Notes & Notices
Farewell to Norm Hannelly
It is with great sadness that we say goodbye to Norm Hannelly. Norm had spent several years as Coordinator of Credit Helpline NSW, before combining this role with the role of senior facilitator/casework officer with the Commonwealth Financial Counselling Programme (CFCP) in early 2003. He approached both positions with great enthusiasm and skill, and was much liked and respected by his peers. Norm left his position earlier this year to move into a new field, and will be greatly missed.
Norm has asked us to pass on his best wishes to all those on the Commonwealth programme, and to the many NSW financial counsellors he has met through Credit Helpline, and to thank everyone for their support and friendship over the last few years.
Telstra Helpline for Indigenous Australians
Indigenous Australians will now be able to speak to someone with a similar cultural background when making enquiries about their telephone or Internet services after the opening of Australia’s first indigenous call centre for Telstra services. The service will be operated exclusively by a specialist team of Indigenous liaison officers who will take calls from Aboriginal and Islander customers from all over Australia on a dedicated customer service number (1800 444 403).
ACCC alleges unconscionable conduct by debt administrator (from the ACCC website)
The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court, Adelaide, against Fox Symes & Associates Pty Ltd, its directors Mr Tim Maher and Ms Deborah Southon, and also a related company, Debt Relief Services Pty Ltd, alleging misleading and deceptive conduct and also unconscionable conduct.
The ACCC alleges that during 2000–2002, Sydney-based Fox Symes extensively advertised its services across Australia as a debt relief administrator, particularly with respect to debt agreements under Part IX of the Bankruptcy Act 1966.
The ACCC alleges breaches of section 52 of the Trade Practices Act 1974, through Fox Symes making false or misleading representations when advertising and counselling clients that:
- their services would release clients from debt and that it was not bankruptcy
- all of their consultants were professional debt management consultants
- client’s credit ratings would not be adversely affected
- creditors would be repaid in full, when, in fact, Debt Relief Services Pty Ltd, an undisclosed related company, received part of the repayment sum
- debts would be frozen immediately and
- interest would not accrue.
The ACCC further alleges that the two companies engaged in unconscionable conduct because they were aware that their customers were likely to be financially or socially vulnerable but nonetheless they knowingly engaged in conduct which exploited that vulnerability.
The ACCC is seeking remedies against the respondents that include:
- declarations that they engaged in misleading and deceptive conduct and false representations
- declarations that they engaged in unconscionable conduct
- injunctions, orders for remedial action, refunds, community service, and costs.
A directions hearing is listed for 4 May 2004 in the Federal Court, Adelaide.
Release # MR 061/04
Issued: 15th April 2004
Why NOT To Consolidate
Gregory Mowle
Wayne Warburton
Gregory Mowle (F/C at Lifeline Brisbane) has submitted the following tips for counsellors who need to show their clients that consolidating those debts may not be the answer to their debt problems. In order to flesh out Greg’s excellent example, Wayne has added some additional thoughts and tables of calculations.
Seven Reasons Why You Should NOT Consolidate
- It costs you more in the long term
When you consolidate debts you are throwing debt on top of debt, adding interest and taking it over a long term. Some loans include set up costs and insurance. Although creditors may say you are saving money on the minimum monthly payments, you are paying more in total. Remember that to decrease monthly payments the total amount must increase.
- Some loans may go from single names to joint names, and
vice-versa
By consolidating you may end up taking responsibility for someone else’s debts, or alternatively you may be releasing someone from a debt.
- Credit card accounts are not “closed”
You may not be asked to close your paid off credit card accounts. Having a nil balance does not mean that you cannot use them again. Unless you are disciplined, you may be tempted to use the credit cards again. This is especially true if you have not budgeted and accounted for household bills.
- Creditors have a vested interest in telling you to
consolidate
Creditors will always tell you to consolidate as it means extra business for them, and hence more interest. They are in the business to make money, and they will profit from a consolidation loan (refer point # 1)
- Your unsecured loans may become secured loans
If you have unsecured loans, such as credit cards, you have plenty of rights and options. If you consolidate the lender may request an item as security for the loan. This places you in a precarious position and the lender in a position of strength.
