Sharkwatch August 2003

NOTES & NOTICES

Freeze on the appointment of new JPs in NSW

In a recent Sharkwatch article (February, 2003) we noted that the impending Justices of The Peace Act 2002 would bring significant changes to the way Justices of the Peace are registered and perform their duties in NSW. The NSW Attorney General has now announced that there will be a moratorium on the swearing in of new Justices from July 14, 2003 to November 28, 2003. This is to allow the AG to finalise applications on hand and to complete other administrative tasks related to the commencement of the Act.

At the conclusion of the moratorium, new applications will be accepted, but the updated application form must be used, and the endorsement of a Member of the NSW Legislative Assembly or a Member of the NSW Legislative Council will still be required. Existing JPs will all be required to re-apply for their appointment, but, if they re-apply within 3 years of the commencement of the Act, can apply directly to the AG’s Department, without the endorsement of a Parliamentary Member. All JPs will have to re-apply for their appointment after every five years.

The Act is expected to commence later this year, and the AG has expressed his wish that the new rules will result in an up to date register of JPs and greater accessibility of JPs to the public.

ACIF Credit Management Code now registered

The Australian Communications Industry Forum (ACIF) has revised the ACIF C541: 2003 Credit Management Industry Code. The revised Code was registered with the Australian Communications Authority (ACA) on July 17. ACIF C541 is an industry code that sets the standards for credit management in the telecommunications sector, and offers greater consumer protection to Telco customers.

Tony Shaw, the ACA Chairman, has stated that the registration of the new Code is timely given the huge rise in credit related complaints to the Telecommunications Industry Ombudsman (TIO) in the March quarter, and he also noted that Telco customers are now more protected when Telcos have sold their debts.

The Code requires telecommunications companies to provide more information to their customers about how they can limit their spending on telecommunications services and prevent unauthorised use of their accounts. It also sets out the steps required before credit management action, including disconnection, is taken.

The ACIF C541: 2003 Credit Management Industry Code is one of a number of telecommunications industry codes, and is available at: http://www.aca.gov.au or at http://www.acif.org.au/acif/index.cfm. Other codes cover billing information, information provided in advertising or at point of sale, complaint handling, and the transfer of customers between companies, and can be obtained from the same websites.

Telstra to give back up to $36 million

Telstra have committed to repaying up to $36 million, which it has accumulated since 1992 as a result of 845,000+ customers closing fixed line accounts which still have credit in them, but failing to claim the money back. Most individual amounts are less than $20.00.

Telstra customers who think they may be eligible for a refund can check at the www.telstra.com/finalcredit website or ring 1800 045 065. If you are owed money, you can pre-register at the same time, and update your details. Telstra will then refund any owed money (plus interest) by either crediting that amount to another Telstra account or sending a cheque directly.

Staying with Telstra, an impressive catalogue of their products and services for ‘older Australians and people with a disability’ landed on my desk the other day. I was surprised at what is available. Financial counsellors with clients from these groups may find this catalogue useful, especially if those clients are isolated in some way. The catalogue spells out ways to save money, details its various concession schemes, notes the various billing formats available (e.g., large print or braille), and provides information about the new Bill Assistance Program. A comprehensive list of useful contact numbers is also provided. The catalogue is available online at: www.telstra.com.au/disability/catalogue/, and the Disability Enquiry Hotline number is 1800 808 981.

Boundaries In Counselling: New Guidelines For An Old Problem

Wayne Warburton
Fiona MacGregor

Issues related to boundaries come up time and time again amongst financial counsellors, and so it is perhaps timely to have another look at the way we set our limits and at what sort of expectations we should have of our clients and ourselves.

What are Boundaries?

According to the Macquarie Dictionary, boundaries indicate limits, confines or restraints. There are various examples of things which provide boundaries. The most obvious is skin, which keeps the good stuff in (blood, bones etc.) and the bad stuff out (e.g., germs and dirt) BUT is also permeable enough to also let good things in (e.g., food) and let bad things out (e.g., waste). Other examples of boundaries include geographical distance, time, emotional distance (which gives people the space they need to feel safe), verbal boundaries (e.g., saying no), personal space, moral boundaries (what behaviour is appropriate?) and safety boundaries (what limits do I need to stay within to be safe?).

For counsellors, boundaries are used to describe the ground rules, the type, and the quality of the counselling relationship. These may take the form of guidelines for ethical behaviour, expectations on the part of either party, limits to the problems being addressed during counselling, limits to the relationship between client and counsellor, and strategies for maintaining personal integrity (retaining your sense of self during the counselling process). Counsellor-client boundaries will include unchanging basic elements (including structural elements like time and place, and the counselling processes themselves), that define the counselling process and distinguish it from other kinds of social events (see Cloud & Townsend, 1992; Hermansson, 1997; Owen, 1997; Smith & Fitzpatrick, 1995 for more).

Hartmann (1997) sees the way we set boundaries as being a personality trait, and describes boundaries in terms of being thick or thin. Hartmann describes people with thin boundaries as being open, trusting, vulnerable and likely to have a rich fantasy life. For these people ‘everything gets through’ and it is hard to set limits in relationships or shut yourself off from other people.

Those with thick boundaries are conceptualised as being solid, well organised and sometimes rigid. These people often lack empathy and have trouble seeing the consequences of their behaviours for other people.

Another way to look at boundaries is whether they are adaptive or maladaptive. Adaptive boundaries contribute to our well-being and would typically lie somewhere between being thick and thin. These should be strong when necessary, but also permeable, flexible, and context dependent. On the other hand, maladaptive boundaries would be seen as being at either extreme. Either they are too weak (e.g., cannot say no or have inappropriate levels of self-disclosure) or too rigid and inflexible. Setting too rigid boundaries may be a way of controlling our environment and thus our own anxiety.

