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Sharkwatch December 2002

Notes & Notices

Farewell to Jean Lewis, Hello to Wayne Warburton ..

Jean Lewis, the senior facilitator/casework officer from the Commonwealth Financial Counselling Programme has left her position in order to move to Greece, where her partner has gained employment related to the 2004 Olympics. Jean wishes all her counsellors well, and is missing her friends from the programme already.

Her position has been taken by Wayne Warburton, who was formerly from Credit Helpline, NSW. A profile of Wayne will appear in the next issue of Sharkwatch.

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Pathological Gambling and Criminality: Greater Understanding Needed Within the Legal System

By Nicole Preece

The vast majority of clients that come through our doors at the Wesley Community Legal Service are charged with crimes such as ‘larceny’, ‘embezzlement as a clerk’ (stealing from one’s employer) or ‘obtaining a benefit by deception’. At the present time, we are defending clients who cumulatively have stolen approximately $3 million. The upsetting fact is that all of this money has been used for the purposes of gambling, with the vast majority finding its way into the holding boxes of poker machines and the like. In my opinion, the criminal justice system should be looking at alternative ways to help these people overcome their gambling addiction rather than labelling them as “criminals” and sending them to gaol. Giving a second chance to problem gamblers who have been guilty of criminal offences is more likely to facilitate outcomes which are beneficial to both the gambler and to society, than would prison terms. Specifically, because prisons are a microcosm of crime, problem gamblers may return from ‘doing time’ with far worse attitudes, circles of influence, and personal problems than they had when they went in. In contrast, gamblers who have sought counselling for their addiction, and who have been given a second chance after their crimes, often seek to redress their mistakes and to undertake pro-social courses of action, such as assisting gambling education groups to spread the message of responsible gambling in schools and at other appropriate venues.

A case study of one of our more recent clients involved a young man who worked at an RSL Club. He was the club’s Keno operator and despite telling management that he had a gambling problem was kept in this position. On one particular day, when the temptation became too much, he started placing false bets by programming the computer so that he received tickets without paying for them. When discovered, he was charged with obtaining a benefit by deception.

Although there seem to be questions as to the club’s moral culpability, the young man will bear the wrath of the law alone, and will try to incorporate the legal outcome of his actions into a life already plagued by childhood insecurities and social problems. If he is convicted, his opportunities for gainful employment and social acceptance will be sorely compromised, and those close to him are fearful that such an outcome would ‘push him over the edge’. He will be sentenced early next year.

It has been a sad trend in the recent past that those who were afflicted with a gambling addiction have been treated more severely by the criminal justice system than those with a drug addiction. The irony of this is that while gambling is legal in NSW it is illegal to possess drugs. It seems to be the view of many judges that gambling is a leisure activity and that, as such, everyone who gambles should be able to use their self-control and to stop gambling when they’ve had enough. It has only been in the last few months that we have seen a slight trend toward members of the legal profession becoming more aware of the nature of problem gambling. In fact, quite recently, a Magistrate at Parramatta Court refused to hear an unrepresented client’s plea and referred him to Wesley to receive both treatment and legal advice. It is refreshing to find that some members on the bench are beginning to view gambling as an addiction like any other, and are treating crimes related to gambling as they would treat crimes related to any other illness (e.g., those related to a recognised chemical addiction), and are thus not assuming from the outset that a problem gambler is an intentional ‘criminal’ who needs to be punished.

Despite this softening in attitudes, there is still a need to further educate members of the legal profession with respect to problem/pathological gambling so that the profession as a whole can continue to move towards a better understanding of this growing social problem, and towards a status quo in which the provision of more reasonable sentences for problem gamblers is the norm rather than the exception.

Nicole Preece is a solicitor with Wesley Community Legal Service in Sydney, NSW.

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Emotional Intelligence: Exploring an Elusive Concept

By Wayne Warburton

In an obscure psychology journal in 1990, John Mayer and Peter Salovey put forward the idea that human abilities may extend beyond those areas traditionally thought of as comprising intelligence (e.g., verbal and mathematical aptitude, problem-solving ability, mental processing speed etc.), and into the realms of emotions. They suggested that people differ in the degree to which they can recognise, control and harness their own emotions and the emotions of others, and described these abilities as comprising emotional intelligence (EI).

As the 1990s unfolded, EI was extensively researched by psychologists and became a multi-billion dollar industry. Commercial organisations spent huge sums to test their employees’ EI levels, and to put into place EI training programmes. Despite this substantial investment of time and money on EI-related projects however, there is still little agreement as to what EI is, how it can be recognised, and ways in which it might be developed.

Because financial counsellors deal so often with emotional issues, and because EI is still a hot topic in both the world of counselling and in the corporate world with which we deal so often, it seems timely to have a closer look at what EI is.

