Inside this issue:

• Notes & Notices
  
• Detention Debts
  Richard Brading 
  
• Centrelink Reparation Orders and Bankruptcy: The ‘Carroll’ Decision
  Kit Hauptmann 
  
• Update on Telstra Options for Low Income and Disadvantaged Consumers
  Wayne Warburton 
  
• Credit Card Fees
  Jo Boltin and Vanessa Stanton 
  
• The Law Matters:
  Drop the Debt: A Proposal From the Sharkwatch Team
  Richard Brading 
  
• AFCCRA Update
  Jan Pentland 
  
• Dealing With Centrelink Debt, Bankruptcy and Fraud
  Kit Hauptmann 
  
• Round-Up
  News, views and information about financial counselling around Australia
  
• In the Media
  Snippets of interest and information found in the media regarding issues around financial counselling 
  

   NOTES & NOTICES

Centrelink Confirmation e-Services (CCeS)

Businesses and agencies that need to confirm a person’s Centrelink details (e.g., benefits received, income etc.) can now do so online with a new automated e-service. This may speed up applications for eligibility for other       concessions or services.

Those seeking to use the service must be registered with Centrelink and have a contract in place to use the service. In addition, they must have the Centrelink recipient’s permission to access CCeS.

Available information includes:

• Customer Confirmation — confirm a Centrelink customer’s entitlement to receive a concession. Can also check the entitlement of a Department of    Veteran’s Affairs customer.
  
• Income Confirmation — obtain a Centrelink customer’s income and payment details. These may include:

1. Centrelink payments
2. Assets
3. Other income

• Superannuation Confirmation — Administrators and trustees of superannuation funds use Superannuation Confirmation to get information about a Centrelink customer’s income support status. This helps them decide whether superannuation can be released early due to financial hardship. A Superannuation Confirmation enquiry confirms the customer's personal details and advises on their income support eligibility.

The CCeS provides access to information which is online and thus current at the time of enquiry. The information is available immediately upon request.

For financial counsellors this may mean faster access to superannuation, concessions and benefits for their clients who receive Centrelink income.

TIO connect.resolve campaign

The Telecommunications Industry Ombudsman (TIO) Connect Resolve campaign was recently launched by the Minister for Broadband, Communications and the Digital Economy, The Hon Stephen Conroy. 

In essence, the TIO has become concerned about a huge escalation in complaints received (46% in 2007-2008), and an escalation in the number of complaints about Telcos’ customer service. The campaign is designed to raise awareness of the issues and facilitate collaboration between the TIO, Telcos, consumers, regulators and other key groups to improve customer service and complaint handling processes in the Telco sector. The TIO is pleased with the response to the campaign from all sectors so far, but it is early days yet. More information can be found at: www.tio.com.au.

The Sharkwatch team would like to wish all our readers a wonderful Christmas. We hope that 2009 is a terrific year for every one of you!

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

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   Detention Debts

Richard Brading
Principal Solicitor, Wesley Community Legal Service

Non-citizens who are imprisoned in detention centres are required to pay for their accommodation and transport costs by the Migration Act 1958.  These debts can be quite large. The accommodation rate is currently $125.40 a day.  The Department of Immigration and Citizenship (DIAC) policy is to give the person a Notice of Removal and Maintenance Costs setting out the daily maintenance amount for the particular detention centre and explains that a visa cannot be granted until the debt has been repaid or arrangements made to pay the debt. 

Debtors frequently suffer stress and anxiety over these debts. The only avenue of complaint against detention debts is to the Commonwealth Ombudsman. The debtor can pay the debt, apply for a waiver or write off or do nothing. 

Payment by Instalments

A debtor can enter into an instalment arrangement with DIAC to pay off the detention debt.  DIAC requires an upfront payment of 25% of the debt or $2000 (whichever is less) and the full debt to be paid off within 5 years.  The debt is not listed with Veda Advantage so it may be possible to borrow the upfront payment.

Write Off

DIAC will write off a person’s debt when it is uneconomical to recover it, or when a detainee is granted a protection visa or temporary protection visa. 

However, a write off does not extinguish the debt. It is merely an accounting entry. The debt may be pursued in the future. 

An application for write off would be appropriate where the debtor is unable to enter into an instalment arrangement at present, but hopes to be in a position to do so in the future. For example, the debtor may need to undertake education and get a job before being able to start paying the debt. 

The sort of information to be provided for a write off includes:

• Assets and liabilities;
  
• Current money plan;
  
• Future earning capacity;
  
• Health;
  
• Family circumstances;
  
• Whether the debtor lives in Australia or overseas;
  
• The debtor’s intentions regarding future visa applications.

In some cases, DIAC will unilaterally write off a debt without notifying the debtor. In those cases, the debtor may only become aware that the debt has been written off after making an application for a waiver. About 95% of detention debts are eventually written off.

Waiver

Alternatively, a debtor may apply to DIAC or the  Department of Finance and Deregulation (DFD) for a waiver of their debt. 

Generally an application should be made directly to the DFD, as DIAC can take 18 months to pass the application on. Also DIAC may decide to write off the debt and never pass the application on. 

It may also be worth making a request to the Immigration Minister who can recommend waiver of the debt.

A debt that is waived cannot be reinstated. 

An application for waiver can be made on the grounds of financial hardship.  Detailed information should be provided about the person’s assets and liabilities, future earning capacity, health and family circumstances. Debts that have arisen through fraudulent or other illegal activities will not be waived where the debtor had a direct role and was aware of the consequences of their actions. 

