Sharkwatch August 2002

Notes & Notices

Welfare Rights Website

The National Welfare Rights Network website was launched recently. It is an important resource for community workers who deal with Social Security matters.�

The site includes over 30 Fact sheets on key and current Social Security payments and topics, two chapters of the 4th edition of the Independent Social Security Handbook as well as the Welfare Rights Centre ‘rates chart’ with all the latest Social Security payment rates (previously issued with ‘rights review’).�

There are also two self-help booklets for appealing to both the Social Security Appeals Tribunal (SSAT) and the Administrative Appeals Tribunal (AAT). The website address is www.welfarerights.org.au�

You Can Complain Guide

The Australian Securities and Investments Commission (ASIC) has produced a free information guide called You Can Complain, which tells people the best way to make a complaint. The guide advises that, under the law, you have the right to complain if you are not happy about any aspect of a financial product or service.�

The guide is now available in English, Arabic, Vietnamese or Chinese. Copies can be obtained by contacting ASIC by telephone on 1300 300 630 or go to their website at www.fido.asic.gov.au�

Consumer Credit Code Website

The Consumer Credit Code now has its own website at www.creditcode.gov.au� to explain to consumers how the code governs all credit transactions in Australia. It gives examples of the type of credit covered, as well as what is not covered, by the code and there is a section on ‘Frequently Asked Questions’ which explains in detail how the code works. It also has links to various useful organisations such as the ACA, ASIC and the ABIO.�
GE Capital Finance—ADR Advisory Council

Consumer Representative

Expressions of interest are sought for a vacant consumer representative position on the Advisory Council for the GE Capital Finance Alternative Disputes Resolution Scheme. The Advisory Council comprises two representatives from GE Capital Finance, two consumer representatives one of whom is Jan Pentland, and an independent Chair, currently Dick Viney.

The ADR scheme as well as an internal disputes resolution process was established by GE when they bought the old AVCO business and in response to issues raised by the consumer movement in relation to AVCO. The schemes cover GE Finance and Insurance (formerly AVCO Financial Services Limited) and AVCO Access Limited.

Expressions of interest for the vacant consumer representative position are sought from persons able to demonstrate the following:

An established appropriate consultative network
A strong interest and experience in consumer issues relating to the finance industry
An awareness of alternative disputes resolution schemes

The Advisory Council meets twice annually in Melbourne. An annual fee of $2,000 is payable to an organisation nominated by the consumer representative, plus travel expenses. For further information including a copy of the Terms of Reference and Charter, please contact Jan Pentland on 0407 042 483.

Expressions of interest should be forwarded by 30 August 2002, to :

Jan Pentland, 18 Mangarra Road, Canterbury, 3126 or janpentland@hotmail.com�

A Protocol for Gambling Financial Counselling�

by Richard Brading
Principal Solicitor
Wesley Community Legal Service

Financial Counselling - an eclectic approach

Financial counselling brings together a number of skills and approaches which are drawn upon by the Financial Counsellor to meet the client's needs. Flexibility is vital, as each client has different needs, wishes and issues.

The main areas in which Financial Counsellors work is General Client-focused counselling, budgeting, provision of information and advocacy. They need to have a good knowledge of credit and debt law, insolvency, negotiation, welfare and social security law. Skills and knowledge in secondary areas such as business law, tax, family law, child support are also necessary.

Financial counsellors only work with people who are in some sort of financial difficulty. They do not provide investment advice. Financial counsellors in New South Wales are adamant that they do not provide advice at all; they only provide counselling, information and options, whereas Victorian financial counsellors see themselves more as paralegals.

Money management is only one aspect of financial counselling. Financial counsellors see many people who have little need of assistance with money management - their financial problems come from external causes such as unemployment, illness, relationship breakdown, business failure etc.

Differences between Gambling Counselling and Financial Counselling

Financial counsellors assume that their clients are providing true information about their financial circumstances, so their approach to counselling is quite straightforward. Where a client divulges a gambling problem during financial counselling, a financial counsellor may refer the client to an Addictions Therapist or other specialist.

Resistance to such a referral may result in the financial counsellor drawing limits on the counselling contract. In some cases financial counsellors will make attendance at gambling counselling a condition of continuing financial counselling.

It depends on the financial counsellor's skills and views and the counsellors opinion of how serious the gambling problem is.

A few financial counsellors are also skilled in gambling counselling and can undertake both roles.