- It is harder to negotiate with one large creditor than with several
smaller creditors
If you have 4 unsecured creditors of around $2000, individually it is unlikely that they will commence legal action if you are in default. If you consolidate to one larger creditor and default, they will be quicker to commence legal action.
- Consolidation does not solve the underlying issues
The most important factor you have to consider is WHY you have to consolidate. Unless you address the reasons why you are behind with your debts, or continually increasing your debt levels, you are bound to keep repeating the same mistakes. Consolidating should not be a “band-aid” solution. Do you have a long-term or a short-term problem? If you change your financial habits you would be able to save a lot of money in interest, fees and charges WITHOUT consolidating.
Here is an Example
Here is an example of a client with four major debts. It is interesting to compare the overall interest paid when the client pays out the debts at the existing rates, compared to making repayments over a set period with a consolidation loan.
From the Money Plan:
| Creditor | Balance | Payment | Interest |
|---|---|---|---|
| Dept. Store | $452.00 | $40.00 | 18.90% |
| Credit Card 1 | $1,688.00 | $60.00 | 17.40% |
| Credit Card 2 | $3247.00 | $150.00 | 27.50% |
| Personal Loan | $8947.00 | $255.00 | 16.30% |
| TOTAL | $14,344.00 | $505.00 |
Calculated Time to Repay and Total Interest Charges
| Creditor | Balance | Repay Time | Interest |
|---|---|---|---|
| Dept. Store | $452.00 | 13 mths | $49.74 |
| Credit Card 1 | $1,688.00 | 36 mths | $496.62 |
| Credit Card 2 | $3247.00 | 30 mths | $1,290.21 |
| Personal Loan | $8947.00 | 48 mths | $3,288.79 |
| TOTAL | $14,344.00 | 13-48 mths | $5,125.36 |
It is interesting to compare these figures with the amount that would be repaid using a typical consolidation loan. To continue with our hypothetical case, here are the details of the consolidation loan:
The Consolidation Loan
| Payout existing creditors | $14,334.00 | |
|---|---|---|
| To borrowers | $666.00 | For other accounts such as Energy bills, school fees etc. |
| Total financed | $15,000.00 | |
| Interest Rate | 16.30% | |
| Term | 60 months | |
| Payments | $367.17 | This appears to be a saving of about $140.00 on what you would have previously paid |
This appears to be a saving of $137.83 on the usual repayments of $505.00. But is it a true economy? Let’s compare the true cost of the two payment approaches:
| Starting Balance | Time to Repay | Total Interest | |
|---|---|---|---|
| With current arrangements | $14,344.00 | 48 mths for longest debt | $5,125.36 |
| With consolidation | $15,000.00 | 60 mths | $7,695.97 |
| How the consolidation loan compares to the current repayment arrangements | 12 months longer to repay | $2,570.61 more in interest |
It is also interesting to compare the way that levels of repayment change over time.
Repayment Schedule by Time
| Payment strategy | 1–13 months | 14–30 months | 31–36 months | 37–48 months | 49–60 months |
|---|---|---|---|---|---|
| Current | $505.00 | $465.00 | $315.00 | $255.00 | — |
| Consol. | $367.17 | $367.17 | $367.17 | $367.17 | $367.17 |
Clearly, in this instance, the client would be worse off with a consolidation loan over the long term — the debt would take a year longer to repay, and there would be $2570.61 more in interest that would be paid for the debt.
In this example, the financial counsellor would need to balance the immediate benefits of a consolidation loan (i.e., the client paying $137.00 per week less in the short term) with the long term downfall — the consolidation payment would stay static for a full 5 years and cost $2,500.00 more in the long run, whereas with the current arrangements, payments would drop with every month (eventually becoming lower than the consolidation payments), and the debts would be repaid within 13–48 months.
Telstra Resource Sheet Insert
One area of concern that has been discussed by the Telstra Consumer Consultative Council (TCCC) Credit Management Working Group (what a mouthful!) is that many new concessions made in recent years for Telstra’s low income customers do not appear to have become common knowledge in the community, and are not as widely used by community workers and financial counsellors as had been expected. For example, the Access For Everyone program is worth literally hundreds of millions of dollars, and has been hard won through many long hours of consultation with community groups and TCCC advocates. During this process, TCCC members assured Telstra that such a package was necessary, and yet, now that it is place, the use of some parts of the package is disappointingly low.