Boundaries that Protect the Client

The setting of counsellor-client boundaries should follow at least four central and guiding principles:

The Duty of Care - The well-being of the client should underpin every decision made by the counsellor. When deciding on any action, the counsellor should ask – ‘Is this in the best interests of the client?’

The Principle of Abstinence – Counsellors should refrain from self-seeking and personal gratification that is beyond the professional satisfaction that is derived from being a part of the counselling process.

The Duty of Neutrality – The client’s agenda is the primary consideration in counselling. Counsellors should not meddle in client’s personal affairs that are outside of the counselling agenda and should not share unsolicited personal opinions with clients.

The Principle of Client Autonomy – Counsellors should always strive to enhance a client’s autonomy and independence. Proper maintenance of counselling boundaries fosters autonomy and independence, whereas progressive boundary violations restrict the client’s freedom to explore and choose.

The maintenance of boundaries is generally deemed to be the counsellor’s sole responsibility, because the counsellor has more power than the client, and the duty of care thus falls to them.

Well set boundaries assist the counselling process because they provide a good foundation for the client-counsellor relationship, by fostering a sense of safety and the belief that the counsellor will always act in the client’s best interests. This in turn develops trust and allows the client to openly express their fears and needs without fearing negative evaluation. When acceptable and unacceptable behaviours are decided in advance, there is also less likelihood that the counsellor’s messages, motives and behaviours will be misinterpreted.

Transgressions of boundaries occur on a continuum from low risk of harm to the client to extreme risk of harm to the client.

Boundary crossing

Involves minor departures from accepted practice, such as accepting a Christmas gift from a client. Boundary violations involve a departure from accepted practice that has a high risk of harm to the client, such as entering into a sexual relationship with a client.

Dual relationships

Occur when the client is also a friend or colleague. These are often unavoidable (e.g., in a small country town), but make it very difficult to maintain an objective relationship with the client, and may cloud your judgment when making difficult decisions.

Physical contact (non sexual)

A gentle, reassuring touch or a hug can be the most appropriate response at certain times with certain clients BUT may also be mistaken for a sexual advance. There are vast differences across cultures and across counsellors as to what is appropriate (e.g., for psychoanalysts such contact is never acceptable).

Self-disclosure
Freud says that no self-disclosure is OK, but is known to have crossed this boundary himself with clients. High levels of self-disclosure are the boundary violation most likely to precede sexual misconduct with a client. It is always inappropriate to share about problems or stressors in your own life, and, as a rule, counsellors should never talk about their own personal fantasies and dreams, or their social, sexual or financial circumstances. Current theorists suggest that some level of self-disclosure is acceptable or even desirable, provided that the circumstances are appropriate and that it is done purely for the client’s benefit within the counselling process.

Sexual contact with clients

This is a very damaging boundary violation. By some industry standards (e.g., various Psychologists Registration Boards, the Australian Psychological Society), such contact may be permissible 1-2 years after treatment termination, but is generally never permissible if the client received any psychotherapy. Typically, clients who have sexual relations with their counsellor experience many of the following symptoms: ambivalence toward their counsellor, guilt, loss of trust, isolation, emptiness, thought disturbances, disturbances to cognitive functions, unstable mood, identity disturbances, sexual confusion, suppressed rage, and greatly increased suicide risk. An ‘average’ profile of the counsellor who has sexual contact with a client is: male, middle aged, professionally isolated, and experiencing personal distress, marital problems, or a ‘mid life crisis’. Typically, a relationship begins after the counsellor gains the sympathy of a younger female client by disclosing their personal problems.

According to Hartmann, 1997, boundary violations occur when someone’s personal boundaries exist at either end of the spectrum from thin to thick. That is, when the counsellor has very thin boundaries (because these counsellors have trouble distinguishing between the client’s needs and their own) or when the counsellor has very thick boundaries (because these counsellors are insensitive to the damage that boundary violations can cause). Research supports this view. Counsellors who violate client-counsellor boundaries tend to come from either of these two groups – predatory psychopaths with very thick boundaries and healthy but mildly neurotic counsellors with very thin boundaries.

REMEMBER, from an ethical and legal standpoint, boundaries that protect the client from you also protect you from complaints by clients, and thus also from reputation damage, legal action, insurance increases, loss of accreditation, and the damaging personal consequences of such transgressions.

Boundaries that protect the counsellor

Many clients will try to get their counsellor to cross their professional boundaries, in order to get ‘special attention’. This may occur for various reasons:

Transference

Refers to when clients treat the counsellor as if they were another figure from their past life, with whom there are unresolved issues. For example, someone who has felt abandoned by their father may transfer their need for attachment to their counsellor, and come to develop a needy and dependent relationship with that person. Such a client may try to get the counsellor to overstep their boundaries, in order to elicit the love that they wanted but did not get from their father. Such clients are very vulnerable to a predatory practitioner.

Need for Control

Particularly anxious clients will have a strong need to control their environment in order to cut down the likelihood that the things which make them anxious will hurt them. This means that they will want to feel that they have control over their counsellor, and will probably use manipulative tactics to gain this control.

Given that many of our clients are depressed, and given that all depressed clients appear to suffer increased anxiety, a financial counsellor can expect a lot of clients to try to exert control over them.

Factors within the counsellor

Counsellors may say ‘yes’ to a client when they really should say ‘no’ because of several internal factors:

fear of the client’s response (e.g., suicide)
fear of hurting the other person’s feelings
fear of being disliked or rejected by the client
fear of the client’s anger (very common)
fear of punishment by client
fear of being shamed by client
fear of being seen as bad or selfish by client
fear of being seen as rigid or inflexible
guilt
sympathy
soft-heartedness

These factors are drawn together in the model shown here, which shows how they may lead to boundary problems.