By contrast, gambling counsellors can count on a level of deception from their clients. Obviously problem gamblers are more likely to be dishonest than their partners, but co-dependency and related issues are common in partners of problem gamblers.

Typical problem gamblers approach financial counselling seeking a quick fix to their financial problems - getting creditors off their backs, obtaining further money to gamble, silencing a critical partner. This inevitably creates an atmosphere of tension between the financial counsellor and client.

A financial counsellor who takes a helping client-centred approach to a problem gambler is likely to be aggravating the problem - fixing the immediate financial problem and freeing the problem gambler to return to gambling and sink to a lower level of debt and problems in the future.

Money management is an important issue.

By definition, a problem gambler is a poor money manager. The problem gambling client will usually present with a mess of debts which may need careful monitoring.

Keeping records of personal expenditure, including gambling expenditure can help the gambler appreciate the value of money and reduce the urge to gamble again.

On the other hand, some problem gamblers live very efficiently, saving as much as possible to fund their addiction.

They may need little help with money management skills.

Counselling for couples

Many financial and gambling counsellors will not see couples together. There are good reasons for this.

They consider that counselling concerns an individual and is generally impeded where a third party is allowed to sit in. Permission for a third party is essential and it should be established that it is freely given.

In the case of Marriage Counselling and Mediation, a trained counsellor would take responsibility for 'gatekeeping' and definitions of 'boundaries' and 'agreed rules'.

Financial Counselling for couples

The Financial Counsellors' Association of New South Wales provides the following description of financial counselling (most state peak bodies follow similar rules):

"Financial counselling:

Is a free, confidential service
Is for individuals, families, small business operators experiencing personal financial difficulties and consumers in general
Supports and empowers those who are experiencing financial difficulties to overcome those difficulties
Provides short term crisis management, and assists to develop long term prevention strategies
Includes: counselling, assessing, educating, informing, providing options, negotiating, advocating, mediating, cash flow management options, personal financial management and referral
Is not welfare, band-aiding, rescuing or just budget preparation
Is designed to empower

A Financial Counsellor has:

Membership (Associate or Accredited) of the Financial Counsellor's Association of New South Wales (FCAN)
The responsibility to undertake continuing training and development and professional supervision, in accordance with the requirements of FCAN
Personal counselling skills
An understanding of consumer banking and financial systems
Skills in negotiation and advocacy with creditors, government bodies and others
Highly developed interpersonal and communication skills, which are continually being updated
An ability to evaluate financial circumstances and identify options
Knowledge of relevant legislation, including the Consumer Credit Code, Bankruptcy Act, Fines Act, and civil debt recovery procedure
Knowledge of the rights of those who are disadvantaged (e.g. Centrelink benefits, Dept of Housing requirements)
A responsibility to carry out consumer education, with clients or groups in the community
Appropriate referral skills, e.g. legal, welfare, other forms of counselling."

In financial counselling, a third party will sometimes be allowed to participate. The counsellor must ensure that permission is given and that if necessary, manipulative suggestion is exposed, confronted and dealt with.

With a couple, the counsellor must determine who is "the client", either one of the couple, or both.

As a general rule, if a couple have financial difficulties and seek financial counselling together, counselling sessions may proceed providing the boundaries are suitably set from the outset. This is particularly possible where the couple has joint debts and a strong sharing of financial arrangements.

However, problems can arise that will force an end to the couples counselling or even the counsellor seeing either client. One situation may occur where there is a conflict of interest, for example, a debt of one partner that has been guaranteed by the other.

Gambling Counselling for couples

Ideally each partner will see a different counsellor where one (or both) is a problem gambler. The functions and expectations are generally lower where a couple present for counselling.

There is the expectation of the non-gambling partner that the counsellor will put pressure on the gambler to stop gambling. There is resistance by the problem gambler to the anticipated pressure. Any number of sub-themes can and will develop.

However, some gambling counsellors have particular expertise in couples counselling and can put the tensions and pressures towards helping the couple resolve their issues. The challenges to the counsellor are much greater in gambling counselling for couples than individuals.

Significantly, gambling counsellors may agree to see a couple in the common situation of the non-gambler dragging the problem gambler into the counselling room.

They consider that it is better to see the couple together, than not see the problem gambler at all.

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

Queensland

Lola Mashado is making a career move from Financial Counselling Services (Qld) to work full time for “Gambling Help” (used to be Break Even) at the end of August. Kate Keating, manager of FCSQ is now looking for two telephone financial counsellors who may be interested in short term contract work - one part time and one full time - from September 2002 until June 2003. If you would like more information on these positions please contact Kate on (07) 3253 2911.