There are two schools of thought relating to EI. Ability models conceptualise EI as an intelligence in the traditional sense (abilities such as those measured in IQ tests; see Mayer, Caruso, & Salovey, 1999), and mixed models see EI as comprising a large set of abilities, emotion-related personality traits and personal dispositions which may lead to success or failure in dealing with emotional information (e.g., Bar-On, 1997; Goleman, 1995). A recent paper by Ben Palmer (2002), of Swinburne University in Melbourne, combines these two approaches, and suggests that EI involves abilities and characteristics in 5 areas:

1. Emotional recognition and expression (ERE). This is the ability to identify one’s own feelings and emotional states and the ability to express those inner feelings to others. This factor may determine to some extent how accurately you display emotional dispositions at work (such as warmth, genuineness, trustworthiness, etc.), and in turn may affect how others respond to you. People high in EI tend to be particularly conscious of their emotions at work and to express those emotions freely. This is less true for those low in EI, who may be emotionally unaware, or inhibit emotions in the workplace.
2. Understanding others’ emotions (UE). This is the ability to identify and understand the emotions of others. In other words, how you ‘read’ other’s emotions, understand the context in which other people express emotions, and understand the appropriateness of others’ emotional responses and behaviours. People high in EI may be able to assess the emotional overtones at staff meetings, and will probably have a good understanding of how emotions affect the dynamics of relationships between themselves and clients or workmates.
3. Allowing emotions to direct one’s thinking (EDC). This reflects the amount to which emotions and knowledge about emotions is incorporated in decision making and problem solving. People high in EI tend to consider how they ‘feel’ about different options when making decisions, and also will examine the ways in which different choices would affect themselves and others emotionally, before making a choice. People high in EDC are often intuitive at work, and do not make decisions based solely on facts, figures and technical information. People low in this EI style tend to be more technical and analytical when making decisions. It is important to note, however, that use of this characteristic is very context specific. People high in EI may use pure reason and logic if the situation calls for that approach.
4. Emotional management (EM). The ability to manage positive and negative emotions, both within oneself and others. Some people are better than others at repairing negative moods (doing something about feeling sad, frustrated, angry etc.) and at maintaining positive moods. Those high in EI are not only good emotional managers, but are also able to influence those around them in similar ways. For example, one financial counsellor I know, has a gift for eliciting positive moods in her clients, so that depressed clients who feel hopeless, leave her sessions feeling hopeful and optimistic. This seems to lead to long-term changes in the way that her clients feel and approach their situation. Emotional management is especially important for financial counsellors, because it is at the centre of effective stress management and adaptability, and contributes significantly to the general atmosphere of the workplace.
5. Emotional control (EC). The ability to effectively control strong emotional states such as anger, stress, anxiety and frustration. Strong emotional reactions can lead to an ‘emotional highjacking’, whereby an individual’s emotions can override their capacity to think and act effectively, and may then lead to inappropriate responses and actions which may be regretted in hindsight.

Research has shown that disclosing one’s feelings is associated with better physical and mental health (see Pennebaker, 1993), and so it is important to express emotions in the workplace. Nevertheless, there are limits to when this is appropriate and to the ways in which this should be done. Strong displays of emotion can provoke anger, resentment, confusion and feelings of powerlessness in colleagues, and are rarely constructive.

Other personal factors may also be important in EI. For example, Reuven Bar-On and Daniel Goleman suggest that EI may depend to some extent on the degree to which an individual is:

Independent, assertive, self-confident

• empathic
• happy, optimistic
• trustworthy, conscientious
• able to work in a team, socially skilled
• open to new experiences
• able to resist impulses and to self-regulate
• motivated, energetic, persistent
• self-aware
• stress tolerant, flexible
• socially responsible

Of course no one person can be all of these things or have perfect EI, and so such lists should be seen as giving a general indication only. It is important to note however, that people may be able to improve their levels of EI, as there is evidence that some EI skills can be taught. The counsellor who is interested in improving their EI can look at ways of bolstering their skills in Palmer’s 5 areas, and should also look at their strengths and weakness in terms of the personal characteristics associated with EI. It is possible, for instance, to put into place stress management and emotional repair strategies, to consciously direct one’s thinking toward others’ emotional states, to become more reflective about one’s own feelings, and for highly emotional people to actively plan for how they will deal with strong emotions as they arise.

There are certainly advantages to improving one’s EI skills. High levels of EI have been linked to greater levels of life-satisfaction and happiness, better interpersonal relationships, and success in occupations that involve reasoning with emotions, such as those involving creativity, leadership, sales and psychotherapy.

Given that financial counsellors need to be intuitive, bold, creative, persuasive and caring in their relationships at work (depending on whether they are dealing with clients, creditors or workmates), the evidence suggests that those financial counsellors who are higher in EI would be more likely to do well in their profession.

If financial counsellors are working in an unpleasant workplace environment, have difficult clients, or have demands at home which are placing them under strain, it may be an effective strategy to change oneself rather than the situation. Emotional disclosure and good emotional management may be a strategy which can result in the counsellor being healthier and feeling happier, eliciting more positive responses from those around them, and in obtaining better outcomes in many aspects of their lives at work and at home.

If you are interested in further reading, I recommend the article by Mayer, Salovey and Caruso, 2000.

References

Bar-On, R. (2000). Emotional and social intelligence: Insights from the emotional quotient inventory (EQ-I). In R. Bar-On & J.D.A. Parker [Eds.], Handbook of emotional intelligence (pp. 363-388). San Francisco: Jossey-Bass.

