Sharkwatch March 2002

2001 NSW Consumer Protection Awards

Tony Devlin and Jean Lewis were the proud recipients of an award for Sharkwatch in the Press category of the NSW Consumer Protection Awards last year. The photograph shows John Aquilina, Minister for Fair Trading, NSW, presenting the award to them at a dinner held in December last year to celebrate the awards.

Financial Counselling was well-represented this time with the top award of the year, Consumer Advocate, going to Narelle Brown of Ryde/Eastwood Financial Counselling Service. This same service was also given an award in the Community Organisation category with the NSW Consumer Credit Legal Service taking the top honours in that category.

A highlight of the evening was a special award created and given to Betty Weule. This was a ‘Lifetime Award as a Consumer Advocate’ and was given in recognition of her achievements over a lifetime of work in the financial counselling industry.

If you have any comments at all on what appears in Sharkwatch don’t hesitate to let us know. You can either write or fax us (contact details on page 2) or email: jean.lewis@wesleymission.org.au��

Notes and Notices

Finalising One.Tel accounts

Consumers disputing a One.Tel debt should contact the debt collection agency requesting the payment and ask them to provide an itemisation of the outstanding account.�

If, after following up with written evidence, the complaint remains unresolved, the information should be sent in writing to the One.Tel liquidator, Ferrier Hodgson, 17/2 Market Street, Sydney 2000, clearly setting out the nature of the complaint and the reasons it remains unresolved. If it remains unresolved the matter could be raised with the ACCC at Sydney Telecommunications Group, ACCC, GPO Box 3648, Sydney NSW 1044 providing all relevant information.

Collection House�

Brian Gebauers, is the new Compliance Manager for Collection House and can be contacted after normal channels of negotiation have been explored and broken down. His number is 1800 173 355 or (07) 3017 3418 and he will deal with complaints about Collection House, any of its subsidiary companies, or their agents, including any law firms retained by them.�

They also have a website at www.collectionhouse.com.au� and consumer complaints can be logged here through the option ‘Contact Us’.

Telstra Contacts

Telstra has recently changed the contact number for their Mobile phone accounts. These are now the contact numbers for both mobile and fixed phones:

Live accounts (ie. before or during temporary disconnection)
Fixed phone accounts—1800 816 025
Mobile phone accounts—1800 657 914
Final accounts (ie. cancelled service/debt collection underway):
Fixed phone accounts—1800 151 992
Mobile phone accounts—1800 816 553

Financial Services Reform Act 2001 - How will it affect us?

(taken from the December 2001 edition of the CCLC flyer, NSW)

Dispute Resolution under the Financial Services Reform Act

A very welcome development brought about by the Act is the requirement for financial services businesses to have a dispute resolution system available to their retail clients (who include small businesses and consumers). A dispute resolution system must consist of:

Internal dispute resolution procedures that comply with standards and requirements made or approved by ASIC;
Membership of one or more external dispute resolution schemes that are approved by ASIC.

The Australian Securities and Investments Commission (ASIC) will administer the FSRA, however, there will be a two-year transition period before companies have to comply with all of the requirements.

Requirements for external dispute resolution systems

ASIC has released a number of Policy Statements on approval of external dispute resolution schemes (PS139 & PS165), and three schemes have already been approved (the Australian Banking Industry Ombudsman, Insurance Enquiries and Complaints Ltd, and the Financial Industry Complaints Scheme).�

These schemes will have to show among other things that they have:

independence from industry members;
adequate coverage (eg complainants, complaint types, monetary limits for claims)
generally no charge for complainants;
fair decision making processes;
the ability to ensure compliance with scheme decisions;

Customers of building societies and credit unions are likely to see some changes that are, in our view, overdue. It is likely that some of the smaller, less developed dispute schemes (eg those for credit unions) will have to undergo significant improvements in order to meet the approval criteria. The changes might also encourage some consolidation of dispute resolution schemes – hopefully reducing consumer confusion about who to call if they have a complaint.�

So, at the end of the two year transition period, consumers (and small businesses) will have access to an external dispute resolution scheme of similar quality and independence whether they ‘bank’ with a bank, credit union, or a building society. This is a really positive development for consumers.�

Requirements for internal dispute resolution procedures:

The ASIC Policy Statement explains that, to comply with the FSRA requirements, financial institutions must:�

have IDR procedures that meet the Essential Elements of Effective Complaints Handling (this includes elements such as fairness, adequate resources, visibility, accessibility, and providing assistance to complainants);
appropriately document the procedures; and
have a system for telling complainants about the availability and accessibility of the relevant external dispute scheme

Who will be covered by the FSRA requirements?