Still in Queensland—Lifeline Financial Counselling Services in Brisbane under the guidance of Gregory Mowle, has taken the bold step of deciding to become a Debt Agreement Administrator and will operate under the name of “Advantage Debt Management Service”.

This will be a division of Lifeline and the service will be offered at no cost to the consumer—no initial fee, no ongoing fees—and will operate under Lifeline’s traditional financial counselling guidelines.�

The decision to be become a Debt Agreement Administrator says Greg, arose out of a desire for consumers to have an ethical, competent and non-profit alternative to the current for-profit Administrators, some of whom charge exorbitant fees. Lifeline is a non-profit organisation and has no vested interest in herding clients into a Debt Agreement.

The name “Advantage” is being used to attract consumers who normally shy away from using a counselling service. Consumers will be able to access the service Australia-wide. Greg can be contacted for details on 07 3250 1900 or email gmowle@lifebrisbane.com.au

Western Australia

The Financial Counsellors Association of Western Australia (FCAWA) are delighted with their new Buddy Program run by Andrea Highman. New Financial Counsellors have jumped at the opportunity to be allocated an experienced counsellor as a buddy.�

This project was formalised out of a previous practice of a new counsellor having a friend who they can call for casework support and ideas or options, for their clients. Five new counsellors, including three country counsellors, have been allocated buddies this year. The buddies speak on the phone and many have had the opportunity to meet their buddy in person at training.

New Financial Counsellors who would like an experienced counsellor as a buddy, or if any would like to volunteer to be a buddy for a new counsellor, are asked to contact Andrea Highman at Sussex Street Community Legal Service on Thursdays or Fridays. Telephone: (08) 9470 2676 or email a.highman@sscls.asn.au�

Talking of new financial counsellors, Sue Happ has just started her new position at Murchison Financial Advocacy Services in Meekatharra which is right in the heart of outback WA. Sue comes from a background in Aged Care and has lived in the area for many years. She is looking forward to the challenges of her new position.

Victoria

Jan Altair of the Djerriwarrh Health Services in Melton has been overwhelmed with the demands made on her service over the last six months or more. Reading the local papers recently confirm what she had suspected all along—the area of Melton has had the second highest population growth rate in Victoria.�

A recent Australian Bureau of Statistics Estimated Resident Population study shows the shire’s population grew by 5.5% over the last five years equating to 12,600 new residents, many of them first home buyers. This has meant complex cases for Jan to handle, with most entailing some kind of intervention to save people’s homes.

AFCCRA REPORT

BANKRUPTCY UPDATE

By Jan Pentland
Chairperson, Australian Financial Counselling and Credit Reform Association

Bankruptcy Legislation Amendment Bill (BLAB)

The Bankruptcy Legislation Amendment Bill (BLAB) was introduced into the Senate on June 19 and is likely to be debated in the Parliamentary sessions which commence on August 19.�

As you are aware, a national campaign has been underway to have an amendment moved and passed which would repeal or amend Section 271 of the Act to remove current discrimination against bankrupts with gambling debts.�

Such an amendment to a similar Bill was moved by the Democrats and passed with the support of non-Government Senators in 2001 but the Bill then lapsed when the election was called.

Those involved in the campaign to remove the unfair treatment of gamblers have relied upon the support of the non-Government parties to bring about this change.�

However, recent developments indicate that the ALP may be more interested in other bankruptcy reform issues, particularly perceived abuse of Part X and may not be able to be relied upon for support to amend s. 271, although this is not entirely clear with different messages coming from particular Labor MPs.

What has emerged is that the resistance to amendment or repeal of s. 271 seems to come directly from the Prime Minister’s office despite advice that the Federal Government’s advisory panel on gambling which came out of the Productivity Commission enquiry has supported the removal of this discrimination.�

Is this another example of John Howard’s inherently conservative views and a perceived need to potentially punish ‘reckless gamblers’?

Meanwhile, the campaign continues. AFCCRA has written to the Prime Minister, to Senator Vanstone, who chairs the advisory committee on gambling, and again written to the Attorney General, Daryl Williams and shadow AG, Robert McClellan, highlighting the effect of s. 271 on debtors with gambling related debts and their families.�

We have also written to all 76 Senators about this issue, asking them to support repeal or amendment of s. 271. Continuing contact will be maintained with McClellan’s and Williams’ advisors who are working on the BLAB.