If the waiver application is refused, the government might then decide to write off the debt. 

Ombudsman complaints

Debtors who are dissatisfied with the lack of response to a request for waiver can complain the Commonwealth Ombudsman. A report by the    Ombudsman in 2008 (DIAC: Administration of detention debt waiver and write-off) said that DIAC should improve the information it provides to people, timeliness and prioritisation in processing cases, and the consistency and reasonableness of decisions on debt waiver and write-off. 

Change is in the air

The Minister for Immigration and Citizenship, Senator Chris Evans said on 24th September 2008:

“I am aware of the difficult circumstances and inequities that the detention debt policy sometimes produces. I have acknowledged publicly that the detention debt system is in need of overhaul and have sought comprehensive advice on this complex issue from the Department.

It has been long-standing departmental policy that persons released from immigration detention after the grant of a Protection or Humanitarian visa are not pursued for their immigration debt on public interest grounds. But we recognise that an inequity may sometimes occur when a person receives a visa other than a Protection or Humanitarian visa, despite having made protection or humanitarian claims, and therefore are still pursued for their detention debt. This is an area that the Department has been asked to explore.

Any changes to the detention debt framework will be part of the Government’s broad strategic overhaul of immigration detention policy” (source: Crikey.com).

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   Centrelink Reparation Orders and Bankruptcy: The ‘Carroll’ Decision

Kit Hauptmann
Financial Counsellor, Incolink, Victoria
From Devil’s Advocate no 182, 22.11.2008

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

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

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

John Hartnett and I met with two senior Centrelink  people from Canberra and N.S.W. They have assured us that if financial counsellors have service users who have (1) been charged with fraud, (2) have a court imposed          reparation order, and (3) have then gone bankrupt, that this will extinguish their debt. If it has not been extinguished and if monies have been collected they will apply the 'Carroll' decision and rectify this problem by extinguishing the debt and returning any monies collected.

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

After this second bankruptcy ended, Centrelink resumed deductions from her pension. After tracking her down, getting her Centrelink number, date of court case, date of second bankruptcy and requesting that Centrelink apply the 'Carroll' decision, her debt was extinguished.

Centrelink also returned all monies that they had  collected after the end of her second bankruptcy. All this was done on the same day of receiving my e-mail.

It is also important to deal with Centrelink debt that Centrelink has deemed to be fraudulent, but which has not been proven as fraudulent in a court.

This matter has also raised a number of other questions that we intend to get answers for, namely:

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

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   Update on Telstra Options for Low Income and Disadvantaged Consumers

Wayne Warburton
National Financial Counsellors’ Resource Service

Recently, at a meeting of the Telstra Credit Management Working Group, a number of options and changes to options when dealing with Telstra debts were discussed. These are detailed below.

Expansion of the Bill Assistance Program

The Telstra Bill Assistance Program is similar to certain electricity and water schemes whereby customers who are struggling to pay their bills can apply to nominated welfare agencies for vouchers towards their utility bills. Telstra funds the scheme, which, until recently, would only provide vouchers for bills related to home phone services.

Telstra have changed the scheme, so that customers with most types of bills, including bills for mobile and internet services (but not bills for Foxtel services), can ask for Bill Assistance certificates if their bill is one of the new style having a 13 digit account number. The same processes and limits apply. That is, no more than 20 certificates can be obtained for any one bill, and the welfare agencies would use the same criteria for assessing need. This is a welcome initiative indeed!

Low income options more easily found on Telstra website

In 2002, Telstra introduced its Access For Everyone Package to help “disadvantaged people and those on low income stay connected”. The package includes such measures as the:

• Telstra Bill Assistance Program (see above);
  
• Disability Equipment Program (specialised telephone equipment that is rented at the same cost as a standard handset);
  
• InContact phones (phones with no line rental charges; takes incoming calls but is limited to some emergency outgoing calls. Can make outgoing calls using a PhoneAway card);
  
• Hardship Assistance Team (specialised team to deal personally with cases of financial hardship);
  
• Message Box (free service for those who are homeless or frequently moving. Allows messages to be left on a message bank, with free access from Telstra phones around the country).

In the past, it has been hard to find information about the Access For Everyone program on the www.telstra.com site. This has now been improved.

In the ‘About Telstra’ menu there is a link to the ‘Customer Service Commitments’ page, which has a direct link to the Access For Everyone page. Those going to the page for home phones (http://www.telstra.com.au/homephone/index.html) will also find a direct link to Access For Everyone in the right hand menu of the ‘Help and FAQs’ page.

Hardship team and written authorities

Telstra has a Special Assistance Team (SAT) that deals personally with cases of financial hardship. Financial counsellors have a dedicated SAT contact number (1800 045 092) that is not publicly available. All in all, feedback about this team has been very positive, but some financial counsellors have been unsure about some aspects of the call back system.

The policy for this team is to return any calls within 24 hours, and the team reports that recently this objective has been met. This policy means that a number of financial counsellors who have called the team while their client has been with them have not been able to immediately get through. As Telstra will not generally accept a written authority to act on behalf of the client, financial counsellors have believed that they will not be able to follow up their clients issues on the subsequent day when the team rings back. This has caused some frustration, and some clients have sought alternate means to sort out their problems.