The FSRA requirements will apply to businesses providing financial products and services, including deposit-taking (eg banks, building societies, credit unions), and insurance. However credit products and services are specifically excluded from the definitions of financial product and financial services.�

This means that finance companies are not covered by the legislation, and have no legal obligation to implement external or internal dispute resolution processes.�

However, it is not all bad news. Forthcoming changes to the Terms of Reference for the Banking Ombudsman scheme will mean that the scheme will soon be able to accept complaints about finance companies that are owned by a bank.�

Once these changes and the FSRA changes come into effect, it will only be customers of independently owned finance companies who are left without access to independent dispute resolution.

BORROWERS IN HARDSHIP WIN CASE AGAINST BANK

Marian Buckley, Solicitor�
Wesley Community Legal Service

In the recent case of McNally & Anor v Australia and New Zealand Banking Group (2001) ASC 155-047, a home loan credit contract (of $35,000) was varied on the basis of the consumer’s hardship.

Of itself, variation of a contract when credit consumers fall into hardship is not remarkable. Section 66 of the Consumer Credit Code outlines the relevant options and procedures.�

However, two aspects of this particular case are encouraging and helpful for financial counsellors. Garry McNally and Sandra Bell got relief from repayments under their contract. This was so:

Even though the action was very late, and
They were not liable for the bank’s costs�

The Circumstances:

When repayments fell into arrears, ANZ sent a letter requesting the consumers contact them. No response to this letter was received and ANZ commenced proceedings for recovery of the loan. A default notice was issued under S.80 of the Consumer Credit Code, requiring payment within 30 days.�

After 30 days had passed, Mr McNally and Ms. Bell had not cleared the arrears, but made a hardship application to an appropriate “court”, under S.66 of the Code. They applied to the Fair Trading Tribunal as they were in NSW, for an order to defer their repayments for twelve fortnights. This was due to their hardship situation—he was in gaol and she could not meet the repayments. By the time their case was heard in the Tribunal, the consumers were able to show that they could then meet their obligations.�

This action was very late:�

ANZ argued that the Tribunal should reject the hardship application. It was filed at a late stage, after the S.80 notice had expired. The debt had become due and payable, and enforcement action had begun.�

The Tribunal found the consumers were entitled to their application. The Code specifically deals with the situation of a late application in S.68(3). Enforcement action can be stayed (stopped from proceeding further.).�

Consumer action may be late and be successful.

Little cost to the consumer:

“Enforcement expenses” were specified in the credit contract, as payable by consumers. ANZ argued the consumers should pay the bank’s legal and other costs from the case as if they were “enforcement expenses”.�

However, these costs did not arise from an action to enforce a debt, but from ANZ opposing a hardship application by credit consumers.�

ANZ had to meet them, as these costs were not enforcement expenses.�

Effects of these findings are not restricted to NSW as the Consumer Credit Code operates throughout Australia.

Importantly, the Consumer Credit Code was found in this case to be beneficial consumer protection legislation.

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

NEWS from AFCCRA - Jan Pentland reports:

Hopefully, everyone has now received their copy of the December 2001 edition of the AFCCRA News. If you haven’t received your copy please contact the AFCCRA Council representative in your state or territory.

As well as news from around the States and Territories, you’ll be interested to read reports from AFCCRA’s representatives on the Telstra and Optus Consultative Committees and the Bankruptcy Reform Consultative Council. Do take the time to also read the overview of financial counselling in NSW by Jennifer Gracie and in Queensland by Lola Mashado. These brief histories follow the one I did on Victoria for the last edition and we hope to have another couple of the other states in the next edition.

Trish Walsh, senior financial counsellor at CARE Financial Counselling Services in Canberra has taken on the task of AFCCRA’s representative in relation to the development of national competency standards for financial counsellors. She is currently liaising with Community Services Health Training Australia about their project, and will be liaising with the states and territories through AFCCRA Council members and designated state representatives for the project. It’s fair to say that we are less than pleased with the work that’s been done so far and are making this very plain to Stephen Auburn, the Project Director. He has just agreed to fund a meeting to discuss the project and development of draft competency standards. Details of meeting time, venue and attendees are currently being negotiated.�

The AFCCRA Council met by teleconference on Monday 18 February. Topics discussed included the national competencies project, the Optus and Telstra Consumer Consultative Committees, the GE disputes processes, and bankruptcy reform – see page 11.