This is a real shame, because many aspects of the program provide real advantages for a variety of low income or disadvantaged Telstra customers, and if the program is cut back for lack of use, many of these advantages might be lost. Details of Access for Everyone were published in Sharkwatch Vol. 4 No. 1 (Feb. 2003) (other back issues are accessible from the index at the top of this page). We would encourage you to take a quick look to refresh your memory about the concessions that Telstra has recently made available.
Telstra have also been quite pro-active in restructuring their credit management practices so that there are more options for repayment, pre-payment opportunities for some customers, and services in place to deal with situations where customers are having trouble paying their bills. Judging from the amount of complaints that Jennifer Gracie and Wayne Warburton still get from financial counsellors about Telstra, it is clear that the system, whilst good on paper, does not always work as planned. Nevertheless, it is still the system we have to negotiate as financial counsellors, and better knowledge of it can only help us to obtain better outcomes.
To this end, we at Sharkwatch have decided to provide readers with an easy to use summary that gives details of current Telstra credit management policy, terms and conditions for their various products (e.g., InContact), and appropriate contacts to use when dealing with credit problems related to Telstra accounts. Fortunately, Telstra have already produced such a summary, and have agreed to provide copies to be mailed with this issue of Sharkwatch. The Telstra Credit Management Fact Sheet should be enclosed (if not, let us know and we’ll post one). We hope you find it helpful.
Round Up
Victoria
Consumer Directors for EWOV Board of Directors sought
The Energy and Water Ombudsman of Victoria (EWOV) are advertising for consumer representatives to sit on the scheme’s board of directors. Here is a copy of their advertisement for those in Victoria who might be interested in applying. It would certainly be a good thing for there to be a financial counsellor providing input at this level at EWOV.
Essential Service Commission Energy and Water Ombudsman (Victoria) Ltd.
Consumer Director opportunity
The Energy and Water Ombudsman of Victoria (EWOV) is responsible for the fair, reasonable and effective resolution of customer complaints and disputes. A Board of Directors governs the scheme, and has an independent Chair and equal numbers of industry representatives and consumer representatives.
The Essential Services Commission, Victoria’s independent regulator of services including gas, water, electricity, grain and ports, will appoint new consumer representatives, effective July 2004. Legislation and licence provisions of the Commission require distributors and retailers of electricity, gas and water, to be members of the EWOV scheme.
The Commission, which has specific powers relating to standards and conditions of service and supply, invites applications from interested and qualified members of the public who possess:
- a current understanding of, and experience in dealing with, general consumer concerns and issues, in particular those of domestic, small and medium business, low-income, non-English speaking and regional (rural and town) consumers;
- an understanding of, and experience applying, dispute resolution principles and methods;
- an understanding of, and capacity to perform, the role of a Director (Director’s fees will be paid for the positions advertised); and
- knowledge of the electricity, gas and water industries, and the customer service regulatory requirements applying to them.
The EWOV scheme is a company limited by guarantee and is subject to the Corporations Law and its Constitution.
Enquiries and applications to:
- Val Smith
- Essential Services Commission
- Level 2
- 35 Spring Street
- Melbourne 3000
- Tel (03) 9651 3931 or email val.smith@esc.vic.gov.au
Closing date: C.O.B. Friday 14 May 2004
Consumer Affairs Victoria release new guide to real estate transactions
(From the CAV release letter, Feb 6, 2004)
The major provisions of the Estate Agents and Sale of Land Acts (Amendement) Act 2003 came into operation on February 1st, 2004. These will result in significant changes to the conduct of estate agents and the sale of real estate in Victoria, including the outlawing of dummy bidding, under and over-quoting, and the retaining of advertising rebates by agents.
Consumer Affairs Victoria have produced a new 56 page free booklet entitled Real Estate: A Guide for Buyers and Sellers. The guide was produced in consultation with industry and consumer groups, and gives an overview of the basic steps involved in a residential real estate transaction. It also informs buyers and sellers of their rights and responsibilities and the greater protection provided to them under the Act.