Telstra explains that the geographical spread of credit management staff makes the physical receipt of faxes difficult, hence the general non-acceptance of written authorities. As the Special Assistance Team is centrally located, it is feasible (and allowed) for them to accept faxed authorities. These can be faxed to 03 9632 1937. This exception to the written authority policy means that financial counsellors have the means to act on the client’s behalf when the Hardship Team calls back.

Telstra have also added 2 new staff to the team and have promised a further increase should demand warrant it. In addition Telstra are trying to address the problem of some Front of House staff failing to refer to the Special Assistance Team when it is appropriate to do so, through targeted training of credit management staff.

Self-service options including increased time to pay

Telstra now have a number of self-service applications which can be accessed 24 hours a day by ringing  13 22 00, and choosing from the menu. These include:

• Promise to pay. Customers ring and say ‘I want a payment extension’. If they are eligible for an extension, it is automatic and there is no need to talk to a consultant;
  
• Check account balance. Home and mobile accounts. Ring and say ‘I want my account balance’. Could be very helpful if financial counsellors are unsure how much their client currently owes;
• Report a payment. Ring and say ‘I would like to report a payment’. Once details are given, disconnections will be halted automatically;
  
• Pre-bill: Check mobile bills. Ring and say ‘I would like to know my pre-bill amount’. Can check current call charges on post-paid mobiles.
  Clearly, these options can be very helpful for financial counsellors and their clients in some situations.

Centrepay options expand

Centrepay is now available for mobile phone and  BigPond Internet accounts that have a 13 digit account number.

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   Credit Card Fees

Jo Boltin and Vanessa Stanton,
Port Phillip Community Centre, Victoria
From Devils Advocate August 14 2008

As part of Port Phillip Community Centre’s Credit Card projects, we wrote to eight of the major credit card providers and asked for clarification of their   processes regarding the imposition of over-limit fees. It had come to our attention that a late fee may be  imposed that causes an account to exceed its limit and thereby incur an over-limit fee. Another practice we’d noticed was that Banks would impose over-limit fees on accounts when it was solely the addition of monthly interest which caused the accounts to go over-limit.

A further issue was that fees often accrue interest and compounding interest, and so the amount of the fee becomes grossly inflated over time. We have received responses from St George, Bendigo Bank, Commonwealth Bank and ANZ.

On the issue of whether the adding of monthly interest or a late fee on credit card accounts could incur an over-limit fee:

• Bendigo Bank agreed this was its practice if the account was more than $50 over its approved limit.
  
• St George stated it did not engage in this practice.
  
• ANZ replied that if it calculates the minimum monthly payment to be higher than any interest that would be incurred at the next statement, and providing no other transactions were made by customers during the billing cycle, the accounts should stay under their credit limits. We have noted, however, an example to the contrary, and successfully requested that ANZ reverse the over-limit fee.
• Commonwealth Bank stated that although its terms and conditions allow such a fee to be imposed, there is no formal system in place and past customer behaviour is taken into consideration before a fee is applied. Previously, we had seen a case of monthly interest causing an account to edge over-limit by $1.50. The client received a call from their bank   requesting that amount be paid to bring the account under its limit but no over-limit fee was imposed.

On the issue of whether late and over-limit fees attracted interest and compounding interest:

• Bendigo Bank, St George, ANZ and Commonwealth Bank all acknowledged that such interest is applied to fees.

This practice raises the legal issue of whether the fees are in fact illegal penalties. Under Australian law, any contractual fee must be calculable at the time of contracting. Of course, the fees themselves may also be illegal as the law says such a contractual fee must reimburse a party for the amount lost due to the other party’s breach and may not exceed that amount and  become a penalty.

Recently, in the case of Schwab v City Group, VCAT held that a $40 late payment fee was unenforceable as it was a penalty and contravened the Fair Trading Act 1999 (Vic).

To date, we are waiting to hear from GE Money, National Australia Bank, Westpac and American Express.

To discuss any of the above please contact Jo Boltin at joboltin@ppcg.org.au or Vanessa Stanton at Vanessa_Stanton@clc.net.au.

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   The Law Matters

Richard Brading
Principal Solicitor
Wesley Community Legal Service

Drop The Debt:
A Proposal From the Sharkwatch Team

Bankruptcy is increasingly common as the result of credit card debt and aggressive debt collection practices. In 2006/07 excessive use of credit rated number 2 in the list of causes of bankruptcies (after                     unemployment) and number 1 in the list of causes of debt agreements.  Financial counsellors are finding that an increasing number of the consumers they see have no viable option to bankruptcy. Bankruptcy should be the last resort.  It has serious consequences for a person’s employment, access to the financial system, ability to travel and more. Bankruptcy is costly to     administer and consumer bankruptcy rarely results in a dividend to creditors.

Debt agreements were instituted as an alternative to bankruptcy but instead have become a form of structured debt collection. Nearly all debt agreements involve the payment of between 50% and 100% of a consumer’s indebtedness, plus administration fees of about $5000. These administration fees add a heavy burden to the commitment required of those consumers who enter into a debt agreement and a significant proportion of debt agreements fail to reach completion. Also debt agreements have some significant consequences in line with bankruptcy.

The credit industry and alternatives to bankruptcy

Bankruptcy could be avoided in many cases if there were an effective process for reducing or waiving debts for consumers in genuine financial     hardship. Regrettably the credit industry has failed to provide this.