Boundary violations elicited by clients may include:

Counsellors disclosing more about themselves than they are comfortable with or sharing personal details which are inappropriate
Personal friendships or other inappropriate relationships with counsellor
Becoming burdened with responsibilities that should really be shouldered by the client
Doing more work for the client than would normally be considered reasonable
Changing important priorities in order to accommodate a client’s demands
Allowing the relationship to extend beyond the work environment or taking work home because of excessive client demands

Maintaining good boundaries

Here are some guidelines for maintaining healthy boundaries and preventing boundary problems:

It is important to have a clear understanding of the principles involved, especially those related to:
- Your Duty of Care to the client: the client’s welfare should always be your first priority
- Your Duty of Care to the self: good boundaries also protect the counsellor’s welfare and wellbeing
Where boundaries are concerned, be cautious and slow to act. Always think the consequences through.
Be proactive about making it very clear to all clients what behavioural expectations each should reasonably have from the other, in terms of rules and boundaries. Then make sure the client understands the rules.
Document any boundary violations (by you or the client) in your case notes, and explain your actions in terms of how they benefited the client. (There should be no boundary crossing that does not benefit the client).
Ongoing training is very important, and may come from your supervisor, professional association or as part of your continuing professional development program. 6) Self-awareness and self-knowledge are important. Here are some questions which might help: Do I have thick or thin boundaries? What issues does someone with my personality need to be careful of? What are my feelings toward each of my clients? What are my biases?
It is important to consult others when boundary issues arise. This usually involves contacting your supervisor, but counsellors should never hesitate to also get advice from their peers or to seek personal counselling.
Find a counsellor whose boundary maintenance is commendable and use them as a role model.
Commit yourself to good supervision. Boundary violations are rare amongst well supervised counsellors.

If you are interested in further reading on this topic, I have included a list of suggested readings on the next page. Unfortunately, this area is not particularly well researched, and good information is not easy to find.

Suggested Reading

Bayne, R., Horton, I. (1996). New directions in counselling.

Bayne, R., Horton, I., Merry, T., Noyes, E. (1994). The counsellors’ handbook: A practical A-Z guide tp professional and clinical practice.

Cloud, H., Townsend, J. (1992). Boundaries: When to say yes, when to say no to take control of your life. Sydney; Strand Publishing.

Hartmann, E. (1997). The concept of boundaries in counselling and psychotherapy. British Journal of Guidance and Counselling, 25 (2), 147-162.

Hermansson, G. (1997). Boundaries and boundary mangement in counselling: The never ending story. British Journal of Guidance and Counselling, 25 (2), 133-146.

Smith, D., Fitzpatrick, M. (1995). Patient-counsellor issues: An integrative treview of theory and research. Professional Psychology: Research and Practice, 26 (5), 499-506.

Webb, S.B. (1997). Training for maintaining appropriate boundaries in counselling. British Journal of Guidance and Counselling, 25 (2), 175-188.

Bankruptcy Update

Jan Pentland (Chairperson of AFCCRA)

ITSA Information Video

The information resource for debtors being produced by ITSA should become available in a few weeks on video, DVD and CD ROM. I understand that Official Receivers in each state will be ascertaining the number of copies of each that will be required by financial counsellors and other community sector organisations. I suggest that each state/territory make contact with your Official Receiver about availability for financial counsellors and means of distribution within the next few weeks.

Discretion to Reject a Debtor’s Petition.

As part of its consultation with ITSA on the BLAA, in relation to the new discretion of Official Receivers to reject a debtor’s petition, AFCCRA recommended that all such cases be referred to a financial counsellor. Victorian Official Receiver, Ashley Page, has indicated that since May 5, 2003, he has had about 6 Debtor’s Petitions where it has not seemed in the debtor’s interest for him to accept the petition, and he has referred the debtor to a financial counsellor. We will explore this issue further when the Bankruptcy Working Group meets with ITSA Victoria on 1 September.

Section 271 review

On July 24, issues related to the reform of s.271 were discussed in a telephone link-up of interested Bankruptcy Working Group members and lawyers from Melbourne, Sydney and Canberra. We now await with interest ITSA’s release of an Issues Paper on s.271 reform. Please contact me if you would like a copy of the issues paper or would like to be involved in future discussions.

Bankruptcy and the Defence Services

A report of the national teleconference discussion on this issue is published on pages 12-13 of this issue of ‘Sharkwatch’. At its 28 July phone link up meeting, AFCCRA decided to work on this as a national issue. I am in the process of setting up an email list to facilitate information sharing and possible future action. Anyone who has experience and/or interest in bankruptcy issues with armed forces personnel should contact me at janpentland@hotmail.com. I will put you on the email list.

Bankruptcy Reform Consultative Forum

On Tuesday 29 July, Penelope Hill (lawyer from Credit Helpline Victoria) and I attended a meeting of the National Consultative Forum about the interaction of the Bankruptcy Act and Family Law, and the ways in which some high income professionals have used this to avoid paying tax. The meeting specifically grappled with the recommendations of an interdepartmental Taskforce Report. To cut a long story short (the report runs to 72+ pages), the proposal broadly is to determine property available to a trustee in bankruptcy on the basis of Family Law principles, whether the couple are married, defacto, separated or divorced, and there is also a proposal to consider property involving ‘other entities’. While ITSA has been asked to clarify ‘other entities’, it seems this may include other family members and business partners.

The proposed changes are unlikely to affect the majority of our clients, who generally have low income and few or no assets. However, for the few debtors/bankrupts with such property (e.g., interest in a house), there is likely to be a resourcing issue, as such clients would require competent information, advice, and representation, but are unlikely to have the resources to pay for a lawyer.

If these proposals proceed to become amendments of the Bankruptcy Act, there may be positive outcomes for some of our clients (e.g., where some non-bankrupt spouses may have a case for a share of property in the bankrupt’s name under Family Law principles). Conversely, it may also mean that the property of non-bankrupt spouses could be at risk. Although such amendments proceed slowly, and changes are not likely in the near future, financial counsellors (especially those working with gamblers and their families) will need to review the information/advice they provide about these matters.

Current Bankruptcy Paperwork

By now, all financial counsellors should have received copies of the updated Prescribed Information booklet, Statements of Affairs, and Debtors Petitions.