OTHER NEWS:

The Financial Counsellors Association of Queensland is holding their Annual Conference from 11th to 12th March this year at the same venue as last year, namely the Riverside Hotel in South Brisbane. The theme of the conference this year is entitled “Removing the Boundaries” with a focus on international perspectives as well as national issues on financial counselling and related credit issues.�

A keynote speaker, Mr Rick Fifield, Credit Counselling Canada, will speak on “Canadian Credit Counselling -Developing Maturity in Service Delivery and Stakeholder Relationships” and later that morning Prof. Sharon Burns, from Institute for Financial Counseling and Planning Education, Columbus, Ohio, USA, will speak on “Agency Accreditation and Counselor Certification in America”.�

In Victoria, Jan Altair has taken up a position with the Djerriwarrh Health Service, Melton, after moving there from Wagga last year.�

Jacinta Laffer from the Financial Counsellors Resource Project of WA in Perth, has gone on maternity leave and Anita Seery of the Murchison Financial Advocacy Service in Meekatharra, WA, has left to take up a position working with Youth Groups.

Jennifer Gracie (NSW AFCCRA representative) has left Moneycare in Newcastle, NSW, to take up a position with the Bobby Goldsmith Foundation who offer financial counselling to people living with HIV/AIDS. At present her email address is: jenniferg@ozemail.com.au��

BANKRUPTCY UP-DATE

Bankruptcy Reform

Since returning from my wonderful and amazing five weeks in Latin America (says Jan Pentland) I have been catching up with people in regard to the continuing developments in Bankruptcy law reform and administration. As reported previously, it is likely that another Bill to amend the Bankruptcy Act will be presented to Federal Parliament in 2002.

AFCCRA has written to ITSA and lobbied through the Bankruptcy Reform Consultative Forum requesting broad consultation on any future reform proposals. It has also encouraged other interested groups to lobby for such a course of action. I shall be meeting with Anne Tuohey of the Interchurch Gambling Task Force on February 20. AFCCRA has also written to non-Government Senators in relation to bankruptcy reform and the amendments in the Senate to the previous Bankruptcy Legislation Amendment Bill.

In early February, I spoke to Terry Gallagher, Inspector General in Bankruptcy who has confirmed that advice has been given to the Prime Minister and the Attorney General on the outcomes of the previous Bill and the amendments in the Senate, subsequent feedback through the Bankruptcy Reform Consultative Forum and consultation with community groups such as the Interchurch Gambling Task Force and AFCCRA.�

Recommendations for a new Bill incorporating some changes have been made to the Government, ITSA has a draft of legislation available and a Bankruptcy Legislation Amendment Bill is on the proposed legislative program announced by the Government. It has ‘A’ status which means that it has priority after urgent legislation.�

Parliament met for 2 weeks in February, and will meet for another 2 weeks from 12 March and then the Budget sitting in May. Terry Gallagher is awaiting Government response to the proposals which ITSA has made including the timing for introduction of the Bill and will then provide information on the Bill to Forum members.�

The Bill will be introduced into the House of Representatives and if passed, will then go to the Senate. I shall provide further information on the Bill and the process as it becomes available. Please contact me on (03)9882 2216 or 0407 042 483 if you want to discuss any of the above.

Part IX Agreements

AFCCRA has requested opportunities for broad consultation in relation to the 2001 Review of Debt Agreements (copies of this report should be available through ITSA). In preparation for any consultation, it is important to collect case studies of Part IX agreements where we see problems. So please, if you have any experience of Debt Agreements under Part IX of the Act where you see any issues, such as high fees, no advantage to the debtor over voluntary bankruptcy, etc., etc. contact your AFCCRA Council member or send them to David Tenant at CARE in the ACT – cccls@austarmetro.com.au�

Bankruptcy and Gambling

We continue to work for repeal or amendment of Section 271 of the Bankruptcy Act which makes it an offence if gambling has materially contributed to a bankrupt’s insolvency in the two years prior to bankruptcy. Meanwhile, it is important to ensure that our clients have the most up-to-date information so that they can make an informed decision. A couple of recent cases have come to my attention where ITSA has asked questions of bankrupts in regard to gambling. As yet, these cases have not been referred for prosecution. I am interested to hear of any other cases and happy to talk to financial counsellors about Section 271.�

Please contact me anytime on 0407 042 483.