The current right to apply for hardship variations to consumer credit contracts provided by sections 66-68 of the Code is hopelessly inadequate. Only a tiny percentage of credit contracts are varied according to the Code procedure.

Unsecured lenders are very reluctant to reduce or waive debts for consumers in financial hardship and instead have relied increasingly on aggressive methods of debt collection.  Most debt collection is outsourced to debt collection businesses and may be sold and resold a number of times if unpaid. 

The pressure of debt collector harassment is perhaps the primary driving force that pushes consumers into bankruptcy.  Although ASIC and the ACCC have been working to limit the excesses of undue harassment by debt collectors for the past few years, the fact is that debt collectors are legally allowed to harass debtors, and they exercise this legal right ruthlessly.

A possible solution?

It is socially undesirable to have so many consumers suffering stress as a result of unmanageable debt. One possible solution is to legislate for a quick and simple debt relief process for consumers unable to  service their credit card debt. This debt relief would be largely administered by the credit card providers. Relief would be provided in 2 forms, temporary and          permanent.

Temporary relief

It is proposed that consumers who encounter a temporary financial crisis would have the right to apply to their creditor for a moratorium on              payments for a period of between 3 and 6 months. They would  simply need to complete and lodge a form with the creditor to be entitled to the moratorium.  The form would provide an explanation of the reason why the moratorium was sought and the period of time needed before payments resumed.  

During the moratorium, interest would continue to accrue on the debt but further credit could not be   accessed. 

In addition, this moratorium would not generate an adverse entry on the consumer’s file held by credit  reporting agencies.

It is anticipated that applications for temporary relief would be made by persons who had lost their job but had a reasonable expectation of returning to the workforce within 3 to 6 months. It would also assist those who had relationship breakdowns or temporary health problems. 

The cost of administering temporary relief moratoriums would be offset by the benefits of assisting consumers in difficulty get back on their feet.  It would also alert the creditor to the possibility of  future financial difficulties and encourage the creditor to monitor the account carefully.  It would also       discourage the creditor from increasing the credit limit without careful consideration.

Permanent relief

Consumers who felt they were in serious financial   difficulty and unable to repay their credit card debt would have the legal right to apply to the creditor for a permanent reduction in the level of indebtedness.  Whilst there is nothing to prevent consumers making such an application at present, the occasions when a credit provider will agree to such a reduction is extremely rare.  As a result, consumers are being unnecessarily forced into bankruptcy.

Our proposal is that the consumer be granted the legal right to apply to an independent tribunal for a reduction in their overall indebtedness in the event that they apply to their creditor for debt reduction and are refused. This tribunal should be given clear guidelines as to when and how it can reduce the indebtedness of a consumer. 

The guidelines would primarily focus on the consumer’s current financial circumstances and future ability to pay the debt.  The factors to be considered would also include the circumstances of the consumer at the time the debt was incurred and the likelihood of bankruptcy in the event that the debt reduction is refused. 

The tribunal would try to resolve the issue by mediation prior to making a formal decision.

The tribunal would have the power to reduce credit charges and reduce the principal debt to an affordable level.  It would have the power to waive the entire debt in extreme cases or order repayment by instalments. 

The tribunal would also have the power to make orders in relation to all the person’s other unsecured consumer debts at the same time. This would assist the many consumers who have more than one unsecured debt. 

The consumer would need to provide full details of their financial circumstances to the tribunal. Confirmation might be required of income,         indebtedness or financial commitments. 

The tribunal would operate in an inquisitorial rather than an adversarial environment. Consumers could be assisted by financial counsellors in preparing the financial details for their application for debt relief.

Once the circumstances in which the tribunal will grant relief to indebted consumers is established, it is likely that the creditors will then voluntarily provide similar relief at first request. 

This could be further encouraged by funding the tribunal with an industry levy in the same way as the Financial Ombudsman Service.  Creditors would save on their debt collection costs.  The role of debt collectors would be enhanced because they would spend less time chasing unrecoverable debts.

The loss to creditors when a debt is reduced would be theoretical rather than real, as the reduced debt would be money that the creditor could not recover anyway.

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   AFCCRA Update

Jan Pentland
Chair, AFCCRA

2009 AFCCRA Conference

The 2009 AFCCRA Conference and EDR Forum will be held in Melbourne in late July. I hope this will give more Victorian financial counsellors the opportunity to attend. More details as they come to hand.

AFCCRA Annual General Meeting

AFCCRA’s Annual Meeting was held in Melbourne on Tuesday 2 December. I am continuing as Chair of AFCCRA and look forward to another busy,          challenging year.

A meeting of the Presidents and Chairs of the five   financial counseling state associations was held in conjunction with AFCCRA Council’s two day planning session.

AFCCRA Chairperson’s Report 2008

AFCCRA’s work as the national peak body for financial counselling continued in 2008 without Government funding of its core peak body functions. Securing such funding is a priority for 2009.

David Tennant resigned as Chairperson of AFCCRA in December 2007 and also stepped down as the representative for the ACT. David’s contribution to AFCCRA over almost a decade has been outstanding. AFCCRA’s achievements would not have been possible without David’s commitment and hard work. Financial counsellors across Australia join AFCCRA Council in expressing appreciation and wishing David all the very best for the future.

In 2008 AFCCRA has focused on:

• Raising the profile of financial counselling;
  
• Enhancing the professionalism of financial counselling;
  
• Lobbying the national Government for increased funding for financial counselling;
  
• Advocating for fair treatment of low income,  vulnerable and disadvantaged consumers who are the client group of financial counsellors.