Goleman, D. (1995). Emotional intelligence: Why it can matter more than IQ. London: Bloomsbury Publishing.

Mayer, J.D., Caruso, D.R., & Salovey, P. (1999). Emotional intelligence meets traditional standards for an intelligence. Intelligence, 27, 267-298.

Mayer, J.D., Salovey, P., & Caruso, D. (2000). Models of emotional intelligence. In R.J. Sternberg [Ed.], Handbook of intelligence (pp. 396-420). New York: Cambridge University Press

Palmer, B., & Stough, C. (2002). SUEIT: Swinburne University Emotional Intelligence Test: Interim Technical Manual. Sydney, Australia: Swinburne University Organisational Psychology Research Unit.

Pennebaker, J.W. (1993). Putting stress into words: Health, linguistic, and therapeutic implications. Behavior Research and Therapy, 31, 539-548.

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Update on Bankruptcy Contribution Rates

By John Haywood�

The following table will give you an indication of what incomes are allowable before a bankrupt person has to make contributions, at current rates. Other important details can be inserted in the appropriate columns for a more exact calculation.

Number of dependents		0	1	2	3	4	4+
Gross Income	Per week	814	982	1,082	1,138	1,161	1,185
Net Income	Per week	627	740	797	828	840	853
Total Gross Income	Per year	42,326	51,086	56,282	59,172	60,358	61,620
LESS	* Medicare Levy	635	766	844	888	905	924
�	** Taxation	9,078	11,836	14,018	15,232	15,748	16,341
�	Child Support	�	�	�	�	�	�
�	Maintenance	�	�	�	�	�	�
Net Income		32,613	38,484	41,419	43,052	43,704	44,354
PLUS	Fringe Benefits�	�	�	�	�	�	�
	Other	�	�	�	�	�	�
Assessed Income		32,613	38,484	41,419	43,052	43,704	44,354
BITA / AITA		32,614.40	38,484.99	41,420.29	43,051.01	43,703.30	44,355.58
Income over BITA		0	0	0	1	1	0
Likely contribution (at 50c per dollar) per annum		0	0	0	50c	50c	0

* Based at 1.5% as per 2001/02 tax scale. Please note that this figure could increase to 2% if income is over $50,000.00 and the client does not have private health insurance cover.
** Based on personal tax rates as per 2001/02 for Australian Residents.

Base Tax Rates (Medicare levy not included)

Taxable Income	Tax	% on excess
0	0	0
6,000	0	17.00%
20,000	2,380	30.00%
50,000	11,380	42.00%
60,000	15,580	47.00%

Medicare Levy

Income	Medicare Levy (%)
13,389	0.00%
14,475	0.20%
> 14,475	1.50%

John Haywood is the coordinator of Creditline Financial Counselling Services at Newcastle, NSW.

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AFCCRA REPORT

By Jan Pentland

Chairperson, Australian Financial Counselling and Credit Reform Association (AFFCRA).

AFCCRA, the Australian Financial Counselling and Credit Reform Association is the national association for financial counsellors with a representative from each state and territory. Considerable discussion at the AFCCRA Council teleconferenced meeting on 11 November centred on Debt Agreements under Part IX of the Bankruptcy Act and their actual and potential impacts on the financial counselling sector. At the request of the Council I raised these issues at the ASIC Consumer Advisory Panel meeting in Melbourne on 28 November.

Under the Financial Services Regulation Act, ASIC is required by March 2004, to licence those who provide ‘advice on financial products’. There are a range of financial service providers such as financial planners, superannuation and investment advisors which clearly come within the Act and are currently undertaking the licensing process. Less clear are fee for service debt counsellors including Part IX administrators and ASIC will be considering these sectors over the next year. ASIC will also look at the work undertaken by financial counsellors in relation to FSRA and I have already had some discussion with them and provided some written information on financial counselling services.

There was also discussion in the AFCCRA teleconference of an Australian Finance Conference (AFC) workshop on positive credit reporting or full file credit reporting attended by NSW AFCCRA Council representative, Elizabeth Terry in October. The AFC is pushing amendment of legislation under the Commonwealth Privacy Act to broaden the amount and type of information that can be held by credit reporting agencies. This was the feature story in the Melbourne ‘Age’ Money Manager on 11 November. Carolyn Bond, manager of Consumer Credit Legal Service, Victoria is reported in the article raising consumer movement concerns with current privacy issues in relation to credit reporting. This is an issue which CCLS has been pursuing for some time.

The second edition of the ‘AFCCRA News’ for 2002 has been compiled and edited by Rosemary Warren, AFCCRA Secretary and South Australia’s representative on the AFCCRA Council. As with previous editions, it will be distributed by AFCCRA Council members in their states and territories through their appropriate networks. Please contact your AFCCRA state or territory representative if you have not received a copy. AFCCRA Council representatives are:

• Jan Pentland, Victoria
• Rosemary Warren, South Australia
• Tania Buck, Western Australia
• Phillip Powell, Tasmania
• David Tennant, ACT
• Tricia Ross, Northern Territory
• Elizabeth Terry, NSW
• Paul O’Brien, Queensland

Editor’s note: See pages 12-13 for a feature article on ‘Positive’ credit reporting. Also, the next issue of Sharkwatch will contain an article on the increased powers of ASIC as they relate to credit providers.