AFCCRA appreciates the support of the many groups and individuals who have contributed to the campaign by lobbying Parliamentarians and raising this issue in various forums. Democrat Senators have indicated continuing support for our campaign and we thank them for this.�

I have spoken to Tim Costello, a representative on Senator Vanstone’s advisory committee on gambling and he indicated that the committee does support the reform of s. 271. Gary Sullivan, Senior Solicitor at West Heidelberg Community Legal Service who has been active in the campaign over a long period, and I, will meet with David Bergman from the Canberra ITSA office on 14 August. As well as discussing the current state of play with BLAB, we are likely to canvas options to protect our gambling clients against action under s. 271—just in case our campaign does not achieve its aim to amend or repeal s. 271 to remove the current discrimination.

Your support is welcome. Background information and clarification is available – please contact:
Jan Pentland on 0407 042 483 or email: janpentland@hotmail.com�

The Law Matters

by Richard Brading
Principal Solicitor
Wesley Community Legal Service

Dancing with Debt Collectors

Financial counsellors across Australia are being bombarded with complaints from their clients of continued creditor harassment even when an arrangement is in place. Sadly, there appears to be no brilliant solution to this problem, and things are likely to get worse, not better.

Consider these facts:

Debt collectors are under increasing pressure to squeeze every last cent out of our clients. Their focus is always short-term.
Debt collectors have little interest in accommodating financial counsellors or their procedures.
Debt collection emphasises speed and repetition as the most effective tools in the recovery of debts. A debtor is more likely to pay the creditor that rings first and most often.
That debt collectors even make some attempt to deal with financial counsellors is a credit to the persistence and political clout of financial counsellors.

So you knew all that. Well here are a few suggestions.

Consider a leaflet or handout for those clients likely to receive communication after an arrangement has been entered into, so that they have a reminder of what to say when creditors call. A response such as “An arrangement has been made, and I am sorry that I cannot discuss this with you. You will have to contact my financial counsellor. Their details are on your file.”
Warn your clients to expect the occasional call and letter. For example, they may continue to receive account statements with various demands attached. Creditors regulated by the Consumer Credit Code may consider they have a legal obligation to continue sending statements to your client.
Also warn your clients to refrain from making any promise or undertaking to the caller. These are always recorded, and only encourage the creditor to call again.
Suggest that clients keep a log of creditor communications including date, time, caller’s name or number and content of each conversation. This can be useful in future dealings with the debt collector.
If calls become a nuisance, advise clients to get an answering machine or an unlisted number.
If creditor communication becomes a nuisance, you can use the client’s log of calls as the basis for a complaint to the creditor or the relevant Alternative Disputes Resolution scheme about the failure to communicate only with you.
Where a creditor persists in communicating directly with the client, and ignoring the financial counsellor’s letters, that conduct is “Undue Harassment” for the purposes of s.60 of the Trade Practices Act. Whilst State Fair Trading or Consumer Affairs Departments have a poor record of responding, most creditors are still sensitive to complaints. Government departments tend to record numbers of complaints, so the more complaints made about a particular issue, or a particular business, the more likely a response.
A complaint to Consumer Affairs or the Australian Competition and Consumer Commission can be empowering for the client.
In extreme cases, the media can be of considerable assistance in highlighting unconscionable practices. This usually depends on the client agreeing to stand in front of a TV camera, at considerable personal cost.
Finally, consider whether you are available to take creditor calls and respond to creditor correspondence. The sad fact is that some financial counsellors do not leave adequate time for creditor communication, and leave creditors with the perfect excuse to by-pass financial counsellors and go directly to clients. Failure to take calls or reply to letters is a discourtesy that reflects poorly on the entire profession.

Interstate Debt Recovery

The issue of court claims commencing in the wrong State is an increasing nuisance. One of the many problems remaining from Federation is our archaic court system, in which each State behaves like a separate country. This court system favours the rich creditor over the poor debtor.

Under the Commonwealth Service and Execution of Process Act 1992, creditors are legally allowed to commence court debt collection actions in any State they choose. The result is that that a debtor in West Australia may be served with a Summons issued out of the County Court of Victoria for a debt incurred in West Australia where there is no connection with Victoria. If that poor debtor wants to defend the claim, then the debtor must either file a Defence in Victoria within 21 days of service, or file an application with the Victorian County Court for the court action to be stayed.