Highlights in 2008

No doubt the highlight was the announcement in the Federal Government’s 2008 budget of an additional $10 million over four years for financial counselling. This doubled funding for the Commonwealth Financial Counselling Program (CFCP) to $5.1 million per annum. Currently funded CFCP funded financial  counselling services across Australia received welcome increases to their funding for the 2008/09 year. A competitive tendering process for 20 new financial counselling positions is underway.

Another highlight has been our work on the review of the financial counselling diploma as part of the Community Services Training Package. When the    reviewed diploma is implemented, we are confident that it will be stronger with more emphasis on technical and legal knowledge and skills specific to financial counselling. With funding from the Commonwealth Government we have contracted Marita Mahony to develop training and assessment materials for the four financial counselling specific units of competency. Our aim is to ensure that Registered Training Organisations provide accessible, flexible, quality delivery of the    Diploma. I acknowledge the commitment of the AFCCRA Diploma Working Group: Jillian Fletcher, Carmel Franklin and Carolyn Deane. These achievements have been possible through their hard work.

The AFCCRA Conference in Sydney was again a great success with our largest attendance yet. Feedback from those who attended has been very positive and we look forward to the 2009 Conference. The keynote address at the conference given by Dr. Charles Livingstone was a first look at the research being done by Monash University comparing the Australian model of financial counselling with overseas models.

I believe that this is a very important piece of work for financial counselling, particularly in the context of AFCCRA’s ongoing discussion with the sector of potential conflicts in partnership with industry. The next stage of the research is a series of focus groups with stakeholders and then a final report.

We continue our work on the pilot of an independent foundation to provide small grants for project work to enhance the financial counselling profession. Our plan is that the first round of grants will be made in early 2009. I appreciate the significant contribution Anna Mandoki has made as project worker.

Gerry Phillips, AFCCRA representative from South Australia has worked with the Australian Tax Office to enhance the understanding by the ATO of the work of financial counsellors. The establishment of an access line for financial counsellors is a significant achievement.

AFCCRA made several submissions to government and industry in 2008, including to the Productivity Commission Review of the Consumer Policy   Framework, the review of the Banking Code, the ITSA Remuneration of Registered Trustee Proposals Paper, and the Federal Government’s Financial    Services Review Green Paper, the Australian Compact. David Tennant’s and David Lawson’s work is acknowledged and appreciated. We’ve also appreciated the opportunity to sign on to the broader consumer movement’s submissions.

Additionally AFCCRA is involved in:

• Ongoing discussion with the relevant Ministers, Government Departments and Regulators on the increasing demand for financial counselling and the inadequacy of funding to meet that demand;
  
• Facilitating information sharing on financial counselling with and between the states and   territory financial counselling associations and networks;
  Maintaining the AFCCRA website at www.afccra.org.
  
• Keeping AFCCRA’s profile and the work of financial counsellors on the national radar through the media, participation in conferences and forums, and contributions to various newsletters and publications across Australia;
  
• Maintaining relationships within the broader consumer movement in Australia;
  
• Representing financial counsellors on the Bankruptcy Reform Consultative Forum;
  
• Representing financial counsellors on the ACCC Consumer Consultative Committee and the ASIC Consumer Advisory Panel.
  
• Facilitating sharing of information from our representatives and nominees on telecommunications forums;
  
• Participation in the Indigenous Financial Services Network;
  
• Participation in the Treasury Financial Services Working Group Advisory Panel;
  
• Lobbying Centrelink on the need to review debt collectors’ access to the
• Centrepay system;
  Participating in the advisory group for the NAB pilot project on fringe lending
• On-going work on financial literacy/financial inclusion issues;
  
• Working with the EDR Schemes on their annual forum including funding the attendance of financial counselling representatives from all states and    territories;

I have personally found it particularly satisfying, to be involved in AFCCRA’s work on building linkages with indigenous financial counsellors; indigenous financial literacy workers; indigenous community organisations and those Government and industry organisations  working in this space.

It’s pleasing to see increasing numbers of aboriginal   financial counsellors training and working right across the country. It was a privilege to welcome more than 20 indigenous workers to the Sydney AFCCRA forums in 2008. Tricia Ross continues to make a significant contribution for AFCCRA in her work with indigenous communities.

AFCCRA Council

Again, it’s been my pleasure and privilege to work with a dedicated group on AFCCRA Council. Representing each state and territory, Council members bring a wealth of experience, innovative thinking and sheer hard work (much of it in their own time). My particular appreciation to Phil Powell, AFCCRA’s Treasurer. Phil puts in many hours of his own time and has done this for almost a decade.

It becomes more and more evident that AFCCRA needs core funding to maintain our work to represent financial counsellors and the interests of our clients at the national level. This is the primary goal for 2009.

The changing landscape

Financial counselling faces challenging times. The landscape within which financial counselling operates is changing rapidly with industry and Government initiatives as well as those coming from our sector. It’s my view that we need to engage in these change processes to be informed, to take up the opportunities that these changes present, and to maximise our         influence – engaging with those changes that advantage our clients and challenging those that don’t.

For more information on AFCCRA, please access the website at www.afccra.org - information and contact details are available and we continue to add relevant material to the website as it becomes available.