Although this booklet will not be relevant for many clients of financial counsellors, it may be an important tool for assisting those clients who are faced with making real estate transactions (such as selling their property) because of their financial problems, or for whom real estate transactions are part of the cause for their overall financial difficulties.
If you would like to obtain copies of the booklet, fax a request to Consumer Affairs Victoria on (03) 9627 6574.
Queensland
The Financial Counsellor’s Association of Qld (FCAQ) held their Annual Conference at the Joondoburri Conference Centre on Bribie Island. The Centre is located in secluded bushland just a few hundred metres from the beach. It is an ideal location to relax and learn.
The quality of the speakers was high. Professor Sharon Beder spoke about “Shopaholics” and the need some consumers have for “Retail Therapy”. Mary McLean of Lifeline Toowoomba spoke about Family Money patterns and introduced her new “MoneyoGram” based on the traditional Genogram. Other speakers were from ITSA, Insolvency Practitioners, ASIC and Queensland’s new Centre for Consumer Credit Law.
The FCAQ AGM was held during the Conference. Paul O’Brien, President for the last two years, has retired from financial counselling and stepped down as president. Gregory Mowle of Lifeline Brisbane was elected President with Lola Mashado of Relationships Australia Vice President.
Greg Mowle
New South Wales
Credit Helpline NSW have received feedback that there are some financial counsellors in NSW who believe that their counsellor resource service is only available to Office of Fair Trading funded services. This is not true. Credit Helpline resources are available to all financial counsellors in NSW. This includes access to the counsellor resource line and to the Credit Helpline solicitor, Emilie Sutton.
All financial counsellors in NSW can ring 1800 650 084 to obtain information or advice from either a financial counsellor or from Emilie. This line is dedicated for calls by financial counsellors and related professionals only, and calls made to this number are free calls in NSW.
Credit Helpline NSW is situated with Wesley Counselling Services, so the Credit Helpline team also have access to professional gambling counsellors, Wesley Community Legal Service, and a network of face to face financial and general counsellors. This means that they can assist other counsellors with a wide range of problems. Remember, any financial counsellor in NSW can ring.
Australian Capital Territory
Paul Guinane has recently left the Care Financial Counselling and Consumer Credit Legal Service in Canberra. Care is in the process of appointing a replacement.
Western Australia
Vince Monterosso has left the Midlands Information, Debt and Legal Advice Service Inc. (MIDLAS) to take a position in the banking industry. Currently, Jacqui Ecclestone (who was a locum at MIDLAS last year when Vince was on leave), and Eve Cowlishaw, are sharing the financial counselling duties at MIDLAS.
MIDLAS are advertising two financial counselling positions as follows:
Position 1: Financial counsellor 22.5 hours per week.
The primary role of the Financial Counsellor is to provide assistance and support to clients experiencing financial difficulties. The secondary focus of this position is to ensure reports are completed in time and accurately records the information required in accordance with MIDLAS Contractual obligations.
Position 2: Financial counsellor 15 hours per week.
The primary role is as for job 1. The secondary focus of this position is to facilitate workshops in the community to Service Providers or interested community groups about issues such as home budgeting and planning, negotiating with creditors and debt repayment options for Centrelink Clients.
For more information, see the May FCRP News or ring MIDLAS on (08) 9250 2123.
The Law Matters
by Richard Brading
Principal Solicitor
Wesley Community Legal Service
Solicitors’ Liens
A lien is a type of security that a tradesperson has over something on which work has been done, but has not yet been paid for. The nature of the lien depends upon the tradesperson retaining possession of the item. For example, a motor vehicle repairer has a lien on a vehicle that he/she has repaired. The repairer can retain the vehicle until they have been paid for the work that has been done.
The lien is a personal right. It cannot be sold or assigned. The lien will be discharged by releasing the property which is subject to the lien, whether or not payment is made. However, the property may be transferred to someone else with the lien continuing, if there is an express agreement for the lien to continue between either the two service providers, or between the original service provider and the client. For example, a solicitor’s lien over documents or proceeds from a matter may transfer to another solicitor who takes over the file, provided the two solicitors (or the original solicitor and client) agree for this to happen. In such a case, if it is necessary to exercise the lien to recover monies owed to the original solicitor, the new solicitor would undertake to collect those monies and pass them on to the original holder of the lien.