An application for a stay of proceedings should refer to section 20 of the Service and Execution of Process Act which provides the following criteria for a court to decide which State is the appropriate jurisdiction:

The places of residence of the parties and of any witnesses likely to be called in the proceeding;
The place where the subject matter of the proceeding is situated;
The financial circumstances of the parties, so far as the court is aware of them;
Any agreement between the parties about the court or place in which the proceeding should be instituted;
The law that would be most appropriate; and
Whether a related or similar court action has already been taken.

A letter to the court is of no use in opposing jurisdiction. An application must be made on the appropriate court form (available from the registry in Victoria, or wherever) and an accompanying affidavit. It is possible that the client might be expected to attend court as well.

Of course, our clients are usually too poor to pay a lawyer to make such an application, or even afford to travel to the registry, so invariably end up with a default judgment against them. This fact is well-known to many creditors and debt collectors.

Once a judgment is entered up in the creditor’s State of convenience, it is then registered for enforcement in the debtor’s home State according to the procedures available in the State of collection. However, if the debtor then wants to apply to set aside the default judgement, the debtor must file the application in the creditor’s State of convenience.

So much for the “justice” system.

The NSW Credit Helpline

by Norm Hannelly, Co-ordinator

About Credit Helpline

Credit Helpline operates two telephone services, has E-mail facilities, and is part of Credit Line Financial Counselling under the general umbrella of Wesley Mission Counselling Services based in Sydney.

Our main telephone service is the Consumer Helpline which is operated by fully accredited and experienced Financial Counsellors. They provide information, discuss options, give basic counselling and offer referrals to the consumers of New South Wales.

Our other telephone service, also operated by accredited Financial Counsellors, is the Financial Counsellor Helpline which provides support and resources for financial counsellors in any agency in New South Wales. This may include up-to-date information on consumer rights, consumer legislation, and general support for debriefing.

Both these Helplines are funded by the Department of Fair Trading in NSW.

The Consumer Helpline

The types of calls we encourage on our Consumer Helpline are:

Information Seeking:

Debt Collection (Process, Rights)
Credit Reporting (Rights, Procedures, Legislation, Strategies)
Centrelink Issues (Eligibility, Rights of Appeal, Referral to Welfare Rights)
Housing Issues (Evictions, Bond Assistance, Rights, Dept of Housing, Tenancy )
Repossession of Goods (Rights, Process)
Insurance & Superannuation (Rights, Access Process, Contracts, Referrals)
Bankruptcy (Advantages, Disadvantages, Alternatives)
Taxation (Non-complex issues)
Child Support Agency (Process, Rights)

Financial Counselling:

Financial Crises
Debt Crises
Exploring Dimensions of Indebtedness (Creditors Sheet Strategy)
Exploring Income & Expenditure (Money Plan Strategy)
Compilation of Assets & Liabilities

All callers are accepted empathically and non-judgementally by the Telephone Financial Counsellor (TFC)

The objective is to facilitate the caller to think about the problem, set the problem in a larger context, and to discuss options and strategies. This method generally employs a cognitive approach whereby the caller’s thinking is gauged for context, expansion and options. The TFC facilitates in this process but does not advise.

Assistance with negotiation and advocacy are possible options which may be chosen by the caller.

Counselling:

In cases where the caller is perturbed, anxious or merely upset, the Telephone Financial Counsellor would seek to alleviate the level of stress of the caller. The feelings of the caller become the principal focus of the TFC. There are many counselling systems which are helpful in this regard. Credit Helpline prefers to use a ‘Rogerian’ client-centred approach.

The types of calls which we do not encourage on our consumer helpline are:

General Counselling or Therapeutic Counselling
Psychiatric or Emotionally Disturbed callers
Solicitation of Legal Advice (TFCs are neither lawyers nor para-legals)

Referrals to Other Agencies:

Because of the need for documentation to be sighted and other factors to be properly assessed, after an initial assessment and discussion of options, the TFC will generally refer the caller to an agency for face-to-face financial counselling. Credit Helpline has a database of all Financial Counselling Agencies in NSW.