Westpac’s Dedicated Service For Financial Counsellors

Reprinted from the Devil’s Advocate, Vol. 31, Issue 62.

Devil’s Advocate staff have been advised by the Westpac Banking Corporation (Westpac) that it is now providing a dedicated service for financial counsellors and other agents acting on behalf of borrowers, for use when issues arise around collections, alleged defaults etc. Correspondence concerning issues between Westpac and its customers should be sent to:

PO Box 309
Brooklyn Park, SA, 5032

The correspondence should be marked for the attention of the acting collections officer if the name of that person is known, or otherwise for the attention of the Servicing Support Team.

The bank is also in the process of installing a dedicated fax line which will be for the use of financial counsellors and acting third party agents. The number is (08) 8290 5070.

The Devil’s Advocate advise that if no response is received within 7 working days, financial counsellors or others should make direct contact with Westpac’s officers on 132 668, extension 64155, and ask for the following Westpac employees, who all manage Hardship Accounts:

• Bennett Sandhu
• Toni Pirintzis
• Nicole Dymott
• Gian Estanislao

Financial counsellors who are not satisfied with manner in which issues are being dealt, should speak to Tania Del Torre, who is the Team Leader.

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The Law Matters

by Chris Joyce
Solicitor
Credit Helpline NSW

The New Bankruptcy Legislation: A Summary of the Changes

On Monday, December the 9th, 2002, Federal Parliament passed the Bankruptcy reforms as sought by the Government in full. The bill went from the House of Representatives up to the Senate, where it was initially amended, and then returned to the House of Representatives in its amended form. The House of Representatives rejected these amendments and sent it back in its original form to the Senate for a second time. The Senate, for whatever reason, decided to pass it in its original form. ITSA expects these changes to be enacted into law shortly.

The main changes to the previous law are as follows:

The removal of the early discharge provisions (formerly 6 months). After enactment of this bill, bankrupts must wait at least 3 years to be discharged from bankruptcy.

An increase in the Part 9 debt agreement income threshold by 50%, to $48,921.

Official Receivers now have a new discretion to reject a debtor’s petition where it appears that the debtor can afford to pay their debts and the debtor’s petition is an abuse of process.

A strengthening of the powers of the trustee to object to a discharge from bankruptcy after the 3 year period.

Allows 2 or more judgments of a Court or Tribunal for amounts totalling at least $2000 to support a Bankruptcy Notice.

A streamlining of the method of replacing trustees and organising the quorum at creditor meetings. There are changes to the rights of proxy voters, and meetings of creditors by post is now allowed.

Bankrupts who make income contributions need only apply to their trustee for permission to travel overseas.

At the meeting of creditors trustees must seek approval of their fees, disclose their fee estimate and explain the impact of such fees on any possible dividend.

Secured creditors can now vote at meetings to the extent of the shortfall in that security.

The Trustee can refuse to call a meeting if the bankrupt’s offer of composition or arrangement does not adequately provide for the trustee’s accrued fees and expenses. The trustee can refuse to call a meeting if the bankrupt’s request is frivolous.

Bankrupts are allowed to seek a variation of their Part IX and Part X compositions and arrangements.

Unpaid employer superannuation is to be accorded priority in the payment of bankruptcy dividends.

Sentimental property such as medals and trophies (but not jewellery), is protected under section 116.

The Trustee has only 6 years to realise a bankrupt’s property from the time of discharge. However in the case of life tenancies this may be extended.

The Trustee has the power to vary income contribution assessments on hardship grounds in lieu of the Official Receiver.

Removal of the limitation on income contribution assessments being made prior to the bankrupt’s discharge from bankruptcy, to enable the trustee to re-assess the discharged bankrupt for non-included income earned during the bankruptcy.

60 day time limits are have been imposed in regard to the application for review by a Court of many trustee decisions.

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by Richard Brading
Principal Solicitor
Wesley Community Legal Service

Armed Forces Bankruptcy

Members of the Army, Navy and Air Force may encounter difficulties in their employment as a result of bankruptcy. The consequences of bankruptcy can vary from a possible notation in a soldier’s service record, to discharge from the armed forces.

The military consider each case individually. The client’s commanding officer should be notified of the client’s situation if bankruptcy is contemplated.

Assistance is available from the Defence Community Organisation social workers attached to most military outposts. The client may also wish to seek legal advice either from within or outside the armed forces.

There is a real risk that bankruptcy could result in disciplinary action, and that this in turn could lead to demotion or discharge from the military. Care must be taken, then, when dealing with a bankruptcy in this situation. The factors that are relevant are:

1. The seniority of the client. Officers can expect to face discharge, demotion or an adverse effect on their career.
2. Deployability. If the client will lose their passport, they will not be able to be sent overseas. Even if the client is likely to get permission from his/her trustee in bankruptcy, the military will not be happy.
3. Security issues. If the client is in a sensitive role with access to military secrets, there will be a loss of trust elicited by bankruptcy. This may result in the client being discharged, transferred or demoted.
4. The ability of the client to carry out duties. If the client is considered to be too emotional, or otherwise unreliable, discharge may result.

