmark General Insurance Company Ltd and        Hallmark Life Insurance Company Ltd after those companies failed to comply with commitments each made in a 2006 Enforceable Undertaking (EU) to ASIC.

“ASIC found that parts of the insurance advice and sales business were often poorly managed and not   meeting the legal obligation requiring there be a reasonable basis’ for personal advice given to customers. Specifically, ASIC was concerned that staff were selling insurance to customers whose needs had not been identified or understood.”

ASIC has now imposed restrictions on Hallmark’s AFSL (license) conditions, including:

• Review of practices by independent expert; will also make recommendations on compensation;
  
• Insurance advice from staff limited to ‘general advice’; ‘personal advice’ is NOT to be given;

ASIC are also responding to concerns about some of GE Money’s debt collection practices, including harassment, excessive or inappropriate contact, and inflexibility with repayment arrangements, by requiring them to engage an independent expert to review their practices, and make recommendations regarding compensation and changes to practices.

   Vale John Haywood

One of Australia’s finest financial counsellors, John Haywood, has died. He was 66 years old. Having survived a stroke 8 months ago, he had then been   diagnosed as having a terminal brain tumour, to which he succumbed on June the 14th.

John came to financial counselling after leaving the banking industry. He completed his training in 1992 and worked as a volunteer at Creditline Newcastle. When the HomeFund debacle erupted, John was employed as a financial counsellor with the HomeFund Commissioner’s Office. Following that John worked as a financial counsellor with Creditline Newcastle and Creditline Sydney, before taking on the role of managing Credit Helpline in NSW. In recent times he has been the Coordinator of Lifeline Newcastle and has been working towards training a replacement so that he could retire full time.

John was well known for his professionalism, his integrity, and his powerful compassion for others. He had a dry sense of humour and was very self-disciplined in both his private life and in his work. John was greatly liked and respected by his colleagues, industry associates, friends and family alike. John was devoted to his wife Norma, and their ten children. Even during the bleakest times of John’s life (John and Norma lost two of their daughters to cancer), John’s focus was always on supporting others.

John was a wonderful mentor to many financial counsellors, and a fine man. He will be greatly missed. 
          

   Round Up

New South Wales

Advice regarding SDRO debts and Centrepay

Lynda Johns, secretary to the Financial Counsellors Association of NSW (FCAN) has sent the following information for NSW financial counsellors. Those who wish to help clients set up a Centrepay arrangement for a State Debt Recovery Office (SDRO) debt should note that the Centrepay Referral number is 555063931A. Knowing the number may save considerable time.

Additional funding for financial counselling and relief services in NSW

On April 13, the NSW Premier Morris Iemma announced a “multi-million dollar financial rescue package to help struggling families across NSW better deal with cost of living pressures,” such as rising interest rates, rents, grocery prices and petrol costs. 

In essence, the package includes:

• An extra $1 million of recurrent funding for financial counselling services;
  
• Providing a 30 per cent boost to funds for families under the Mortgage Assistance Scheme;
  
• An extra $840,000 to allow more families to access interest free loans for essential household items;
  
• Reviewing all hardship provisions in NSW Government agencies; and
  
• Requesting all Government agencies consider monthly payment options.

Any scheme which boosts funding for financial counselling, offers relief for families under mortgage stress or other forms of financial hardship, and boosts no-interest loans funds, will be welcomed by all NSW financial counsellors.

The MERIT Scheme

We have received queries from a number of NSW financial counsellors who have been referred clients associated with the MERIT scheme in NSW. They were a little unsure about what the scheme entails.

The Magistrates Early Referral Into Treatment (MERIT) scheme is a special program based in NSW Local Courts that “provides the opportunity for adult defendants with drug problems to work, on a voluntary basis, towards rehabilitation as part of the bail process.”

Each potential candidate is assessed, and a personalised treatment program is developed. “Defendants are closely case-managed by the MERIT Team throughout the  program and the Magistrate receives regular reports on the participant.” Continued involvement in the MERIT scheme is a condition of bail. “The final hearing and sentence generally coincide with the completion of the MERIT program. Magistrates are then able to consider the defendant's progress in treatment as part of final sentencing.”

For more information, go to the website at: http://www.lawlink.nsw.gov.au/lawlink/cpd/merit.nsf/pages/merit_index.

Victoria

News on the SSA Report

In the last Sharkwatch (Vol 9, Issue 1, Mar 2008), we noted that the State Services Authority (SSA) was conducting a review of financial counselling services in Victoria. We have now heard from the SSA that “a report on the Review of Government Funded Financial Counselling Services was delivered to the Premier on 29 February 2008. It is up to the Premier to determine whether Government will publicly release the report. If the report is publicly released, it will be posted on the SSA website, delivered to all financial counselling service providers funded by the Victorian Government, and sent to all organisations that made a submission to the review.”

The SSA website is at:  www.ssa.vic.gov.au/.

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

Queensland

TIO to hold consumer consultative forum in Brisbane

The Telecommunications Industry Ombudsman (TIO) will be holding a Consumer Consultative Forum for caseworkers in Queensland who have an interest in issues surrounding telecommunications.

The forum will run from 10.00 am to 2.00 pm on Tuesday August 5th at the Sofitel Hotel in Brisbane.

The forum is free to attend and lunch will be provided.

The purpose of the forum is for case workers and staff from the TIO to exchange experiences and information about the sorts of telecommunications issues affecting consumers and how these are being handled by casework agencies, the TIO, and the telecommunications industry.

The Ombudsman, Deidre O’Donnell, will also give a presentation on how the TIO works, complaint trends, and how caseworkers can best use the TIO.