Jan Pentland is Chairperson of the Australian�
Financial Counselling & Credit Reform Association
(AFCCRA)

Any contributions to “Round Up” would be most welcome. Our aim is to include some news from each state and territory. Contact Jean Lewis on�1800 647 409 if you have anything you would like�to have included. Alternatively, you can email to: jean.lewis@wesleymission.org.au

The Law Matters

Transfer of Moneys to Super Fund before Bankruptcy

by R. J. Cruickshanks, Deputy Official Receiver
Insolvency & Trustee Service Australia

On 6th September 2001 the Federal Court handed down judgment in the matter of Official Trustee in Bankruptcy v Trevor Newton Small Superannuation Fund Pty Ltd [2001] FCA 1267.�

The Official Trustee was successful and the judgment confirms the long held belief by trustees that payments made by a debtor prior to bankruptcy to acquire a “non-divisible asset” (commonly known as “protected property”), such as superannuation, motor vehicle etc, are subject to the other provisions of the Bankruptcy Act (the “Act”) such as s.115, s.120, and s.121.

The case involved three payments totalling $263,674 made by a barrister, Trevor Newton Small (“TS”) before the date he became bankrupt, to the Trevor Newton Small Superannuation Fund Pty Ltd (“TNSSF”) as trustee for his superannuation fund. The bankrupt and his accountant were directors of TNSSF. An amount of $92,900 was paid in the relation back period, and the other two payments totalling $170,774 were made within two years before the date of bankruptcy.

The following is a chronology of the critical events occurring prior to bankruptcy:-

5/9/1995 The ATO issued three Notices of Assessment to TS for unpaid income tax totalling $308,802.20 which was due and payable on 27th October 1995

21/3/1996 The ATO commenced legal proceedings against TS to recover the unpaid income tax.

1/4/1996 TS was personally served with a Statement of Claim issued by the ATO out of the NSW Supreme Court for $398,223.01. TS did not file a defense to the Statement of Claim.

May 1996 On the advice of his accountant, TS consulted a registered trustee in bankruptcy and his solicitor

21/6/1996 TNSSF established with TS and his accountant as its directors.

26/6/1996 TS paid $85,387.00 into TNSSF as a contribution

9/7/1996 The ATO obtained judgment in the Supreme Court against TS for $391,778.14

15/1/1997 TS paid a further $85,387.00 into TNSSF as a contribution

28/2/1997 TS personally served with a Bankruptcy Notice issued by the ATO and based on the Supreme Court judgment

14/3/1997 TS committed “an act of bankruptcy” when he failed to comply with the requirements of the Bankruptcy Notice (start of “s.115 Relation Back period”)

23/7/1997 TS paid a further $92,900 into TNSSF as a contribution

29/7/1997 The ATO filed a Creditor’s Petition relying on TS’s “act of bankruptcy” of 14th March 1997

6/10/1997 A Sequestration Order was made against TS on the ATO’s petition.

Issues considered by the Court:-

1) Were the three payments void pursuant to s.121(1) of the Bankruptcy Act or does s.116(2)(d) protect the payments?

The Court held that there is a distinction between “an interest in a Fund” and “a payment into a Fund”. Section 116(2)(d)(iii)(A) protects an interest in a regulated fund. A payment to a Fund may give rise to an interest in a Fund which is protected, however the trustee of the bankrupt estate is not precluded from challenging the validity of the payment into the Fund that gave rise to that interest�

2) Payment to Fund in “Relation Back period”

The Court held that as the $92,900 payment made to the Fund on 23rd July 1997 was in the “relation back” period as defined in s.115 of the Act , it vested in the Official Trustee and consequently TS had no authority to part with it. The TNSSF of which TS was a director, would have been aware of that lack of authority, and derived no title to the money. Furthermore, the Court held that pursuant to s.129(4) of the Act, the $92,900 is recoverable by the Official Trustee.

3) Payments to Fund before the commencement of relation back

TS was insolvent when the two payments of $85,387 each were made to TNSSF as evidenced by the existence of a judgment debt to the ATO of $391,778.14 obtained six months before the second of those two payments and the serving of TS with ATO’s Statement of Claim for $398,223.01, two and a half months prior to the first of those two payments; TS’s liabilities exceeding his assets, and TS and his advisers admitting TS could only meet his obligations to the ATO if TS could negotiate a repayment scheme.
The Court concluded that TS’s “main purpose” in making the payments to the TNSSF must be taken to have been to prevent the money from becoming divisible amongst creditors i.e. the payments were void against the Official Trustee by s.121(1).

4) Did the exception in s.121(4) apply?

By s.121(4)(c) a transfer of property is not void against the trustee under s.121(1) if the transferee could not reasonably have inferred that at the time of transfer the transferor was or was about to become insolvent. Because the transferee was a company of which TS and his accountant were directors, the transferee must have been aware of TS’s insolvency. The exception under s.121(4) was therefore not available.