If the client becomes bankrupt and is permitted to remain in the military, there will be ongoing monitoring of the client’s situation.

Where a creditor has a judgment against a defence person, it can be garnisheed using the procedure in s.64 of the Public Service Act 1922 (Cth) which provides for direct payment of 20% of the debtor’s net salary by the paying officer. In some cases, this may be a better alternative to bankruptcy.

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TICA: Facts About The Tenancy Black List

By John Haywood

Watsa make you “TICA”. To get to the heart of the problem I visited their web site and extracted the following information. More detailed information can be obtained by visiting their web site on www.tica.com.au Keep a watch on it.

TICA is a national central register of information relating to the history of tenants. TICA DEFAULT TENANCY CONTROL SYSTEM allows over 12,000 property managers throughout Australia and New Zealand to access its database and inquire if a tenancy applicant has had any defaults registered against them.

Members of TICA may register any defaults or breaches of a tenancy agreement on the database from the time of constant arrears. Members are also able to list current tenants through to recommended tenants.

Once listed, a tenant will remain on file until such time as the debt has been cleared and the time specified for listing a default by TICA has been completed.

The following list provides a selection of the most common breaches tenants can be listed on the database for. It should be noted that members may list other breaches which may not be listed below.

COMMONLY ASKED QUESTIONS

Over the years tenants have raised a number of questions about the TICA DEFAULT TENANCY CONTROL SYSTEM. The main questions have been -

How do I find out if I am on the TICA database? To inquire if you are listed on the TICA Default Tenancy Control System database by mail, you can write to TICA. You should give:

• your full name
• your date of birth
• your drivers licence number
• your passport number
• your contact phone number
• your current address.

Attach the letter with a bank cheque or money order for the amount of $11.00 inclusive of GST and forward to TICA, P.O. Box 120, Concord, NSW 2137. Please allow up to ten working days for your request to be received and the reply sent to you. Do not send cash or personal cheques.

TICA enquiries can also be made by phone using the Tenant Helpline. The number is: 1902 220 346

Calls are charged at $5.45 per minute (inclusive of GST). Higher rate applies from mobile or pay phones

What do I do if I have been listed?
One avenue of action is to approach the member who put the default on the database and make arrangements to pay the debt. If someone has a listing and is considering applying for tenancy in another rental property, they should avoid falsifying their details on the application form, as being discovered doing this will greatly compound the problem.

How long will I remain on the database?
There are 3 time periods that a tenant default can remain on the database: 3 years, 5 years and indefinite.

3 years:
If a default is recorded with TICA for a tenancy agreement breach where no money has been lodged, the recording will remain for 3 years. After 3 years has expired, and after further confirmation from the listing member that no monies are owing, the comment will be changed to “Tenancy History Only”.

5 years:
If a default is recorded with TICA for an incurred debt, and a dollar value has been lodged, the recording will remain for five years after the debt has been cleared. Once the debt has been cleared, however, TICA will note this and record the date of payment. After 5 years has expired the debt amount will be removed and the comment changed to read “Tenant History Only”.

Indefinite:
Default details remain on the database until such time as the debt owed has been repaid in full. This notation also shows how long the debt has been outstanding.

What if I dispute the debt?
You may try to approach the member who lodged the listing and try to resolve the matter. If you believe that the amount owed is less than that stated on the database, negotiate with the agent for what you and the agent believe to be fair amount. TICA will not become involved in the negotiations unless it as the tenant’s request via the tenant helpline.

If you believe that the agent is being vindictive, advise TICA of your allegation and provide them with proof of your claim. They will contact the allegedly offending member and request their comments. In the event that it is proven that that the member’s lodgement was merely vindictive, TICA will remove the listing and advise you in writing.

Who has access to my personal information?
Only TICA members have access to the database

Will it effect my credit rating?
TICA has no partnerships or commercial arrangements in place with any other credit reporting agencies, and so a TICA listing should not affect your ability to gain credit. It should be noted, however, that in the event that legal proceedings are commenced against a tenant who owes money for rent or damage, this information may be recorded by a credit reporting agency and thus affect that person’s ability to gain credit.

Who are TICA members and how are they identified?
A door sticker advising they are members of TICA easily identifies members. The sticker includes a map of Australia and New Zealand. It should be noted that the National Privacy Principles will become effective in December 2002, and, in order to comply with these, agents will need to advise prospective tenants that their application will be verified through TICA and that information about them may be recorded on the TICA database.

When will TICA remove a tenant’s name?

• If proof is offered of wrongful use of identity
• If proof is offered of a vindictive listing or that information is false
• If the debt has been paid and the agent no longer exists.

When will TICA alter a listing?

• If a tenant has received a full or partial bond refund, then a lessor or agent cannot request payment of further monies
• Where agent error has occurred
• Where the matter has been dealt with by a court or tribunal which has jurisdiction over the matter and the relevant body has ordered the tenant to pay amount different to that on the database.

What information am I entitled to under the Privacy Act?

• Whether or not your information is recorded on the TICA database.
• What information is recorded on the database about you.
• The member who recorded the information.
• Contact details for the member who recorded the information.
• The date the information was lodged on the database.