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   Dealing With Centrelink Debt, Bankruptcy and Fraud

Kit Hauptmann
Financial Counsellor, Incolink, Victoria

Many financial counselling service users who are, or have been, the recipients of Centrelink payments, may, for one reason or another, end up with a Centrelink debt.

A number of financial counsellors have been dealing with this issue, with greatly different outcomes.

This article is an attempt to pull together the latest work done in this area, along with the experience of many years of past success, and how to apply them to our casework.

Overview: 1. Centrelink debt

• If an over payment has occurred then Centrelink has the right of recovery.
  
• The rate of the recovery is negotiable but can not exceed 14% of the pension or wages.
  
• Tax returns will be taken in full to retire Centrelink debt.
  
• If the debt was solely caused by Centrelink (their fault, mistake or incompetence) and received in good faith, then you are in a much better position to negotiate this debt. In some cases you may be able to mount a case to the SSAT to have the debt waived.

Practice note: Many financial counsellors will always use Freedom Of Information (FOI) to access the   service users Centrelink file before dealing with Centrelink issues. Other financial counsellors will just assert what they are arguing is fact and then let Centrelink prove otherwise.

2. Authorised Review Office (ARO)

The ARO is the first person you write to if you are not happy with your initial dealings with Centrelink.

3. Social Security Appeals Tribunal (SSAT)

If you have no luck with Centrelink you may end up taking the matter to the SSAT. If you are going this far you may have requested an FOI of Centrelink for your service users full Centrelink File.

4. Administrative Appeals Tribunal (AAT)

Lets hope things have been sorted by this stage but if not you may end up here.

5. Bankruptcy

The decision to go bankrupt on debt including a Centrelink debt is an option that you would always canvass and discuss with your service user.

This paper does not go into the whys and wherefores of bankruptcy. However, as financial counsellors we should understand that if a service user presents with a problematical Centrelink debt then bankruptcy might be a very good option, especially if they are trying to repay it out of a pension or benefit. Remember, Centrelink debts should always be listed in a         bankruptcy, regardless of size or the way it arose.

The information below is in regard to a service user who is bankrupt or contemplating bankruptcy.

The first question to ask is: Has Centrelink taken the matter to court and has the person been found guilty?  If so, has a reparation/restitution order been made by the court?

If there is a reparation/restitution order

• If the original debt was proven at law to be fraudulent, the status of that debt will change to a judgment debt if a restitution/reparation order is made. All judgment debts are provable in bankruptcy, and will be extinguished by   bankruptcy, even where the original debt arose through fraud (see the article on the 'Carroll' decision on page 5).
  
• Centrelink has the right to receive creditor dividends (such as a tax return in the first year) during the period of bankruptcy. Any debt remaining at discharge will be extinguished.
  
• If the service user has continued to repay the debt after being discharged from bankruptcy, or Centrelink has been recovering the debt by     deductions from their pension or collecting their tax return, Centrelink may have to refund all monies collected (again, see the article on the 'Carroll' decision on page 5).

No reparation/restitution order has been obtained

• If the Centrelink debt is not a fraudulent debt it is extinguished by bankruptcy. However it is quite common to have to point this out to Centrelink.
  
• If the Centrelink debt is fraudulent, Centrelink has the right to recover it after bankruptcy. However, Centrelink should not claim a debt is a fraudulent debt unless it has been taken to court. If they do claim it is a fraudulent debt without it going to court and then try to recover the debt at the end of bankruptcy this can be challenged   successfully (the Dobson case). See below for further information and the appropriate letter to send to resolve this problem.
  
• If your service user goes bankrupt and they have a Centrelink debt then Centrelink cannot collect on that debt during the bankruptcy period. If       Centrelink does try and collect the debt, a simple letter, e-mail or phone call should fix that problem.

Appendix: Sample letter

Note 1: Please change the letter to suit your client and modify as needed. For example, this letter was written for a client with a mental illness. Your letter will specify a different set of circumstances.

Note 2: The editors of Sharkwatch have made small modifications to Kit’s sample letter to enhance clarity.

Note 3: The editors of Sharkwatch advise readers to be careful in the construction of such a letter. Full details of this and other correspondence, as well as further information, can be obtained from Kit Hauptmann at kith@incolink.org.au.

This letter has been written for the situation where Centrelink claims that a Centrelink debt is fraudulent.

……………………………………………………….

From: [Your organization details and address]

To: The Authorised Review Officer
Centrelink
[Add address]

Date: [Add date]

RE: [Add client name and Centrelink reference        number]

Dear Sir/Madam,

The above mentioned client has approached our service for financial counselling and an authority, duly signed as per the Privacy Act, is attached.

[Ms/Mr] ________________has advised our office that you have claimed [his/her] debt to be fraudulent, and that you plan to reinstate the debt once [he/she] is discharged from bankruptcy.

[Ms/Mr] ________________has advised our agency that the debts were incurred at a time in [his/her] life when she was suffering from a range of mental health issues. A copy of a letter from [his/her] doctor detailing [his/her] diagnosis is attached. [Ms/Mr] ________________believes that at all times [he/she] complied with [his/her] reporting obligations to the best of [his/her] ability, and at no time acted in a fraudulent manner.

It is out contention that the debts she bankrupted on should be written off by Centrelink and not be reinstated.

We wish to refer you to the case of Dobson; Department of Family Community Services [2000] AATA 41 (28 January 2000). In the light of this ruling, it is our contention that not all of [Ms/Mr] ________________’s payments were fraudulently obtained.