5) Was there consideration?

If the Superannuation Fund trustee had provided consideration to TS for the payments, it would be entitled pursuant to s.121(5) to be paid the value of consideration which it gave. The Court agreed with the Official Trustee’s submission that the onus was on the trustee company (i.e. the transferee) to prove what, if any, consideration was given. The Court followed Cook (Trustee) in the matter of Benson [2000] FCA 1977, and agreed that the promises, guarantees and management services that the TNSSF provided were not provided as consideration for the contributions made by TS.

Accordingly, the Official Trustee is not required to repay TNSSF any moneys from the moneys that TNSSF is now required to pay the Official Trustee after making an adjustment for income tax payable by TNSSF.

Compiled by R.J. Cruickshanks with great assistance from T. Castrisos, Deputy Official Receiver

Living in the country and paying for it

by John Mumford

John Mumford has been a financial counsellor for twelve years at the Family Resource Centre in the Wonthaggi & District Hospital, Victoria. Wonthaggi is about 130kms south east of Melbourne and is a semi-rural area.

As part of his work as a financial counsellor, John has been highly active as a consumer advocate, particularly in regard to utility issues and raising rural issues to city based decision makers. He is a member of a number of consultative groups with regards to essential services and has been actively involved in making representations to the relevant government Ministers over the last few years to raise safety-net, regulatory and consumer issues.�

The Victorian government has recently launched an inquiry into the huge increases in LP Gas prices. John is currently working with the Concessions Unit at the Department for Human Services to develop an assistance program for low income and disadvantaged domestic users of LP Gas. The Financial & Consumer Rights Council of Victoria has received government funding to prepare an issues paper on regulatory and consumer issues faced by LP Gas users.

The following article, written by John, first appeared in the May/June 2000 edition of the Consumer Rights Journal. Since then, a number of significant changes have come about in which John’s activities as a consumer advocate have no doubt had their influence. The themes he describes however, will no doubt be familiar to most financial counsellors who work in areas outside the major cities of Australia.

The rural lifestyle offers many advantages - a healthy environment, a sense of freedom and strong community spirit. However, not all residents can benefit from this lifestyle—those in need face severe disadvantages.�

Past and current political and economic policies have had significant negative effects on rural communities. These policies have brought about the withdrawal and closure of public and private services, and have driven up costs and charges. This results in a reduction in local employment that leads to a loss of population as residents are forced to look elsewhere for opportunities.�

At the same time, the population in some rural areas is increasing as low-income families are pushed past the fringes of the metropolitan area seeking cheaper housing and a new life.�

There seems to be an expectation that rural communities should be able to look after themselves and that they should not expect handouts. Poor rural communities do not have the resources to adequately replace services that government and responsible industry should be providing.�

Much of Australia is experiencing economic recovery, but this recovery is yet to extend to rural regions. Rural incomes are substantially lower than non-rural. There is a high proportion of employment in low-pay industries and part-time and seasonal work. Rural areas have a high dependence on welfare payments.�

The rural community faces disadvantages in many ways. In the provision of basic utilities like water and sewerage, electricity, gas and telephone, consumers in rural areas often face:�

Higher pricing
Differential pricing
Reduced quality and maintenance of services
Inadequate regulation, especially in areas of water and non-mains gas

In the provision of services like health, education, financial, legal, employment and welfare, rural consumers often face:�

Poor services - in that a service is not provided or is only token
Inadequately resourced services
Services that are difficult and costly to access�

Rural communities lack adequate resources to fully provide for basic infrastructure like roads, public transport, quality housing, public buildings, and sports and recreational facilities.�

A look at some specific areas may demonstrate some of the issues.�

Health�
One of the most vulnerable sections of our community are those suffering ill health. There is a serious shortage of medical practitioners and specialists in rural regions. Rural residents can be faced with huge costs to access medical services. This financial stress frequently compounds the health problems. There is minimal government assistance for this section of the community.�

Water and Sewerage
Rural water authorities (businesses) are not regulated, so there are no uniform standards to protect consumers. The result is a lack of consistency between authorities in areas like pricing, service standards and assistance for those in financial hardship. Some authorities are still charging interest on overdue accounts.�

Many rural towns (including some that are long established) do not have sewerage. Rural water authorities are working to provide sewerage to these areas. The cost of sewerage schemes is considerably more for rural residents than for metropolitan residents. Some rural residents question the value of an expensive sewerage scheme, as they cannot justify the expenditure at a time when their property values are stagnant due to the decline of their community.�

Gas�
The reticulated mains gas network does not extend to many rural areas. Residents in these areas rely on LP gas (bottled gas). There is no regulation of the bottled gas industry, as competition is supposed to provide consumer protection. Bottled gas customers do not have access to the Winter Energy Concession provided by the Victorian State Government. These customers have access to an alternative concession - The Non-Mains Winter Energy Concession. This concession is paid at a set rate, which discriminates against large users of energy - for example, families with children, and the elderly and frail - that have high heating needs. Bottled gas customers do not have access to the State Government Utility Relief Grant Scheme, which provides assistance to consumers of gas, electricity and water who are experiencing financial hardship.�

Profile of a rural area�
The Bass Coast Shire is located in the South West section of the Gippsland Region, Victoria. The shire has two main centres, Wonthaggi and Cowes, both about 130 kilometres from Melbourne.�

The shire has a high proportion of residents on low incomes. Much of the available employment is in industries that are low paid and seasonal, for example, services, tourism, and primary industry. The shire has a large population of Centrelink recipients: aged, unemployed, disabled, and sole parents. Over 50% of residents rely on Centrelink payments for all or most of their income.�

There is no public transport in the shire or to the centres of service delivery in the Gippsland Region. Residents rely on part-time visiting services from federal and state government departments. Many government services are not provided in the shire - residents need to travel more than 80 kilometres for access.�

There are minimal specialist services in the shire, for example, medical and legal. Real estate values are stagnant in all but a handful of areas. Much of the region is undergoing development by the shire council and rural water authority. Many property owners have been levied with road-making and sewerage charges, and they have little capacity to pay.�

However, since writing this in 2000, there has been an increase in real estate values which has had the flow on effect of increasing rental accommodation costs.

The shire also has a high level of low-priced accommodation but much is of poor standard and in isolated areas. This affordability attracts people on low incomes, and the shire population (now 25,000) is growing at well above the state average. Many new residents do not realise the hidden costs. Isolation, lack of services and lack of family support create the need for a reliable car and a telephone. A higher proportion of calls have to be made at STD rates.�

Winters in South Gippsland are unusually long and very wet. Health problems are common, especially among the young and elderly. Mains gas is not available in the region, denying residents the cheapest form of heating. These factors, combined with low-quality housing, often result in high energy bills.�

Per capita, the shire has the highest concentration of electronic gaming machines in rural Victoria.�

For a lot of people, the attractiveness of the country, and the belief that it must be cheaper to live there, spells financial disaster.

Finance Brokers Research Project we need your help!

by Nicola Howell, Solicitor, CCLC

Consumer Credit Legal Centre (NSW) Inc. (“CCLC”) has been commissioned by the Australian Securities and Investments Commission (“ASIC”) to conduct a research project on finance and mortgage brokers in Australia, and we’re seeking the help of financial counsellors and other caseworkers across Australia.

Why a project on finance and mortgage brokers?
In the last few years, more and more finance and mortgage brokers have entered the market and begun providing access to personal loans and home loans. At the same time, at CCLC, we have seen an increase in consumer complaints. Issues such as misrepresentation, high fees, unfair pressure, aggressive marketing, and fraud, have been reported, particularly in relation to brokers targeting those who have had difficulty getting credit from the mainstream lenders.�

Our discussions with caseworkers across the country suggest that the problem is not isolated to NSW. However, regulation is state-based, and some jurisdictions do not have any specific finance or mortgage broker regulation at all.�

ASIC is the Commonwealth regulator with specific responsibility for financial services. From March 2002, ASIC will have new consumer protection powers in relation to credit products and services generally. For the first time, it will be able to take action against finance and mortgage brokers (and credit providers) for breaches of the consumer protection provisions of the ASIC Act (misleading and deceptive conduct, unconscionable conduct, etc).

This research project will give ASIC a better understanding of the finance and mortgage broker market, as well as the scope and nature of consumer issues, and will help it to develop appropriate policy responses. The report may also be of interest to State and Territory agencies.�

Caseworker input
As part of the project, we are seeking information about caseworker experiences in this area. We are interested in views and experiences about both mortgage brokers (who generally deal with home loans only) and finance brokers (who generally deal with other personal loans, but may also deal with home loans). For example:

What percentage of your caseload involves complaints about finance/mortgage brokers?
Why are clients using finance/mortgage brokers?
What types of problems are you and/or your clients finding?
How are brokers targeting and advertising their services?
Do you think the fees and commissions are fair, and appropriately disclosed to consumers?
Do consumers understand the relationship between brokers and credit providers?
Do brokers explain the fees, repayments, and other terms and conditions of loan products to consumers?
What forums do you use for resolving broker complaints (eg dealing direct with the broker, credit provider, industry association, industry dispute scheme, Consumer Affairs Department, ACCC, ASIC, etc). Have your experiences been successful?