John Haywood is the coordinator of Creditline Financial Counselling Services at Newcastle in NSW and is also a counsellor and former coordinator at Credit Helpline NSW. John plays golf at the mighty Cockle Creek course.

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“Positive” credit Reporting: The pros and cons

By Elizabeth Terry

On the 23rd of October this year, the Australian Financial Conference (AFC) ran a workshop on “positive” credit reporting. Elizabeth Terry attended the workshop as the NSW AFFCRA representative, and makes this report based on the information provided by workshop speakers.

Positive credit reporting, (or ‘full file’ credit reporting as I prefer to call it), involves providing expanded details about the credit status of customers rather than just details of negative credit events such as defaults. The Australian Finance Conference (AFC) have been researching this practice and intend to report to Treasury before the end of the year on its viability. The AFC report will include recommendations for policy change.

The type of information which is included in positive credit reports includes:

• The limit of credit,
• The balance of credit accounts (in dollar figures)
• Any delinquency patterns in payment

There is quite a debate about the advantages and disadvantages of this approach, and a few of the commonly quoted arguments are noted here:

Advantages of full-file vs. negative file only reporting:

(As put by Michael E. Staten, Georgetown University, USA, during his workshop address on full reporting overseas)

• Past payment histories would be available to lenders
• Low risk borrowers may get better rates (because price matches risk)
• Lending and risk assessment would become more transparent
• With certain restrictions, target marketing would be possible
• In the USA, full file reporting drives the decisions with collections (e.g., soft or aggressive collection styles)
• It allows for various industries (i.e., different credit providers) to gain access to a person’s borrowing patterns in another area
• The loss of privacy, which is the greatest obstacle to full-file credit reporting, may be offset by other advantages for people with good credit records (i.e., they may be rewarded with better credit access and lower interest rates)
• Lenders can target customers from full file reporting
• Without information borrowers all look the same
• Better information for lenders leads to better measures for pricing for risk (i.e., more people would have access to credit at lower rates as risk assessments would be better targeted)
• Delinquency would be predicted with a scoring model
• Creditors would know the type and balance of accounts in full file reporting
• Creditors would be able to screen out higher risk borrowers with positive credit reporting
• There would be more lending, which pushes economic growth. There would also be more profit for lenders, and presumably more lenders in the market.
• Full-file credit reporting makes it possible to have instant credit availability at the point of sale.

Disadvantages of the full-file credit-reporting system

(As suggested by Elizabeth Terry, President of the Financial Counsellors Association of NSW [FCAN] )

• Full-file reporting could be a good thing, but also has the potential to be disadvantageous for consumers, depending on who can access the file. It all seems a bit ‘big brother’, especially if the government has open access to the information. I think legislation is required to restrict access
• If real estate agents can access the file, they would have knowledge of potential tenants’ delinquency patterns and may refuse rental property to those with less impressive listing details
• It could cause problems for some consumers if their employers have access to their records
• If clients are making minimum payments only, and are not in default, they may be extended more credit, thus increasing their debt, even if the person is having trouble managing their financial situation
• Utilities companies could refuse service on the basis of delinquency patterns
• At the first default, lenders may proceed to the court more quickly, in order to get their money ahead of other creditors who are also listed on the file At the present time creditors are not aware of other debts until they get an assets and liabilities statement, and even then they are not necessarily aware of other defaults.

Opinions from the credit industry in Australia

Westpac – Michael Vainauskas
(From his workshop address on business perspectives)

• The full extent of reporting is wanted by Westpac
• Currently not all information is disclosed by some customers, and some also embellish/misrepresent their situation
• At present, no credit is given to loans that are paid well and paid out. This system will give such credit
• Customers don’t always know their financial situation. Positive data will be able to provide this
• A history of good credit handling is currently not on file. Positive credit reporting will provide this
• Westpac supports the initiative if it is used only when the customer applies for credit or for account management services, but does not support the use of positive credit reporting for marketing or mailing lists

Toyota – Andrew Maeer
(From his workshop address on delinquency management)

• Credit decisions needs to be well-informed and made up front. Positive credit reporting should reduce the incidences of fraud, misinformation, and keep creditors up to date with changes in circumstances.

AMP Banking – Guy Harding
(From his workshop address on credit versus profit scoring)

• With positive credit reporting, credit providers can weed out customers who are not profitable (those who pay their credit card off every month) and who are thus subsidised by those less well off.
• More sensible decisions can be made with positive reporting.
• Positive reporting can help to detect fraud.
• Positive reporting can provide a clear picture of a potential client’s utilities history, and can also inform creditors as to a client’s real assets (e.g., if they have a home etc.)

Opinions from a financial counselling perspective

Financial Counsellor – Betty Weule
(From her workshop address on counselling perspectives)

• Financial counsellors support positive reporting – clients have huge over-commitment, and positive credit reporting may lessen the incidences of further lending to those who are unable to afford more credit
• Full reporting encourages clients to be responsible.
• If there is a hiccup on a person’s Baycorp file, full reporting would show if that person was a good borrower before the problem, and may make credit more available to good money managers with a Baycorp listing
• If Australia is to introduce positive credit reporting. we need to develop an Australian model that is appropriate
• There are significant dangers in target marketing, and it would be highly undesirable for positive reporting to be used for this purpose
• Such a system would make credit more immediately available, and so there must be concerns about impulse buying, especially for car purchases

So there it is. Positive credit reporting, the pros and cons. It is certainly a vexed issue with many valid arguments on both sides. If you have any thoughts on this subject, Sharkwatch is interested in printing the views of financial counsellors from a wide cross section of Australia on this issue, and would value any correspondence from readers.