Please contact me (at janpentland@hotmail.com or on 0407 042 483), or Penelope Hill (at Credit Helpline Victoria), if you have any queries about any of the above.

The Law Matters

Emilie Sutton
Solicitor
Credit Helpline NSW

Federal Court Rules on State of Victoria v Mansfield: PERIN Fines Deemed Not Provable in Bankruptcy

Most debts are provable in bankruptcy. However, there are some exceptions. Section 82(3) of the Bankruptcy Act states that ‘penalties or fines imposed by a court in respect of an offence against a law’ are not provable in bankruptcy and therefore a person continues to be liable to pay court fines and penalties after discharge.

In the recent judgment of State of Victoria v Mansfield, the Full Court of the Federal Court held that that infringement notices registered through the Penalty Enforcement by Registration of Infringement Notice (PERIN) procedure used in Victoria are penalties or fines imposed by a court, and so are not provable in bankruptcy.

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The PERIN Procedure

The PERIN procedure, which is set out in Schedule 7 of the Magistrates’ Court Act 1989 (Vic), is used for the enforcement of infringement notices (i.e. “on-the-spot” fines) issued for minor offences. The infringement notice explains how to pay the fine and offers an option to have the matter dealt with in an open court.

If the person does not pay the penalty or choose to have the matter heard in an open court, a ‘Courtesy Letter’ is then issued. This gives the person another 28 days to pay the infringement penalty, plus an extra charge.

If the person still fails to take any action, the infringement notice may be referred to a registrar of the PERIN Court. The registrar will then make an order that the person pay the fine and costs. Importantly, the enforcement order is deemed to be an order of the Magistrates Court.

Once a PERIN court order is made, a penalty warrant enforcement notice is issued. The sheriff will normally visit the person and ask them to pay the fine. If the person cannot pay the fine the sheriff will issue a seven-day notice, after which the Sheriff can seize the person’s assets. If the person does not have any assets that can be sold, the person could be jailed for one day for every $100.00 or part thereof that they owe.[1]

The Mansfield Decision

Port Phillip City Council issued Michelle Mansfield with 72 parking infringement notices. She failed to take action in relation to any of the infringement notices or the Courtesy Letters that followed. Port Phillip City Council ultimately applied to a registrar of the PERIN Court for registration of the infringement penalties. The registrar then made an enforcement order to pay the infringement penalties and costs, which amounted to $14,755.30.

Ms. Mansfield later became bankrupt. She sought an order from the Federal Court under s.60(1)(b) staying any legal process in respect of her non-payment of the infringement penalties and costs and a declaration that the amounts owing in respect of the parking infringements were provable in her bankruptcy.

The key issue between the parties was whether the infringement notices were properly characterized as ‘penalties imposed by a court’ for the purposes of s.82(3) of the Bankruptcy Act.

Ms Mansfield argued that the money she owed in respect of her parking infringement penalties were debts imposed by statute, rather than debts imposed by the Magistrates’ Court.

In the first instance, Justice Merkel accepted that the PERIN procedure did not impose a new liability, but rather, enforced payment of a pre-existing statutory liability.[2] They were therefore not ‘penalties or fines imposed by a court’. Justice Merkel declared that the unpaid penalties or fines and costs payable by Ms Mansfield in respect of the parking infringements were provable debts in her bankruptcy. Justice Merkel also ordered that any legal process against Ms Mansfield which resulted from her non-compliance with the enforcement order be stayed.

The State of Victoria appealed against this decision.

The Full Court of the Federal Court in State of Victoria v Mansfield[3] unanimously reversed Justice Merkel’s decision. It held that the PERIN procedure was a procedure of the Magistrates’ Court and was therefore a ‘penalty or fine imposed by a court’ for the purposes of the Bankruptcy Act. As a result, Ms. Mansfield’s parking infringements were not provable in her bankruptcy, and she was therefore not entitled to an order stopping recovery action.

Ms. Mansfield may seek special leave to appeal this decision in the High Court of Australia. Unless the High Court overrules this decision, people on very low incomes who are unable to pay on-the-spot fines may be imprisoned. Ms. Mansfield herself now faces the prospect of being imprisoned for 170 days because she was unable to pay her parking fines.

Ms. Mansfield’s plight highlights the disproportionately negative effect the PERIN procedure can have on ordinary people. It is hard to understand how it could be in the public interest to imprison people simply because they are unable to pay their parking fines.

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Implications for other States and Territories

Each State and Territory in Australia has passed legislation that governs the registration and enforcement of fines and penalties.[4] However, there are some significant differences between the legislation in each State and Territory. The relevance of the Mansfield decision for each State and Territory therefore depends on whether the legislation in that State or Territory deems an infringement notice to be an order of a court.

In South Australia, it appears that fines are not provable in bankruptcy. The Expiation of Offences Act 1996 states that once an enforcement order is made, ‘the order will be taken to be an order of the Court, and … is enforceable under the Criminal Law (Sentencing) Act 1998 accordingly’.[5]

Similarly, in Tasmania, the Justices Amendment (Infringement Notices) Act 1997 states that ‘an enforcement order is taken to be an order of a court of summary jurisdiction’.[6]

A similar provision is included in Queensland’s State Penalties Enforcement Act 1999.[7]

The Federal Court’s decision probably does not change the situation in New South Wales which has a purely administrative process to enforce infringement penalties

However, until guidance is provided on this issue by the courts or ITSA, it may be necessary for bankrupts in States or Territories other than Victoria to continue to include any infringement notices as unsecured debts in their Statement of Affairs.

Counsellors should warn such clients that the infringement penalties may not ultimately be provable debts in their bankruptcy, depending on whether the Mansfield decision is applicable in that State.

It is also possible that other state governments may change their laws to mirror the PERIN process.