Referrals are also made to:-

Government Departments
The offices of various Ombudsmen
Welfare Rights
Local Members of Parliament
Law Access
Solicitors
Ethical Review & Regulatory Bodies
Lifeline 13 11 14

The Financial Counsellor Helpline

The types of calls we encourage on our Financial Counsellor Helpline are:

Information Seeking:

As with consumer calls above, any information which might help the financial counsellor
Legislation (Current and Proposed)
Legal Access via a Credit Helpline Solicitor and Legal Resources
Trends in Consumer Issues
Hints on process (especially for non–familiar issues)

Debriefing:

Financial Counsellors may feel free to “download” after their difficult sessions
Feelings of the counsellor may be discussed in strict confidence
At this stage Credit Helpline does NOT offer Supervision

Support:

Credit Helpline offers support to Financial Counsellors by way of:

Resources

Legal Library
Legally Qualified Personnel
Distribution of a Newsletter
Agency Visits for information sharing

Contacting Credit Helpline

Credit Helpline can be contacted by phone or email on:

Consumer Line:
1800 808 488 (Toll Free NSW)

Financial Counsellor Line:
1800 650 084 (Toll Free Country, NSW) (02) 9319 3054 (Sydney City)

Via the Credit Line Website: www.wesleycreditline.org�

E-mail: norm.hannelly@wesleymission.org.au�

Teleconference on Debt Agreements & Debt Agreement Administrators

A teleconference was held recently to discuss current issues arising out of Debt Agreements or Part IX’s, particularly in relation to commercial Debt Agreement Administrators. The participants, mostly financial counsellors, were from various states around Australia and situated in city-based agencies as well as more remote areas. Jan Pentland, who is chairperson of AFCCRA, was one of the participants and these are her views and conclusions on Debt Agreements and Debt Agreement Administrators arising from the teleconference and a range of other information sources:

Firstly, I reaffirm my own and AFCCRA’s support for Part IX Debt Agreements (DAs) as a low cost, flexible alternative to bankruptcy as stated in AFCCRA’s letter to Terry Gallagher, ITSA, of 6 May 2002. Financial counsellors have been doing informal repayment arrangements similar to Part IX for many years.

There are a number of clients I have seen where Part IX is appropriate and there will be more of such cases with the mooted 50% increase in the income threshold. Also, greater use of DAs would certainly flow if they were not registered on Baycorp in a manner that has the same effect for a debtor as bankruptcy.

However, the concerns which financial counsellors have raised since the introduction of DAs remain. Financial counsellors have participated in ITSA’s Review of Debt Agreements and contributed their views and concerns in many forums and consultations.

The Review looked at Part IX data from December 1996 to May 2000 and commented in the summary that ‘usage has been on the low side and termination/incompletion rates are reasonably high’. Financial counsellors are very interested to know what the current situation is in relation to the viability of DAs and if the termination/incompletion rates remain high.

What we do know is that since the Review, due to vigorous advertising campaigns and alleged misrepresentation of Part IX as the ‘fix all’ solution, the landscape has changed greatly. Numbers of debtors contacting Debt Agreement Administrators (DAAs) has increased exponentially as has the number of DA proposals made and accepted under Part IX.

However, anecdotal evidence through financial counselling networks does not give us any confidence that the system is working. Many of us would like to see it working well as another option for debtors and would like to work with ITSA towards that end.

Issues identified by Financial Counsellors:

DAAs are not giving debtors full information about their options including voluntary bankruptcy
Many debtors do not understand that what is being proposed is an arrangement under the Bankruptcy Act and the implications, e.g. for their credit record, in fact some DAA advertising states that it is not bankruptcy
Many unsustainable DAs are being proposed – some are rejected and then revamped and resubmitted, often rejected again – fees are charged for these proposals whether they are accepted or not.
Debtors are signing blank agreements with DAAs
Debtors are not aware of all the fees being charged by the DAA
Baycorp is registering DA proposals which may not be accepted – one debtor missed a career opportunity due to his rejected DA being registered on his credit record
Debtors start making contributions, usually through direct debits, at the start of their relationship with a DAA but the proposal may not be lodged for several weeks enabling the DAA to collect their fees before the viability of the DA is tested – the DA may or may not be accepted – creditors continue to contact the debtor because the proposal has not been lodged.
Debtors with unsustainable DAs are contacting financial counsellors very distressed – direct debits continue – they can’t meet basic living expenses and are using emergency relief services for food for their families
Financial counsellors are having difficulty in contacting and trying to work with DAAs whose clients have then presented at our services
Disproportionately larger numbers of DAs are lodged in some states – it seems that there is a variance in ease of acceptance of DAs between states although this may be changing and maybe all ITSA offices are now accepting DAs without any assessment of viability?
Some DAAs do not provide much of a service to their clients once they have their contribution direct debit in place
Debtors do not know that they can cancel the direct debits
Debtors do not understand that they can ask for a variation or termination of the DA if it is not working
Debtors with a nonviable DA are unable to bankrupt until the DA is terminated
Creditors are not receiving payments for a long time into the DA and not at all if it fails in the meantime
DAAs are attracting a lot of desperate debtors through their advertising and are referring those with no money to pay for a DA to financial counselling services often giving them inaccurate information, e.g. that the financial counsellor will be able to provide or assist them get a debt consolidation loan

The Review of Debt Agreements Summary also stated that ‘Some debt agreements are doomed to fail because debtors enter arrangements that they cannot meet. These occurrences can be reduced by encouraging debtors to use budgets and by using objective means to test the viability of proposals.’ Financial counsellors suspect that a lot of DAs are failing because they were unstainable from the beginning.