Elizabeth Terry is the current president of FCAN, works as a financial/gambling counsellor with Wesley Counselling Services in Sydney, and is also the NSW AFFCRA representative. In her spare time Elizabeth …… Oh. What spare time?

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Book reviews

The Australian Consumer Handbook 2003

The Australian Consumer Handbook for 2003 has been published and distributed by The Commonwealth Department of Treasury. The forward, written by Senator The Hon Ian Campbell, Parliamentary Secretary to the Treasurer outlines the need to change the name from The Australian Directory of Consumer Dispute Resolution Schemes and Complaint Handling Organisations.

Colloquially, THE Consumer Directory has become THE Consumer Handbook.

This publication is so good that it has become an essential tool in the armoury of consumer advocates. All Financial Counsellors should have this handbook in their resource libraries.

The Categories included are:
Banking & Finance
Building & Housing
Consumer Protection and Advocacy
Education
Essential Services
Food and Beverages
Government Services
Health
Insurance
Legal Services
Media and Entertainment
Motor Vehicles and Transport
Retail Shopping
Services for Targeted Groups
(Culturally Diverse, Disabilities,
Indigenous, Seniors, Youth, Women)
Telecommunications and Internet
Travel and Tourism
Veterinary Services

Within each of the above categories there is a further subdivision by:
Business
Industry Associations
Government Agency
Mediation
Court

The Consumer Information is divided into:
Before You Buy
After You Buy
Writing a Complaint Letter
Sample Letters
Answers to Common Questions

There are 3 indexes—the Organization Index, the Subject Index and the Jurisdictional Index. Jurisdictions are further subdivided into National, State and Territory categories.

The Debt Collection Process and Rights of the Debtor have not been specifically covered in detail, probably because such an undertaking would require an analysis for each State and Territory. I see the value of this book as a general reference resource and not as a specific authority.

The Australian Consumer Handbook is comprehensive, easily read and an easily navigated resource. I commend it to Financial Counselling Agencies in particular and Community / Welfare Agencies in general.

Copies of the handbook can be purchased from the Government Info Shop for $15.00. To find the location of the nearest outlet, phone 132 447. Electronic copies of the book can be accessed at www.consumersonline.gov.au free of charge.

Norm Hannelly
Co-ordinator,
Credit Helpline NSW

Counting the Cost: Telecommunications and Low Income Households

By Kate MacNeill from the Communications Law Centre, Victoria.

This excellent small booklet (just 30 pages) investigates the impact of telecommunications related expenditure on household budgets, particularly those of low income families. It provides research which shows that the number of telecommunication contracts and purchases undertaken by households has risen significantly over the past 10 years. It also provides research from the Communications Law Centre which shows that the incidences of Telco debts in bankruptcy have increased from 42 to 56% in just 3 years, and that the average Telco debt per bankruptcy has risen from $879.00 to $1316.00 in the same period.

There is a chapter dedicated to the experiences of financial counsellors, and the issues of increased mobile phone debt, selling techniques from the Telcos, and internal credit management practices are discussed here.

The book provides concrete facts to demonstrate what financial counsellors already know—that the proliferation of mobile phone usage amongst low income groups is having a disastrous effect. It also touches on the complexity of the types of decisions people now need to make when choosing a telecommunication product and reveals that those from low income households often end up paying more per unit of service than those from moderate and high income households. Low income groups also have, on average, far less access to products which require specialised hardware, such as internet services.�

The book concludes that policies are needed which ensure that it is possible for people from all social strata to have sufficient access to telecommunications products to be able to fully participate in community and economic life.

Counting the cost gives a timely reminder of how important it is that all people have access to telecommunication tools in this society where people are becoming increasingly isolated. Surely it is time to recognise that such products are as important to people as other utilities such as electricity and water in many ways.�

All Victorian financial counsellors will be issued with this booklet as a matter of course. Financial counsellors from other states can obtain a copy of the book from:

The Communications Law Centre,
Fig Tree Lane,
University of NSW,�
UNSW, Sydney, NSW, 2052
Phone (02) 9385 7385
Fax (02) 9385 7275
Email: admin@comslaw.org.au�

Wayne Warburton
Commonwealth Financial Counselling Programme

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GE CAPITAL FINANCE – The Complaints Process

By Jan Pentland

The GE Finance complaints process was set up by GE when they bought AVCO, in response to a campaign and issues raised by the consumer movement in relation to AVCO practices. GE Finance established an internal disputes resolution (IDR) process and an alternative disputes resolution (ADR) process. The IDR and ADR schemes had coverage of the old AVCO businesses only, although there was a commitment from GE to consider broadening the schemes in future. This became more important for the consumer movement as GE’s acquisitions increased and as GE increased their market share of non-bank finance.