[1] Victoria Legal Aid, “on the spot a guide to fines and the PERIN system 2nd ed.”, available from www.legalaid.vic.gov.au

[2] Mansfield v State of Victoria [2002] FCA 1175

[3] [2003] FCAFC 15

[4] Fines, Penalties and Infringement Notices Enforcement Act 1994 (WA), Fines and Penalties (Recovery) Act 2001 (NT), Magistrates Court Act 1930 (ACT); State Penalties Enforcement Act 1999 (QLD), Fines Act 1996 (NSW), Expiation of Offences Act 1996 (SA), Justices Amendment (Infringement) Act 1997 (TAS).

[5] Expiation of Offences Act 1996 (SA) s 13(6)(b)

[6] Justices Amendment (Infringement Notices) Act 1997 s 92I(1)

[7] Section 147

CENTRELINK and BANKRUPTCY: WHEN IS AN OVERPAYMENT FRAUD?

Penelope Hill (Credit Helpline Victoria)

This article was originally published in the March 24 issue of the ‘Devils Advocate’, produced by the Financial and Consumer Rights Council Inc. (FCRC) in Victoria. The author, Penelope Hill, has since updated this paper, and has generously allowed Sharkwatch to reproduce the new version here.

The following draft 'Facts Sheet' is being developed by Penelope Hill from Credit Helpline Victoria, in response to a need to clarify the treatment of Centrelink debts (particularly overpayments) when a debtor bankrupts. Feedback from across Australia on your experience and views on this matter are welcome. Interested parties should contact Penelope at penelope@vicnet.net.au, or Jan Pentland at janpentland@hotmail.com.

Centrelink Debts and Bankruptcy

Centrelink are entitled to continue to enforce some Centrelink overpayment debts after your clients are discharged from bankruptcy.

However, Centrelink are only entitled to enforce those debts that were fraudulently incurred.

If a client is already receiving benefits, Centrelink will enforce fraudulent overpayments debts by deducting from benefits. Before taking any enforcement action, a Centrelink officer will make the decision that the debt is fraudulent and therefore not wiped by the bankruptcy. The Centrelink Officer’s decision is not scrutinised by any outside body such as a court unless the client goes through the appeals process—requesting a Review, appealing the Review decision at the Social Security Appeals Tribunal (SSAT), or appealing the SSAT decision at the Administrative Appeals Tribunal (AAT). Most clients are so overwhelmed by the whole process that they will not question Centrelink’s decision that the debt was fraudulently incurred.

Credit Helpline (Victoria) and some Victorian financial counsellors [and many others—Ed.] have concerns that, in some cases, Centrelink is making incorrect decisions as to what constitutes fraud, and that as a result, many discharged bankrupts are repaying Centrelink debts that should have been wiped by the bankruptcy.

General

Debtors should include ALL Centrelink debts on their Statement of Affairs.

As soon as Centrelink receives notification of a client’s bankruptcy from the Insolvency Trustee Service of Australia (ITSA), it should stop all debt recovery action on the client’s Centrelink debts (including withholding action).

Centrelink should stop all debt recovery action for the period of the bankruptcy; it should also refund any payments/withholdings that it has deducted after the date of the bankruptcy and before discharge.

Some Centrelink debts will be extinguished when the bankruptcy ends.

Fraudulent Centrelink debts will not be extinguished by bankruptcy. Centrelink will recommence withholdings for fraudulent debts when the debtor is discharged from bankruptcy.

When is a Centrelink debt fraudulent

The AAT decision on the meaning of fraud

Some Centrelink officers appear to take the view that all overpayment debts are fraudulent. The case of Dobson; Department of Family and Community Services [2000] AATA 41 (28 January, 2000), clearly shows that not all overpayments are fraudulent. This case was discussed in Devil’s Advocate Volume 28, Issue 56 (27 May, 2002). A full report of the case can be found at the austlii site at: http://www.austlii.edu.au/au/cases/cth/aat/2000/41.html.

Dobson’s case demonstrates that:

In general, Centrelink is not entitled to deduct payments from a client’s pension to recover an overpayment, if the client bankrupted after the overpayment. Centrelink is only entitled to recover an overpayment if the client’s fraudulent actions caused the overpayment.
A debt is only fraudulent where someone knowingly or recklessly makes a false representation or acts with deliberate dishonesty. (Check your client’s explanation of how the overpayment occurred to see if it fits within this test).
The mere fact that your client knew that he or she should have notified Centrelink of income earned during a particular period is not enough to show that the client has been fraudulent.
Medical evidence of your client’s state of mind at the time they incurred the overpayment will be useful to show why your client failed to report a change in circumstances etc.
A creditor does not have to show that a debtor has been convicted for fraud before pursuing a debtor after bankruptcy.
A debtor can challenge the pursuit of the debt if there has been no conviction for fraud. (Dobson did this in the SSAT and the AAT. If the debt is not a Centrelink debt, then debtors will need to challenge in other courts).

We have concerns that Centrelink does not apply Dobson’s case when making a decision as to whether or not a debt is fraudulent. Our concerns are that Centrelink automatically decides that the debt is fraudulent if it falls under either section 1223 or 1224 of the Social Security Act (ss1223 and 1224 debts include overpayments due to a client’s failure to notify Centrelink of changed circumstances etc.). A copy of sections 1223 and 1224 can be obtained at: http://www.autslii.edu.au/au/legis/cth/consol_act/ssa1991186.html.

What should you advise a client who is bankrupting (or has bankrupted) with a Centrelink debt?

Centrelink writes to bankrupt debtors after it is notified of the bankruptcy, about whether or not it intends to pursue the debt after the debtor is discharged from bankruptcy.