It is our experience that many DAAs do not objectively test the viability of a DA for debtors who contact their service, rather, they are a commercial entity driven by their desire to collect their fees. We have many case-studies where DAs have been set up that do not allow for the debtor’s essential on-going living costs – no amount of budgeting can redress a structural problem of this nature.

What is happening with DAs? We know that the numbers are up but how many are viable? In the roundtable discussions, creditors have commented that they are not being informed of the progress of the DA. They have requested that the DAA advise them (and ITSA?) if the debtor’s payments have stopped and/or it is unlikely that further moneys will be paid. How long are DAs being allowed to run by DAAs when it seems that they are not working? It will be very difficult to work towards a viable Part IX Debt Agreement regime if this situation is allowed to continue without accurate up-to-date data.

Financial Counsellors and Debt Agreements

Financial counsellors have approached DAs with caution. A small number remain totally opposed. Others are exploring DAs as an option with debtors and assisting with preparing DA proposals, seeing them through to full and final settlement of debts where that is the proposal, and setting up administration arrangements through financial institutions if the proposal is to repay over time. I am happy to do this with my clients.

Others are referring to DAAs with whom they have developed a good working relationship. Personally, I would welcome competent, ethical DAAs into the field so that I can refer appropriately to them.

Administration Fees for Debt Agreements

ITSA staff have suggested that Financial Counsellors should go beyond what is outlined above to taking on the actual administration of DAs. It has been suggested that we could appropriately charge a fee for this work as do commercial DAAs.

The reasons why I think Financial Counsellors should not do this are:

It is a fundamental principle of the financial counselling sector that we do not charge a fee for service and most state associations will not accept as members those who do charge a fee for service – there are good historical reasons for this.
Administration of a DA over time which required regular collection of payments from the debtor and distribution of funds to creditors would require systems which most services do not have or could easily put in place. There is also the legal and ethical issues and requirements of services collecting and holding clients’ funds.
There would be a conflict of interest within our work if some of our clients were paying for the service and some not.
If one option (DAs) provided funds to our service while other options did not, how could we be sure that we would not promote that option? – this is exactly what is happening with commercial DAAs and why there are a lot of DAs being proposed which should not be.
This could be the start of the slippery slope in regard to on-going funding for our sector.
Inferior service models for financial counselling which are really debt repayment models based on funding provided by industry are the norm overseas. These service models become captive to the industry that funds them. They do almost no work on systemic issues which are a fundamental part of the Australian Financial Counselling service model.

I am interested in your feedback on this. Should we continue to engage ITSA and other stakeholders including Debt Agreement Administrators, in an on-going discourse towards an efficient and effective Part IX Debt Agreement regime?

Contact me on 0407 042 483 or janpentland@hotmail.com with your thoughts.

In the Media

Payout for scam victims

A Queensland couple who were duped into paying more than $40,000 extra for a Gold Coast townhouse will be compensated for everything they lost on the deal.

The state’s new Property Agents and Motor Dealers Tribunal has ruled that Lynda and John Worrell fell prey to an “elaborate and manipulative” scheme, and should receive a $130,000 payout.

The Nambour couple were contacted by telemarketers in 1998, attended a seminar on negative gearing and were taken around the Gold Coast, before signing up for a $160,000 townhouse in Surfers Paradise.

They discovered later, when applying for a car loan, that their retirement nest egg was valued at just $117,000.

The Queensland Government tightened regulations last year to limit the practice of inflating property prices and hiding sales commission charges, after hundreds of scams similar to the Worrells’ case were revealed.

Lawyer Judy Teitzel, who represented the Worrells, said the tribunal’s decision was significant because it recognised all the losses incurred by victims of such property deals.

The Australian, 26 June 2002

Loan Shark fined

The Brisbane Supreme Court has ordered a notorious Gold Coast loan shark and his company to pay $270,000 in fines plus costs.

The court also prohibited Timothy John Ward and his company Shark Financial Services Pty Ltd from ever providing credit in Queensland under the Consumer Credit Code.