Solicitors, as well as having liens, may ask clients to provide additional security by signing a document creating a “lien”, “charge” or “mortgage” over property to secure that solicitor’s costs. When dealing with debts to solicitors, financial counsellors should always ask their clients what papers they have signed, and what securities they have explicitly given to the solicitor.
Whether or not solicitors make special arrangements of this type, solicitors are able to use two types of liens.
The Retaining Lien
This lien is the right a solicitor has to withhold documents or other personal property of a client or former client until paid. The retaining lien entitles the solicitor to hold all deeds, papers and other personal property of the client that comes into the solicitor’s possession with the client’s consent.
However, not all documents are subject to the retaining lien. The solicitor has no retaining lien over the client’s will or to original court documents.
At common law, the retaining lien does not apply to monies held in a solicitor’s trust account, such as the proceeds of sale of property. However, in some States, legislation permits the solicitor to exercise a lien over money in the trust account, where a bill has been rendered to the client, but remains unpaid. For example, in N.S.W., s.61(3)(d) of the Legal Profession Act creates a lien over money held in a trust account where a bill has been issued up to the total of the charges in the bill.
The retaining lien is overridden in the event of bankruptcy by s.129(3) of the Bankruptcy Act which says that “a person is not entitled, as against the trustee, to withhold possession of the books of account or any papers or documents of the bankrupt relating to the accounts or to any of the examinable affairs of the bankrupt or to claim any lien on any such papers of documents.”
The “Fruits of the Action Lien”
This is a new form of lien. It gives a solicitor the right to be paid out of judgment or settlement monies that have been recovered by the solicitor on behalf of the client.
In Ex parte Patience; Makinson v The Minister (1940) 40 SR (NSW) 96, the NSW Court of Appeal said that:
“If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client’s right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money. … That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor’s costs.”
In Worrell v Power & Power (1993) 46 FCR 214; 118 ALR 237, the solicitors received their costs from the other party to the court proceedings within the 6 month relation back period prior to the client’s bankruptcy. The client’s trustee in bankruptcy alleged that the receipt of costs was a preferential payment.
The Federal Court held that because the order for costs had come about due to their exertions, the solicitors had a lien over those costs. That right arose on the making of the costs order which pre-dated the commencement of the bankruptcy, even though payment was not made until after the commencement of the bankruptcy. So, the solicitors were a secured creditor and did not have to release the money to the trustee in bankruptcy.
In Kelso v McCulloch (SC(NSW) 3832/94), the client filed a debtor’s petition prior to the settlement of her personal injuries claim. She included her unpaid lawyer’s fees as an unsecured debt in her Statement of Affairs. However, when the personal injuries claim was eventually paid, the lawyers were able to assert their fruits of action lien against their bankrupt former client. The trustee in bankruptcy was not involved, as compensation for personal injuries is exempt property under s.116(2)(g)(i) of the Bankruptcy Act.
In a similar case (Angela Cominos v Cevdet Taskin [NSWSC, 27 August 1996]), the client changed solicitors during a personal injury case. The client filed a debtor’s petition immediately before Terms of Settlement were filed, listing the first solicitor’s costs as an unsecured debt. The NSW Supreme Court held that the fruits of action lien applied, saying:
“…it is a matter of course that the Court should assist a solicitor to obtain payment for professional work and expenditure which she has done which has brought about recovery by her client. This is true whether one solicitor has acted throughout, or whether several have, or whether at times the client has not had professional assistance. … the law as it presently stands provides solicitors with a powerful and effective manner of retaining costs or recovering those costs notwithstanding the termination of the retainer. It is also a clear warning to those who endeavour to use the bankruptcy system to endeavour to have the cake and eat it too.”
The fruits of action lien can override other securities. In Doyles Construction Lawyers v Harsands (SC(NSW) 3007/96), the NSW Supreme Court held that the solicitor’s fruits of action lien prevailed over the equitable security held by a bank. The judge reasoned that the solicitors should be paid out of the settlement moneys first because the money would not be available at all if it had not been for the solicitor’s work.