If your client is bankrupting (or has bankrupted) and has a Centrelink debt, you should:

Inform the client of the review processes within Centrelink, and the SSAT and AAT, in relation to challenging the Centrelink decision to pursue a debt after bankruptcy. [Eds. note: see Sharkwatch Volume 4, Issue 1, Feb. 2002, for details on Centrelink appeals and reviews ],
Assess whether there are circumstances to support an application that the debt was not fraudulently incurred.
If you believe that there are such circumstances, inform the client that he/she should contact you as soon as they receive a Centrelink letter saying that Centrelink will recommence debt collection after the bankruptcy.
Advise the client that if they delay in making an application to challenge a decision to recommence debt collection after the bankruptcy, they may lose the right to a refund of any money taken by Centrelink.
Advise the client that they are unlikely to be successful in getting Centrelink to overturn its decision, and will probably need to go to the SSAT or AAT.
If your client has already been discharged from bankruptcy, you should investigate whether he/she can apply for a refund of any payments made to Centrelink or taken by Centrelink.
Refer your client to the Welfare Rights Unit or another solicitor experienced in social security law, for advice on:
- whether the debt claimed by Centrelink would be increased if Centrelink recalculated the debt owing after re-examining the file. (To properly assess this, it is necessary to get a complete copy of the client’s Centrelink file and do one’s own recalculation of the amount owing. This can be an onerous task as the files can be very large.)
- how to make the application to the SSAT/AAT.

A Caution

As Centrelink may be reluctant to initiate a criminal prosecution for debts below a certain amount, do not assume that the client will be successful in an application to the SSAT or AAT just because he or she has no conviction or prosecution for fraud.

Centrelink will probably recalculate the debt owing by a client once a client starts any application to the SSAT/AAT. It has been the experience of some lawyers who work in the field that Centrelink’s initial calculations are frequently incorrect. A recalculation by Centrelink may result in the client being required to pay a lower amount to Centrelink; it may also result in the client being required to pay a higher amount.

Teleconference 25th June, 2003 - Bankruptcy and the Armed Forces

Norm Hannelly
Richard Brading

After many Commonwealth funded (CFCP) financial counsellors had raised concerns regarding bankruptcy for clients employed by the armed forces, the CFCP Senior Facilitator/Casework Officer (SFCO) arranged this teleconference as part of the SFCO’s continuing support program to CFCP counsellors. Of particular interest to counsellors were issues related to the promotional prospects for bankrupts in the Armed Forces and concerns relating to apparent bankruptcy-related injustices within the military hierarchy.

During the introduction stage of the teleconference, one of the participants drew our attention to the following article in the Townsville Bulletin published on June 20. 2003:

“The Australian Defence Force yesterday warned problem debtors in its ranks to pay what they owe to the government or face legal action. Defence force chief Peter Cosgrove and defence department secretary Ric Smith have asked the Defence Legal Service to take action where those outstanding debts had made no effort to clear the slate. The Army newspaper reported that 9,000 defence personnel owed debts totalling $4.6 million. More than half were three months or more overdue”

The issues from the armed forces perspective are:

Concern that defence personnel with debt problems are suffering stress which affects their work performance.
Perceived unreliability. As a result of stress, accidents and mistakes are more likely. Bearing in mind that defence personnel work with lethal equipment, unreliability is an important safety issue.
The reputation of the armed forces may suffer if debts are not paid. This is particularly the case in ‘garrison towns’. If debts are not paid, all service personnel will suffer when businesses are no longer willing to extend credit and service personnel are no longer trusted to fulfil their financial commitments.
Trust. Even junior members of the armed services have the responsibility of looking after expensive equipment or material. There is a concern that personnel with serious debt problems may be tempted to steal or rort the system.
Security. The service person in debt is more susceptible to corruption, such as being tempted to sell military secrets.
Deployability. Service personnel by virtue of their employment must be able to move overseas. Bankruptcy may prevent service personnel from being deployed overseas.

It seems that each of the three services handles bankruptcy differently. In the Navy, the bankrupt will be removed from a position of trust. In the Army, a soldier will receive administrative assistance and deductions will be made from pay. In the Air Force, the bankrupt will be subject to either a formal warning, which may lead to discharge from the unit on administrative grounds.

Action will vary depending on the rank and occupation of the bankrupt serviceperson (e.g., an army cook would be treated lightly by comparison to an officer in control of significant financial matters or sensitive information).

The discussion covered the causes of bankruptcy in the armed services, the effects on defence personnel and their families and the vulnerability of defence personnel to coercion from within and outside the Defence Forces.

The Military Liaison Officers (MLOs) within the sub-branches of the Defence Community Organization (DCO) are responsible for provision of counselling and assistance to defence personnel with debt problems who may be facing bankruptcy. Whilst MLO’s and the DCO can assist in arranging for payment of debts by instalments, obtaining loans, and other matters, they have no specialist financial counselling skills and the quality of assistance must vary. Some MLO’s have a practice of referring service personnel in debt to local financial counsellors, but others do not. This appears to happen on the initiative of the individual MLO’s. Ad hoc referrals have also been made by social workers from the DCO (who work with MLOs) and from armed forces padres.

What is needed is a more formalised recognition of the value of financial counselling from senior levels in the armed services to ensure that all DCO’s and MLO’s refer appropriate cases to financial counsellors. Ideally, this needs to be done discreetly to reduce issues of peer pressure and gossip that arise when it is known that a military person is seeing a financial counsellor.

It is also important that Commanding Officers (CO’s) understand the client confidentiality required by financial counselling. One counsellor reported that a C.O. stopped referral to her agency after she refused to provide him with details of what had happened during the course of financial counselling.

It would be helpful to include some financial literacy at the early stages of military education so that new armed forces personnel are less likely to get into debt. This could be introduced as part of the curriculum at the entry level training bases.