Caseworker survey
We have developed a survey to collate caseworker experiences, and will be distributing it through State Associations and other networks throughout February and March 2002. If you haven’t already completed a survey, but would like to do so, please contact CCLC as soon as possible (contact details below).�

Case studies, advertisements and broker contracts
In addition to the caseworker survey, we’re keen for caseworkers to send us other relevant information, including:

Individual, anonymous case studies;
Copies of broker advertisements in your local papers or other publications;
Copies of any contracts, agreements, appointment letters, or authorities between brokers and consumers (subject to client consent, and with identifying details deleted).

Confidentiality
All information received from caseworkers will be treated confidentially, and individual survey responses and other documents will not be provided to ASIC.

More information�
We know that financial counsellors are always very busy, and that the demands of casework are high. However, information about the practices of finance and mortgage brokers from your casework experience will help ASIC and can identify areas where better regulation is needed. Your contribution will be greatly appreciated.�

If you would like any more information or would like a copy of the survey, please contact us at CCLC:

Nicola Howell – Ph (02) 9212 4169
Nicola_Howell@fcl.fl.asn.au or

Leanne Kohler – Ph (02) 9212 4135 Leanne_Kohler@fcl.fl.asn.au�

Teleconference on the First Few Years

A teleconference was held recently with participants who had been practicing as financial counsellors for a short time only. Below is a summary of the key points discussed during the teleconference. It is not meant to be a complete reproduction of what was said but merely to capture an overview of what was discussed during the given time.�

Introduction

Participants came from a mix of backgrounds bringing interesting and varied experiences to their work. One had run their own small business, another had been a minister of religion, another had worked in the commercial world; others had a background of social work, accounting and some were students of psychology. One participant had had the experience of being a client and fighting a major bank for their rights. The experience had so inspired them, they had gone on to become a financial counsellor.

Difficulties and Coping Strategies

Some of the difficulties for financial counsellors had possible remedies while others were not that easy to find appropriate coping strategies for. There are many inherent difficulties and frustrations in financial counselling and these were just some that were discussed within the constraints of time.

Difficulties/Issues Suggestions of strategies for coping

Difficulty in obtaining all relevant information from a client who is emotionally overwhelmed by their circumstances.

Don’t always expect to obtain all relevant information in the first session anyway
Initial session may just be a listening/supporting session if client is in significant crisis
However, the impact of immediate practical help in some form can be a powerful tool in relieving a crisis
It is important to remember we are not therapists but we play a vital role in being able to refer clients onto other forms of personal/family counselling etc

Difficulty in accessing legal advice/support

Establish contact with a state based consumer credit or community legal centre lawyer eg, via a Credit Helpline service or a state based resource worker. Legal advice varies between states

Dealing with creditors

Important to speak to the right person who is able to make a decision eg. Manager or supervisor when negotiating.
Remember consumers are protected by the Consumer Credit Code and Trade Practices Act

Expectations of agency/funding body on number of clients seen. Depending on circumstance, a high number was considered in excess of four clients per day and some cases even three

Set workload according to what you feel comfortable with in accordance with your experience, training and agency support
Allow enough time to do file maintenance, follow up, training and supervision. Block out a day or part of day for this
Learn to say no to some clients
Allow at least two hours for new clients

Clients not attending appointments

Don’t book too far ahead, keep to just two weeks in advance
Do your own bookings as this allows you to assess client and make sure they bring in correct paperwork
Educate agency admin staff in role of financial counsellor and how to make bookings correctly with appropriate number of clients

In the Media

Collection House targets commercial market as growth continues

The Brisbane-based company said yesterday that first-half profit had more than doubled from $3 million to $6.9 million as it purchased portfolios of debt from its customers, and grew its existing business. First-half revenue more than doubled, surging 115 per cent to $52.7 million.

Collection House estimates it has about 40 percent of the outsourced consumer debt collection business, in which total fees across industry in Australia amount to $180 million.

The total amount of fees available in both the consumer and commercial sides of the business would also rise as banks, telephone companies and other creditors started handing their bad debts to Collection House and its competitors sooner. They currently hand over the accounts after six months or more, but would start moving that back to as little as one month, said Collection House’s managing director, Mr John Pearce.

Australian Financial Review, March 1, 2002

Poor pay more for Telstra downloads

Low-income earners who want access to Telstra’s fast internet service and lock in to the cheapest monthly upfront fees will pay up to eight times more for their downloads than wealthy users.