Full details of this case can be found at the austlii site: www.austlii.edu.au/au/cases/cth/aat/2000/41.html.

The most important and relevant aspect of this case is that the AAT found that:

A debt is only fraudulent where someone knowingly or recklessly makes a false representation or acts with deliberate dishonesty;

The mere fact that someone knew that he or she should have notified Centrelink of income earned during a particular period is not enough to show that the client has been fraudulent.

We ask that you revue your decision based on the above information.

I can be contacted on ________________ should you wish to discuss any of the above.

Yours Sincerely,

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   Round Up

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

Queensland

New Financial Telephone Counselling Service

The Financial First Aid Telephone Counselling Line commenced on November 26. It provides information, resources and referrals to members of the public.  Financial counsellors from Queensland are encouraged to refer to this line as a backup option if they cannot meet demands for their service.

Number: 13 11 51
Hours: Monday to Thursday, 4.00pm to 8.00 pm

Salvation Army Moneycare extends Queensland services

For some time the Salvation Army Moneycare has been providing financial counselling services in Brisbane and Rockhampton. These services have now been extended to Maroochydore and Mackay.

The experienced Peter Hogg in Brisbane has retired and has been replaced by Veronica Doroghazi. Bradley Wiggington continues to service Moneycare clients in Rockhampton and Maroochydore’s financial counsellor is Debbie Robbie. We are pleased to report that Mackay now also has a new Moneycare financial counsellor in Margaret Wright.

Financial counselling in Queensland has always been seriously under-resourced, so it is encouraging to see new services being funded and established.

Northern Territory

The two financial counselling services in Darwin now have new workers.  Anglicare has employed Annette Bould who is moving from interstate. Annette will be seeing new clients in January.

Somerville’s new workers are Jayne Stockwell who commenced work on 1st September and Sheena Caddy who began work on 8th December.  At the moment, Serena Staines remains the most experienced financial counsellor in Darwin. Serena is the Coordinator of the Financial Counselling Service at Somerville. Early in the new year, all three financial counsellors from Somerville will be based at the Palmerston office with outreach to Wagaman as required. This will enable Serena to provide the best support possible for the new workers.

Victoria

Change to administration of State government financial counselling funding

There has been a significant change to the administration of the Victorian state government-funded Generalist Financial Counselling Program (GFC) in Victoria. Until recently, responsibility for administration of the GFC in Victoria rested with Consumer Affairs Victoria. From November the 10th, the Victorian Office of Gaming and Racing has assumed responsibility for the administration of the GFC program. The Office of Gaming and Racing will also continue to administer the Gambler’s Help program (PGFC).

Existing Funding and Service Agreements between the Victorian Department of Justice and agencies that provide GFC services in Victoria were due to expire on June 30th, 2009. These Agreements have been extended to June 30th, 2011, at which time there will be a synchronization of the funding periods for both the GFC and PGFC programs.

ITSA Melbourne continues to outsource bankruptcies

In her Bankruptcy Working Group update, Anna Mandoki notes that ITSA Melbourne is currently outsourcing the administration of some bankruptcies to Registered Trustees (i.e., private trustees).

ITSA has advised that it does not outsource bankruptcies where there are no assets and/or income is well below the contribution threshold (Category 1 bankruptcies). However the more complicated Category 2 bankruptcies account for about 60% of total bankruptcies. In these bankruptcies, there is usually some form of asset or an issue that will require follow-up work by the Trustee. For example, people expecting a tax refund, people with property (even if there is little or no equity), people with boats, caravans or other valuable property, or people who have recently sold property, are all likely to be listed as Category 2 bankruptcies. Currently in Victoria, about 15% of Category 2  bankruptcies are being outsourced to Registered Trustees by ITSA Melbourne.

As financial counsellors are well aware, bankrupts have no right to object to their bankruptcy being outsourced. Anna Mandoki has put together a list of suggestions of possible courses of action for financial counsellors that may help avoid the bankruptcy being outsourced. This is available in the Dec 4 issue of the Devils Advocate, which can be accessed at:  http://fcrc.org.au/.

TIO community consultation scheduled for May

The telecommunications industry ombudsman (TIO) has recently embarked on a series of community consultations that are designed to (1) ascertain which Telco issues are currently being experienced at the ‘coalface’ by professionals such as financial counsellors, (2) provide helpful information, and (3) work in concert with key groups to maximise outcomes for consumers of telecommunications products.

The first consultation, held in Brisbane earlier this year, was well attended by financial counsellors and community solicitors, and was judged as being very    successful by participants. The Ombudsman has since identified financial counsellors as a key consultation group, and has organised a roster of consultations that will cover most of Australia on a two year rotation. Next year the TIO will hold consultations in Perth and Coolangatta that coincide with the national conferences for the Financial Counsellors’ Associations of Western Australia (FCAWA) and NSW (FCAN) respectively.

The Melbourne consultation is being run in conjunction with the FCRC professional development calendar, and has been scheduled for May the 19th. It will run from 9.00—4.00 at the Hayden Raysmith room on the 4th floor of Ross House (247-251 Flinders Street, Melbourne).

New South Wales

New FCAN premises, F/C training courses

After more than 20 years of FCAN using volunteers in Executive Committee positions, FCAN members are delighted to have received some funding from the NSW Office of Fair Trading to set up an FCAN office and to employ an Office Coordinator.