Creditor harassment of defence force debtors was raised by several financial counsellors as a common problem. Although armed forces staff are frequently moved around in their employment, this is not an obstacle to either responsible debt collection or to harassment, which usually takes the form of threats to disclose debts to the CO or actual disclosure. If a debt is not paid, a creditor or debt collector will simply write to the debtor’s CO, or, if the identity of the CO is unknown, to the debtor’s CO c/o the Army, Navy or Air Force headquarters (the letter will eventually be sent on to the relevant officer). Creditors who contact an armed forces debtor’s CO to seek payment of a debt appear to be contravening both the Trade Practices Act (s.60), and the Privacy Act. However, if a CO takes ‘administrative action’ against a debtor after receiving such information (this can include loss of job and career), the CO’s actions do not appear to be unlawful. Financial counsellors should note that personal correspondence passed on through the armed forces (e.g., correspondence addressed to the debtor personally) is not read by the CO, and poses a much reduced risk of such consequences.

There is great variability in the way that COs respond to debt and bankruptcy issues. Some take a very tough line against personnel with debts. One counsellor reported that a client had been threatened with 3 months leave without pay. There were several reports that some COs harangue their troops on the evils of bankruptcy and the dire consequences for bankrupts within their units.

Punishment of defence personnel who become bankrupt is a very real problem. Demotion, redeployment, and discharge are all a risk for debtors. It appears that a number of good soldiers, sailors or airman have had their careers unnecessarily ruined by bankruptcy. This is at odds with the Defence objective of retaining good staff who may each cost up to $500,000.00 to train. The cost of training a defence person is high, and the average retention in the Defence Forces is only 7-10 years.

Service personnel, who are often young and financially naïve, are regularly the targets of predatory lending practices by both ‘payday lenders’ (who advertise and locate close to many military bases), and main stream lenders. Drug/alcohol issues may also add to financial problems.

One of the participants referred to the culture of young service personnel buying expensive cars in anticipation of overseas allowances with little or no forethought to the financial commitment after the high allowances stop on their return to Australia. This is currently a big issue with many soldiers returning from Timor and Iraq.

Defence personnel normally receive subsidised housing, but if they are posted back into an area where they have an investment property, they are required to move into it. In this instance, both rental income and tax-deductions related to negative gearing may be lost, and the property may become unaffordable. There is also the first home buyers trap.

A further consideration is the drop in income that may arise on discharge from the defence forces and how that affects those who may have substantial loans.

Payroll overpayments by the Defence Department are also a problem. In the case of administrative errors, the discretion to waive is often used. One must ask, however, why such overpayments occur in the first place? Surely, payroll information must primarily emanate from the service itself, rather than from servicepersons or employees. Even if mistakes are a result of erroneous employee claims, it should be noted that the regulations governing pay in the defence forces are some hundreds of pages long, and may thus be a contributory factor.

The military attitude to bankruptcy is clearly in need of updating. It was pointed out that bankruptcy will usually reduce money worries and stress and that it tends to lessen the risk of crime or corruption, as there is no longer creditor pressure.

The teleconference clearly demonstrated the problems that face financial counsellors who work with defence force clients. It appears that the main issues to be addressed are:

Harassment and privacy breaches by creditors and debt collectors who directly contact CO’s
Predatory lending to junior military staff by payday lenders
The unrealistic negative attitude that defence forces have to bankruptcy
The need for a recognition of the value of financial counselling by the armed forces at a high level
The need for improved working relationships between some CO’s and financial counsellors
The need for basic financial literacy training for new recruits

It was suggested that these issues be referred to AFCCRA with a request that they be raised at a high level with the government and armed forces chiefs.

Round Up

FOCUS on the NT

Diana Bessell
Remote financial counsellor at Katherine

My name is Diana Bessell and I am a financial counsellor with Anglicare in Katherine, in the Northern Territory. I have been in this position for almost three years. Previously I was employed as a Community Service Worker at the Katherine Woman’s Crisis Centre. I was in that position for ten years.

Anglicare provides a unique service in that the primary focus of my program is working with Aboriginal people in remote communities. As the region takes in around 4,000 square kilometers, this requires me to spend considerable time traveling, as some communities are around 5 hours driving time away. I also provide a service to low income families, individuals and people of non English speaking background who are experiencing financial difficulties.

Many indigenous people place more importance on the spoken rather than written word, so they are not as dependent on documentation as the non-indigenous population. Very few clients present with any documentation at all. This makes it difficult when dealing with Government departments and creditors etc.

I am the only Katherine regional Tax Help participant which is coordinated through the Australian Taxation Office. Between July and November I travel to many remote communities to complete tax returns for indigenous people free of charge. Other options for these people are to travel long distances to Katherine to see a tax agent or to pay a fee of $80 to $130 for a visiting agent for this service. Most people would only receive a small refund. Last year I completed around 600 tax returns and received an award for services to the Indigenous communities. I enjoy an excellent working relationship with the Centrelink Remote Team from the Katherine office and often travel to remote communities with them, more often than not staying in not much better than ‘swagging it’ style accommodation

Tricia Ross
AFCCRA representative and financial counsellor at Ludmilla

Tricia is not funded through the Commonwealth Financial Counselling Program (CFCP), but puts forward concerns here that are of interest to all counsellors on the CFCP, especially those who have indigenous clients or work in very remote areas.

My name is Tricia Ross and I have been the NT representative for AFCCRA for one year, and a financial counsellor with Anglicare Darwin for 18 months. My previous background is quite diverse, and includes youth housing, recruitment and telecommunications. I love fishing, and hate cold weather.

My predecessor Cheryl Kuhn now manages the program along with several other programs Territory wide. I have been fortunate enough to make regular use of her considerable expertise and supervision throughout my time here to date, and have a keen interest in social justice and action on consumer issues throughout the NT and nationally.

There are unique circumstances facing consumers and their advocates in the NT, and I shall endeavour to cover some of them in this brief. The cultural diversity, isolation, lack of literacy and numeracy skills, and restricted access to information for consumers are the exacerbating factors I believe.

The practice of book up is not a new one, and extensive research has been done to date on the pro’s and con’s of it. This service has recently been swamped with consumers that are in a cycle of ongoing, unmanageable debt as a result of book up. There are reports of caveats having been placed on a debtors property, and corner store owners visiting debtors and threatening their children. I personally have witnessed such behaviours whilst accompanying clients to establishments that hold their debit cards and pin numbers.