A CD of music or information for a student wanting to take advantage of Telstra’s new cable plan will cost about $18.30 to download the data. Wealthy users who are able to afford a plan with a more expensive upfront cost are being charged just $2.90 for the same amount of information.�

Welcome to the crazy world of internet pricing where Telstra, Australia’s largest company and still 50.1 per cent government-owned, reaps higher profit margins from the poor but lower ones from the rich.

The Australian, January 23, 2002

Welfare blitz fits cheats to profile

The Minister for Family and Community Services, Amanda Vanstone, has launched a personal crusade this year against welfare fraud, foreshadowing the expansion of techniques such as “profiling” to weed out cheats.

Claiming that a deep “motivation” to serve the working poor was underpinning her campaign, Senator Vanstone said the new methods of detecting overpayments would bring about a new era of welfare compliance.�

“I don’t have Skase to chase any more so I need something to do,” she said. “This is my new chase. It’s vitally, vitally important work.”

Centrelink officers will be trained to look for traits that fit the profile of welfare cheats. People with a history of casual earnings and irregular declared income are among those who will come under scrutiny.

The profiling technique augments existing methods. These include cross-referencing welfare, taxation and other government records, and Centrelink’s “dob-in” Web site.

Sydney Morning Herald, January 17, 2002

Webs sited:

The Child Support Agency has a new feature on their website which is a calculator designed to help parents work out their child support payments. The website can be found at www.csa.gov.au� and the new feature is called CSA Calculators and offers a Basic and Advanced method of immediate calculation. By entering both parents income it will calculate child support payments as an annual and weekly sum. It also has other features such as Budgeting and a Living Expenses calculator to help manage your money.

A Sorry Tale of Car Dealers

by Heather Webster

Every now and again we have a client come in with a sorry tale similar to the following:

A young man in his twenties suffers from a chromosome deficiency with physical and mental consequences. He works as a storeman in a sheltered workshop and takes home $380 pwk. He is married to a girl who works as a cleaner and earns $300 pwk. They drive a 1988 Holden.

On the weekend he “bought” an 8 cylinder second hand Holden for $49,000. As he had no money, they took his 1988 Holden as deposit but refused to give him a copy of the contract until he paid a further $500. He drove home from the dealership in Sylvania to his father’s house in Wollongong. It was too late for his father to do anything that night.�

At 9.15 the next morning his father drove the new car to the dealer and asked if they would cancel the contract, take back the car plus $500 and give him back his son’s original car.�

He spoke to three people. The lady who arranged the finance said she could and would tear up the finance application (this she said can be done anytime within 7 days). AGC confirms finance has been cancelled. A Swann insurance policy was added to the car finance at a cost of $4,400. It is assumed this was cancelled with the finance.�

The manager said the finance and purchase of the car were separate and even though the finance was cancelled, the contract to buy the car was still valid and could only be broken by paying 5% ($2,450).

The father rang the owner, who has a number of dealerships; he said the contract was valid and “take us to the fair trading tribunal if you have an issue”.�
The client still has no copy of the contract, as the car yard will only give it to him when he has paid $500 (due as part of deposit as old car was insufficient).

Legal advice obtained was that the contract should be rescinded by returning the car to the dealer. Just drive it in, drop it off and tell them you are rescinding the contract.�

Then commence an action in a small claims court (such as the NSW Fair Trading Tribunal) to recover the 1988 Holden or its value.

The arguments to be raised are:

The contract is clearly conditional on finance; see Section 124 of the credit code.
A contract can be re-opened under Section 70 of the Credit Code; hence a court can change an unjust contract.
Section 52 of the Trade Practices Act (and similar sections in State Fair Trading Acts) covers misleading or deceptive conduct. They have misled the client into believing he can afford the car.
Section 51AB of the Trade Practices Act (and similar sections in State Fair trading Acts) covers unconscionable conduct. It is unconscionable to take advantage of a mentally handicapped person.

The client could and should, have a solicitor or his father at the tribunal or court to put his case. This would need to be applied for when the application is made.

The NSW Fair Trading Tribunal would cover this case even though the car cost more than the $40,000 limit, as, after the car is returned to the dealer, they are only arguing over the loss to the client of the old car or the loss to the dealer of his 5% fee.

Given the speed with which the father acted and the limited capacity of the client to understand finance, the legal advisor considers that there is a good chance that the Tribunal will find in favour of the client.

Heather is a financial counsellor with Credit Helpline, NSW

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