The court heard Ward charged interest rates of more than 200 per cent and threatened violence if customers did not pay.

The Australian, 15 June 2002

RBA links credit card, Eftpos reform

The Reserve Bank of Australia has opted for a ‘big bang’ approach to reforming the payments system by deregulating credit cards and Eftpos at the same time, rather than initially focusing on credit cards.

The planned shake-up comes as figures issued yesterday emphasised the growing use of credit cards, showing card spending hit a record $9 billion in May.

The RBA is expected to cut the fees banks charge each other for card transactions by about 30 per cent, and allow merchants to levy a fee on customers for using credit cards. The effect of the simultaneous changes is likely to make Eftpos more attractive to consumers than credit cards, which might become more expensive to use.�

Yesterday’s data shows spending on credit cards, as measured by merchant transactions, has nearly doubled in the past three years to just under $100 billion, from $25 billion only three years before that.

The Australian Financial Review, 16 July 2002

A QUIZ TO TEST YOUR FINANCIAL COUNSELLING KNOWLEDGE

Are you up-to-date with the latest Financial Counselling terminology? Do you know the difference between a Caveat and a Cravat? Take this test and see how you compare.

1. A person who is unable to pay their debts as, and when, they fall due, is called:

a. Insolvent
b. Solvent
c. Christopher Skase
d. Several times a day and quite often late at night by debt collectors

2. What can take up to half of a man's pay packet?

a. A Garnishee Order
b. His lunch order
c. Peter Costello
d. His wife

3. What is the name of the document that takes away possession of a person's assets?

a. Sequestration Order
b. Loan Contract
c. Marriage Certificate
d. Divorce Certificate

4. An "oral examination" is:

a. An investigation of a person's financial position under oath
b. A painful trip to the dentist’s.
c. Quite exciting, depending on who you do it with
d. Illegal in Tasmania

5. If you state to a frontline Collection Officer that you have a Client who qualifies for assistance under Section 66 of the Consumer Credit Code, their response will be:

a. "Okay, we can grant a 90 day moratorium with a possibility of stopping interest charges".
b. "Does that mean he has died?"
c. "…………………………", (ie. stunned silence).
d. "Section what of the Consumer what?"

6. I.T.S.A. stands for:

a. Insolvency Trustee Service of Australia
b. I Take Several Assets
c. Itsa new car!
d. I’ll Take Sex Anyday!

7. A collection Officer phones you to state your Client has reneged on his proposal, via you, to pay weekly. Your reply is:

a. "I'm sorry, I'll phone my Client to see what crisis has occurred and I'll phone you back with an updated financial position".
b. "I'm sure the cheque's in the mail".
c. "Me no speaka da English".
d. "When I said he would pay weekly, I meant as in not strongly – you know
w-e-a-k-l-y".

8. An 'acceleration clause" is:

a. The right of a Creditor to call up the remaining balance of a loan.
b. What your teenage son believes he has a right to test out when he borrows your car.
c. The clause in a credit card contract that states the balance will escalate alarmingly if only the minimum payments are made each month, thanks to the exorbitant rates of interest.
d. The right of a Debtor to run away very quickly if a debt collector knocks on his door.

9. A Client tells you his assets have been liquidated. Your reply is:

a. "What is the residual debt?"
b. "Did it hurt?"
c. "I didn't know there had been a flood".
d. "Were you in the water-bed business?"

10. A Warrant of Execution is:

a. An order of the Court to seize a Debtor's assets
b. An Olde English medieval cure for Debtors
c. Similar to a Death Warrant, ie what consumers sign when they take a consolidation loan with a fringe credit provider
d. A statement of a Debt Collector's wishful thinking, ie that all debtors be taken out at dawn and shot

How did you go?

Tally up your scores:

Mostly a)'s Well done, you are a top notch Financial Counsellor – or maybe you were sitting next to Betty Weule when you did this test.

Mostly b)'s Perhaps Financial Counselling is not for you. You have little legal knowledge, poor comprehension skills and no grasp of current affairs. In other words, a career in the Public Service beckons.

Mostly c)'s You appear to be totally cynical, cruel, aggressive and have no knowledge of debt recovery procedures. You would make an excellent Debt Collection Officer.

Mostly d)'s Not only are you a realist, you have a good sense of humour. Congratulations you are a true Financial Counsellor!

Quiz is by Gregory Mowle who is a Financial Counsellor with Lifeline, Brisbane, Qld�

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