The Advisory Council for the GE Capital Finance Alternative Disputes Resolution Scheme was also established, with Dick Viney as independent Chairperson, two representatives from GE and two consumer representatives, Jan Pentland and Kate Keating. Following Kate’s resignation earlier this year, the second consumer representative position has been filled by Katherine Lane from the Consumer Credit legal Centre in Sydney.

Natalie Jackson from GE Compliance and Audit, who has oversight of the IDR and ADR schemes, recently indicated that GE is well underway with a process to broaden the IDR and ADR schemes to cover all of the GE businesses. GE plans to have a system in place by March 2003, whereby all complaints lodged with any branch will be monitored by the central complaints handling department. This will include immediate referral of certain priority complaints, and automatic referral of other complaints if not resolved within 48 hours.

Until the central system is established next year, all complaints about GE companies can be made to Compliance and Audit at GE Capital Finance, 572 Swan Street, Richmond 3121 – Phone 03 9921 6126. This includes complaints or disputes with GE Finance; GE Automotive; AGC; Buyers Edge; AVCO Access; Myer card and other GE store cards.

If you have any feedback about GE’s complaints process, please contact me at janpentland@hotmail.com or on 0407 042 483.

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Telstra Priority Assistance Service

Telstra has recently announced its Priority Assistance Service, whereby eligible customers can be registered for priority telephone repair and installation work, should they, or someone in their household, suffer from a life-threatening illness. This is a free service which applies to fixed phone lines but not to mobile services. Further information and application forms can be obtained from www.telstra.com.au/accessforeveryone/priorities.htm Telstra intends to mail an explanatory brochure to community organisations in the near future. Consumers who wish to get more information about the service or who want to register for priority assistance can do so using the relevant Telstra inquiry line, on 132200.

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In the Media

Jump in credit card fees.

The Commonwealth Bank has announced it will raise the annual fees for credit cards linked to loyalty programmes and will also introduce a percentage based fee for cash advances on credit cards. The annual fee for ‘Commonwealth Awards’ cards will rise from $45.00 to $59.00 and gold card fees will rise from $82.00 to $114.00 per annum.

Of particular interest to low income earners is the new fee structure for cash advances on credit cards, whereby there will be either a flat fee or a fee of 1.25% of the cash withdrawal amount, whichever is the larger.

Sydney Morning Herald, 11th October, 2002

Centrelink considers condensing their fifteen benefits into one.

On Dec 12, the government released a consultation paper on welfare reform. This paper stresses the need to simplify welfare payments and puts forward a model which abolishes the current system—which has 15 income support payments for working age people (i.e., pensions, allowances and student payments) and 14 payment rates—and introduces a standard rate of pay across groups, with ‘add-on modules’ of payment for housing, living alone, participation in training schemes, disability costs and for children.

There seem to be three main themes which run through the paper: Making people work harder for their payments; Reducing the length of time of welfare receipt in many sectors; Reducing the complexity of the system (taking a one-size-fits-all approach).

Copies of the proposal can be obtained from the Family and Community Services Website at:

www.facs.gov.au/welfare_reform�

Written comments on the paper should be submitted by June the 20th, 2003, to:

Welfare Reform Submissions
Working Age Task Force
Commonwealth Department of Family and Community Services
Box 7788
Canberra Mail Centre
ACT 2610

Government Press Release, Dec. 12th, 2002.

Changes to eligibility for InContact phones.

There are new eligibility criteria for new customers of the InContact service. From December 9th, 2002, under these new provisions, Telstra can refuse to supply an InContact service to a customer, if they do not meet Eligible Concession Card (ECC) criteria.

Specifically, all new applicants (other than Credit Managed Customers and Crisis Accommodation Program Customers), must hold a current ECC. Further, the customer must continue to hold the ECC for the duration of the period in which InContact is provided to them.

Eligible Concession Card means any one of the following cards issued in Australia:

1. An Australian Government Department of Veteran’s Affairs Pensioner Concession Card with a payment type which is valid for 12 months in a full year of issue;
2. An Australian Government Centrelink Pensioner Concession card
3. An Australian Government Centrelink Health Care Card with any of the following payment types:

• Family Tax Benefit Part A, card code FA;
• Farm Help Income Support, card code FFR;
• Foster Care, card code OF;
• Low Income Card, card code LI;
• Mobility Allowance, card code MO;
• Newstart Allowance, card code NS;
• Newstart Mature Age Allowance, card code NMA;
• Parenting Payment (Partnered), card code PP;
• Parenting Payment (Single), card code PPS;
• Partner Allowance, card code PA:
• Sickness Allowance, card code SA;
• Special Benefit, card code SL;
• Widow Allowance, card code WA;
• Youth Allowance (unemployed), card code YA;
• AUSTUDY, card code AUS.

Existing InContact customers will not be affected by the changes, but will need to prove that they have an ECC if:

They require InContact services to be provided at another dwelling, or

Their InContact service has been cancelled, terminated or disconnected for any reason and a new InContact service application has been made.

Because there are a limited number of InContact services available at any one time, Telstra has also reserved the right to refuse InContact to a customer, even if that person satisfies the eligibility criteria.

Telstra Press Release, Dec. 9th, 2002