In Firth v Centrelink [2002] NSWSC 564, the net proceeds of settlement of a personal injury claim of $16,211.80 were paid to the Department of Social Security, pursuant to a statutory garnishee issued under s.1233 of the Social Security Act 1991. Nothing went to the solicitor’s client. The solicitor was left without the fruits of action to secure his costs. He sued Centrelink to recover the $16,211.80, claiming a prior equitable right, namely a fruits of action lien. The Supreme Court of NSW decided in favour of the solicitor, saying that the solicitor’s lien gave him the right to trace the funds into the hands of a third party. Centrelink had to pay the money to the solicitor.
Generally, the solicitor who wishes to enforce a “fruits of action” lien must give notice to the person holding the money, and do so promptly. In Grogan v Orr (NSWCA 2 August 2001), the client instructed his new solicitor not to pay costs owed to a former solicitor. The new solicitor followed the client’s instructions and released all the money to the client. The client became bankrupt a year later. The former solicitor did nothing for almost 6 years and then sued the new solicitor for the costs he had not received. The court held that the former solicitor was unable to recover the money from the new solicitor because he had delayed too long in asserting his “fruits of action” lien.
AFCCRA Update
Jan Pentland
The Australian Financial Counselling and Credit Reform Association (AFCCRA) is the national peak body for financial counsellors. The AFCCRA Council is composed of a representative from each state and territory and met by phone link up on 2 February. We welcomed the return to the Council of David Tennant representing the ACT and Lola Mashado representing Queensland. Thanks to Jackie Harris and Paul O’Brien for their contribution to AFCCRA and our best wishes to them for the future.
Reports were received from AFCCRA’s representatives on the Bankruptcy Reform Consultative Forum, Telstra and Optus consumer consultative councils, and the ANZ financial literacy project. These reports and others will be included in the next edition of the ‘AFCCRA News’ which has been delayed as editor, Rosemary Warren recovers from a back/neck injury – get well soon, Rosie!
On 5 February, David Tennant and I met with Colleen Gibbs at the Department of Family and Community Services in Canberra. Colleen was the interim program advisor for the Commonwealth Financial Counselling Program after Francis Foo’s departure (Sue Barrett is the new program advisor). As always, David and I flew the flag for the need for increased Commonwealth funding for financial counselling services but we’d be kidding ourselves if we thought there was much joy there in the near future. Never-the-less, it is important that the economic and social benefits to society of an adequately funded financial counselling sector continue to be promoted. We also discussed with Colleen the introduction of the Financial Services Reform Act (FSRA) and the relief granted to Financial Counselling agencies by the Australian Securities and Investments Commission (ASIC). The relief is incumbent on agencies meeting the obligations and requirements outlined by ASIC in Class Order (CO 03/1063).
Financial counsellors across Australia will be sorry to hear that Francis has moved to another job after almost 10 years with the Financial Counselling Funding Program. While we welcome Colleen, we’ll miss Francis’ depth of knowledge and good humour.
AFCCRA Council will meet again by phone link up on 5 April. Please contact your state or territory AFCCRA Council representative, or me on 0407 042 483 or at janpentland@hotmail.com if you have any issues to raise at the national level.
Superannuation & Home Loans
Norm Hannelly
Traditionally, superannuation has not been allowed to be a lever for home loans. In the current climate of superannuation mismanagement and the government’s concern for the increasing aged population, maybe it is time to rethink the concepts. If superannuation is considered as personal provision for retirement income and therefore a counterbalance to a government age pension, then surely it must be in the interest of government to protect the viability and growth of such a provision. However, fund management corporations have not served individual investors well, nor have they helped to alleviate the long term concerns of government. Reform of the system is required.
Leaving the individual investment to be handled by private enterprise has proved costly in some recent instances. Regulation of the industry needs to be strengthened. A few decades ago only public servants, managerial staff of larger corporations and some “blue collar’ employees were afforded superannuation opportunities. Since then governments have seen the need to enforce universal superannuation. All employers must provide superannuation for their employees. In addition to these “non-contributory” schemes, employees are encouraged to contribute extra from their pays. Fund managers exercise enormous investment power. Speculation with large equities, derived from superannuation contributions, should be tightly regulated by government for its own sake and for the protection of superannuants.