The forum is an excellent opportunity for agencies to develop a good working relationship with the TIO, and we at Sharkwatch would urge as many financial counselling, gambling counselling and rural counselling agencies as possible to attend.

Those who are interested in attending the forum should contact Kevin McKertich from the TIO on (03) 8600 8701, preferably before Friday July 25.

CFC News

Government Doubles Funding for Commonwealth Financial Counselling Program in May Budget

The key elements

Basically, the Rudd Government, in its May budget, committed $20 million over four years for increased financial counselling services and for the support of people under financial stress. The basic elements are as follows:

• Funding for the Commonwealth Financial Counselling program (CFC), will be increased by $10 million over four years, doubling the size of the program. This money will be used to increase the capacity of existing counselling services and to establish new services in high need areas.
  
• In addition, $10 million over four years will be provided to develop and distribute practical and easy to understand financial management information  products. These would provide information on   issues related to mortgages, credit cards, hire purchase usage as well as for other, similar financial  issues. These products will be  particularly targeted to assist people in, or at risk of, financial stress, and will be distributed through Centrelink's Financial Information Service and through other providers of financial information and counselling.

Background

As many Sharkwatch readers would be aware, the Commonwealth Financial Counselling program (CFC) was set up with the aim of providing assistance to Australians who are experiencing personal financial difficulties due to a variety of circumstances, including mortgage stress, unemployment, sickness, credit over-commitment and family breakdown.

To this end, the CFC currently funds 41 community based organisations that provide generalist financial counselling services in every Australian State and Territory. The total amount of funding prior to the budget was $2.5 million per year. Under this new measure, the funding for such services will now     double.

Overall, across Australia, government funding supports around 150 community organisations to provide generalist financial counselling services. (The State and Territory governments contribute around $12 million per year for generalist financial counselling services.)

A government press release has noted that “in 2006-07, Commonwealth Financial Counselling services saw more than 11,000 people, less than the previous year. More families are struggling with financial pressures from    rising interest rates, credit card debts, and housing costs, and financial counselling services are unable to meet existing demand.”

Reading between the lines, it appears that part of the Federal Government’s motivation for increasing the funding for our sector may have been the belief that the factors that are currently impacting on interest rates, fuel prices and the cost of living, such as oil prices, global credit pressures and worldwide economic trends, are  going to continue to have an adverse impact on many Australians.

The potential flow-on effects of these factors include increased mortgage stress, over-borrowing to make ends meet (including an increase in short term loans from fringe lenders in an effort to survive financially from pay-day to pay-day), and an increase in the number of Australians whose expenditure exceeds their income. This in turn would increase the demands on, and for, generalist financial counselling services in Australia. If such advice was given to government by economic forecasters, it would make sense for the government to increase funding for financial counselling services to meet the projected increase in need.

This funding increase also indicates that the Federal government believes that financial counselling services in Australia are basically doing a good job—otherwise alternative solutions would have been put forward. It is nice for our profession to be recognised for the important role it plays in assisting lower income Australians who face financial hardship or who get into serious trouble with debt.

In the view of the Sharkwatch editors, these funding  increases show an important balance between primary intervention strategies for financial  mismanagement and overspending (financial literacy training and educational strategies) and tertiary intervention strategies for financial stress (i.e., financial  counselling; see article on pages 4-6).

Other measures related to the budget increase

The Government has noted a number of related initiatives, including working with industry to encourage lending organisations to more actively engage with customers who are exhibiting early signs of financial stress, and requiring such lending organisations to provide information on available counselling services to such customers. The Government will also be              encouraging stronger links between financial institutions and financial counselling networks.

More information

Further information on the increased funding package (which was implemented on July 1), is available from the following
internet site: http://www.facs.gov.au/internet/facsinternet.nsf/aboutfacs/budget/budget2008-08_fs-15.htm.

   Vale Revd. Canon Dr Christopher Newell

It is with great sadness that we at Sharkwatch heard of the tragic passing of the Reverend Canon Dr Christopher Newell AM, a widely known and respected academic and consumer advocate.

According to the Hobart Mercury (June 24, 2008), Christopher was reported missing on June 20, and his body was found by police on June 24. The Mercury,  correctly, described Christopher as ‘Tasmania’s foremost bio-ethicist’, but such a description is barely adequate.

Christopher struggled with significant physical disability throughout his life, and was a powerful advocate for consumers with disabilities. He had a brilliant intellect, a quirky and delightful sense of humour, a rare           compassion for others, a deep spirituality, a strong drive and energy, and the sort of ‘presence’ that makes a lasting impression in any company. More than anything else, though, Christopher was just a wonderful person.

He wasn’t afraid to speak out strongly on controversial issues such as euthanasia, but tended to earn people’s respect rather than enmity, even when speaking from an opposing viewpoint. He represented the interests of  consumers, particularly those with disabilities, on many different boards, councils and consultation groups, and was known for thinking carefully before he spoke and providing wise and considered counsel. He was an    original thinker, often breaking stalemates by approaching a problem from a different perspective, or offering guidance on the overarching principles that should guide good decision making.

Christopher had also published a number of excellent and acclaimed books, many in the field of ethics, and was author of numerous academic papers in   international and national publications.

In recognition of his work, Christopher received an   Order of Australia medal in 2001 for ‘services to people with disabilities, to health consumers, and the   development and practice of ethics’, and was a delegate at the 2020 Summit in Canberra in April.

Christopher was just 44 years old, and is survived by his wife Jill, and three children, Hannah, Hayley and Christine.

His is a great loss for Australia, but many, like me, will just miss a wonderful friend. Farewell Christopher.

Wayne Warburton