There have also been tenancy issues in relation to the holding of debit cards for rental deductions that are questionable and unaccounted for in the way of any documentation.

These practices have prompted regulatory authorities such as the Racing Gaming and Licensing Commission to investigate and change conditions of individual operators liquor licenses. As most corner stores in the NT hold liquor licenses which generate a large proportion of their income, moves by the Commission have been assisted and welcomed by community organizations and advocates such as ours.

The last 12 months have seen pay day lenders and debt agreement administrators (DAAs) set up for the first time in the NT. One has voluntarily ceased trading whilst the Department of Public Prosecutions examines over 50 alleged breaches of the Consumer Affairs and Fair Trading Act. Interestingly, within weeks of ceasing to trade, another similar enterprise began operating in the same location with a different trading name.

I am now hearing allegations that interstate DAA’s are informing clients over the phone that they can ‘be saved’ from bankruptcy by signing a contract enabling them to act on their behalf, and fees for the service will not be discussed until the said contract is signed!

It appears that the Australian Securities and Investment Commission’s role in consumer protection is still being determined by all involved, and we are anticipating further clarification at a consumer forum to be initiated by the Consumer Affairs Council in August this year. The Australian Competition and Consumer Commission (ACCC), the Telecommunications Industry Ombudsman (TIO) and ABA Ombudsman are also contributing.

I look forward to hearing from colleagues regarding consumer issues, and can be reached by email at tross@anglicare-nt.org.au

AFCCRA Update

Jan Pentland
AFCCRA Chairperson.

ASIC

Clarification of the position of financial counsellors in regard to ASIC’s obligations under the Financial Services Reform Act to licence anyone providing general or personal advice in relation to financial products is proceeding. As Chair of AFCCRA, I have been engaged in on-going discussion with ASIC. It was indicated recently that an issues/discussion paper will be released for comment within a few weeks. Progress on this issue will be provided to states and territories through AFCCRA Council members.

Diploma of Community Services (Financial Counselling)

During 2002, the Australian National Training Authority reviewed the Community Services Training Package and undertook a project to identify National Competency Standards (NCS) towards a national qualification for financial counsellors. The NCS have now been ratified, and the nationally accredited Diploma of Community Services (Financial Counselling) is the outcome. AFCCRA facilitated and funded a national telephone link-up of representatives from each state and territory on May 13 to exchange information and share ideas on the challenges for implementation. This group will meet again by telephone link-up later in 2003. Trish Walsh, who took the minutes of the telephone link-up, has written a very informative article in the June 2003 edition of the AFCCRA News. The June edition of the ‘AFCCRA News’ has now been distributed through the AFCCRA Council members. If you have not received a copy and would like one, please contact your state or territory AFCCRA representative or contact me – see below for my details.

If you would like to discuss any of the above, please contact Jan Pentland on 0407 042 483 or at janpentland@hotmail.com

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

In The Media

Loan sharks in Japan...

A Japanese loan shark abducted a debtor, took her to the mountains a few kilometres away, ordered her to dig a metre deep hole and then told her to sit in it. As he shovelled dirt onto the woman’s head, he threatened to bury her alive unless she repaid the money, Japanese police said.

The jobless woman had originally borrowed 50,000 yen ($630.00AU), but fell behind in her instalments after repaying 20,000 yen. This was not surprising, given the usurious (and illegal) interest rate, which required her to repay 110,000 yen over 4 months!

Sydney Morning Herald, 30th June, 2003

Four million Australians live in constant financial stress

Original article by Ben Ruse

Reprinted from the Financial Counsellors Resource Project (FCRP) News of Western Australia

Australia’s worsening poverty is being ignored according to the St. Vincent de Paul organisation.

The Charity told a senate inquiry on poverty that almost four million Australians lived in a state of constant financial stress in households earning less than $21,000.00 a year. The Charity wanted a national plan developed to tackle poverty because the free market would not solve the problem.

The West Australian, 25th June, 2003

Compensation payments may become taxable

Original article by Alan Thornhill and Jerry Pratley

Reprinted from the FCRC News

Thousands of traumatised people who get compensation payments for injuries at work could soon face big tax bills. The risk arises under a draft ruling issued by the Australian Tax Office, which cites recent court rulings that payouts can at least partly be a substitute for lost income, and are therefore taxable. The draft ruling, which has not yet come into force, is already attracting fierce opposition.

The West Australian, 20th June, 2003

Sloppy lawyers warned their costs may be capped

Original article by Leonie Lamont

Lawyers have been warned that if they continue to ravage estates by charging high legal costs, judges will step in and cap costs. NSW’s Chief Judge in Equity, Justice Peter Young, has also warned lawyers that their fees may be in doubt if they allow big bills to be tun up by ‘claimants [who] are not particularly concerned about how much they get out of the estate as long as they ruin it for everyone else’.

Justice Young has also been increasingly critical in recent judgements of ‘sloppily done’ legal representations in family provision cases, and has followed up with a public warning in the latest edition of the Law Society Journal. He said costs are ‘getting out of all proportion to the amount involved in the estate … Unless something is done … more drastic action may need to be taken, such as judges assessing costs based on what would be done by a solicitor of reasonable competence and efficiency’.

Justice young quoted various examples. In one, a modest $154,000.00 estate was ravaged by a $112,000.00 bill, after a bitter dispute between a family and their gay son’s de-facto partner. A $10,000.00 legacy was given to the dead man’s partner, and there was less than $20,000.00 left to go to the dead man’s parents, both of whom were pensioners. In another case, a woman was awarded a $60,000.00 legacy from her father’s estate, with overall costs totalling a staggering $204,500.00.

Justice Young issued a warning to lawyers about judge’s discretion in capping costs, and noted that he would rarely award costs which were more than the legacy that the successful claimant received.

Sydney Morning Herald, July 29, 2003

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