FCAN have now chosen an office at Suite 114, 410 Elizabeth Street, Surry Hills NSW 2010. Their telephone number is 1300 914 408. FCAN are now interviewing for the office position, and expect that the new employee will commence work in January 2009.

This is very exciting for FCAN as they have always had to rely on the goodwill of agencies in NSW giving the services of their staff to run the Association. For extremely busy financial counsellors, this has often been a very onerous task.

As well as providing funding for an office and staff person, the NSW Office of Fair Trading has also given funding for the next two years to train financial counsellors in NSW. We are able to provide training in two regional areas and one Sydney course during 2008/2009 and again in 2009/2010. The first course, which is being run by Betty Weule, commenced in Kempsey and will be completed before Christmas. The second course, run by Jennifer Gracie, is underway at the FCAN office in Surry Hills and the third course, again being run by Betty Weule, will commence in Wollongong in February 2009. Centacare Wilcannia/Forbes will also be running a training course for financial counsellors, including indigenous workers, and FCAN has provided some funding to support that program. The trainers will be Kevin Howard and Jon O’Mally.

In addition, FCAN will be offering two days per year advanced training for financial counsellors in six regional areas, with the first of these taking place in the Northern Rivers area of NSW.

It has been a requirement for more than 20 years, that all NSW financial counsellors complete an intensive training course before becoming accredited members of FCAN. We are very grateful to have this recognised by the    Office of Fair Trading and for funding to be provided for both initial and on-going training.

Centrelink uses casino records to assess gambling income

According to a story in the Sydney Morning Herald (‘Centrelink uses gambling records’, Stephanie Peatling, November 4, 2008), Centrelink has been using “records provided by Star City casino to assess whether people have earned extra income from gambling … that should have been counted as income when they were means tested for their welfare payments”.

“The director of the Welfare Rights Centre, Maree O'Halloran, said Star City patrons would be "shocked to learn that the casino collates data on their winnings and losses, let alone forwards it on to Centrelink".

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   In the Media

Families Minister Jenny Macklin launches additional CFCP funding

Original story: ‘More funding for financial counselling”

“An additional $10 million will be poured into financial counselling services for families facing mortgage stress and cost of living pressures, the federal government says.

“Families Minister Jenny Macklin has announced the money would be given to 41 community and local government  organisations across Australia so they could provide free financial counselling in high need areas. The money would be delivered over the next four years.

“"In NSW alone, in the last year there were just under 300,000 families or individuals who were helped by financial counsellors," Ms Macklin told reporters in   Sydney.

“Jason Clare, federal MP for the south-western Sydney seat of Blaxland, which takes in Cabramatta, Fairfield, Bass Hill and Greenacre, said his electorate was "the mortgage stress capital of Australia." "Last year 300 families in Blaxland lost their homes," he said. Mr Clare said the biggest mistake people made was waiting too long to get help. "People need to know there is free and independent advice out there," he said. "You don't need someone to sell you a product which is going to put you into a worse situation."

“Wesley Mission CEO Reverend Keith Garner said for every one of the ten consecutive interest rate rises in the past, there had been an increase in the number of people seeking help from the organisation. "There isn't a stigma with going to a financial counsellor," he said. "There are homes all around Australia with enormous mortgages with hardly any furniture," he said.

“Wesley Mission counsellor Wayne Warburton said around half of his clients seeking help for mortgage stress were suffering clinical depression. "It effects   mental health. It breaks up relationships. People think about suicide," he said. For people with schizophrenia and bi-polar disorder, such stress "is the sort of stress that can bring on a psychotic  disorder," Mr Warburton warned.

“Wendy Luckett, also a financial counsellor with Wesley Mission, added she had noticed an increase in clients with gambling addictions. "It's a coping   mechanism for people dealing with feelings of being a failure," she said.”

Sydney Morning Herald, Melbourne Age, October 3, 2008

Mortgage strife hits affluent suburbs of Melbourne

Original story by Tim Colebatch

“Some of Melbourne's most affluent suburbs are feeling the pain of the financial crisis. A new survey reveals the number of mortgages in arrears is rising sharply. The survey, by global ratings agency Fitch Ratings, found Beaumaris and Black Rock are now the epicentre of mortgage defaults in Victoria — with 4.7 per cent of the value of their mortgages in arrears at    September 30.

“In Camberwell, where virtually every mortgage was up to date in March, payments are now in arrears on 1.9 per cent of its mortgage dollars. In Mount Eliza, the arrears rate has soared from 1.4 to 3.8 per cent. The Fitch survey found similar trends in Mornington, Brighton, East Malvern, Hawthorn, Box Hill,  Essendon and Yarraville.

“The survey analysed 840,000 securitised loans by   postcode. Nationally, 19 of the 20 worst default areas are in NSW, especially in Newcastle and western Sydney. But there, too, the rot has entered the best suburbs. In Vaucluse, 6 per cent of all mortgage dollars are now in arrears — the seventh highest in Australia.

“The national default rate rose to 2.13 per cent in   September, up from 1.56 per cent a year earlier.     Victoria's default rate rose in the six months to March, but was almost flat in the past six months, despite the strains of higher interest rates. At 1.77 per cent, it is well below the national average.

“FitchRatings analyst Ben McCarthy predicted growing "mortgage delinquencies" as unemployment rises.”

Melbourne Age, November 27, 2008

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