One of the tenets of an egalitarian society should be home ownership for all families. The opportunity to invest personal savings in the tangible provision of housing for oneself, one’s dependants and others should be encouraged and protected by governments. Collective personal savings must benefit the national economy. On-shore investments and the concept of “buying back the farm” help to stabilise the risks of speculation. Why not link the concepts of savings, superannuation and housing? Why not allow individuals to borrow on their superannuation equity and potential for the purpose of building homes? Of course a central government would need to regulate such a scheme in order to protect an individual superannuant (saver/investor) and the government’s stake as a provider for financial security for the aged.
Implementation of a Commonwealth Superannuation Home Bond Scheme could lead to the strengthening of superannuation savings and alleviate the demand for home ownership.
Update On GE Capital Finance Dispute Resolution Process
Jan Pentland
Katherine Lane
Jan and Katherine are consumer representatives on the GE Capital Finance Advisory Council. They provided some valuable information for Sharkwatch (Vol 4, Issue 4, October 2003) regarding dispute resolution processes at GE. This update adds further valuable information at a time when many financial counsellors are seeking guidance on this specific issue.
Alternative Dispute Resolution (ADR)
The Advisory Council for the GE Capital Finance ADR Scheme met on 10 December 2003. The Council with Dick Viney as independent Chairperson, includes two representatives from GE and the two consumer representatives, Katherine Lane and Jan Pentland. The Council continues to strongly lobby GE to expand the ADR Scheme to cover all of the GE businesses and has requested an indication of progress towards this goal by the next Council meeting and achievement of the goal by the end of 2004. Currently, the ADR Scheme covers the old AVCO business, now trading as GE Finance and Insurance, and AVCO Access only.
Access to the GE ADR Scheme is through the GE Internal Disputes Resolution process (IDR). Financial counsellors and consumer advocates are encouraged to progress complaints through GE’s IDR, and, if unsatisfied with outcomes with matters covered by the ADR Scheme, to pursue that avenue.
Internal Disputes Resolution (IDR)
“Beacon”, GE’s centralised computer complaint handling procedure was introduced across all GE businesses during 2003. It is worth noting that GE’s definition of a complaint is “Any expression of dissatisfaction from an external source, however made, to anyone in our business, regardless of whether GE is at fault.” Theoretically, this very broad definition should pick up all complaints and customer dissatisfaction with GE. However, as we all know with any system, this relies on what information is put into the system at first point of contact. It is already clear that many ‘complaints’ as defined by GE are not making it into the system. This has been raised at the ADR Council and further feedback on internal system checks requested. However, broadening of the ADR Scheme and independent access to it is likely to be more effective in achieving an efficient and effective overall disputes resolution regime for GE.
While customers are encouraged to sort out complaints with the particular GE business as first point of contact, where this is not working, or when a consumer advocate or financial counsellor becomes involved, the matter can be and should be raised directly with the GE Dispute Resolution Department, phone 1300 550 006 or 03 9921 6126, or write to the GE Disputes Resolution Department at 572 Swan Street, Richmond 3121.
If you have any queries or feedback in relation to GE’s disputes resolution processes, please contact Jan Pentland on janpentland@hotmail.com or Katherine Lane at Katherine_Lane@fcl.fl.asn.au.
Addendum
As you are no doubt aware, I am one of the consumer representatives on the GE Capital Finance ADR Advisory Council. I am planning to undertake some staff training with the GE Auto Collections staff on what financial counselling is and what we do, and how they could work more effectively with our sector.
I expect this initial training to happen in late April/early May and it may then extend to other GE staff. In planning my presentation and the facilitation of the training sessions, I am very interested to get any feedback (positive or negative) about financial counsellors’ interactions with GE Collections staff, particularly GE Auto.
If you have any information/suggestions/feedback please contact me on 0407 042 483 or at janpentland@hotmail.com
Why Not Contribute?
Heaps of Sharkwatch recipients give the feedback that they would like to hear more stories from the mouths of other counsellors, hear interesting case studies from other services, keep up with what is happening at the various agencies and read articles from a wider variety of their peers. Despite the fact that this is what the overwhelming majority of Sharkwatch readers seem to want, we get almost no submissions.
So, we would like to hear about your experiences. You don’t have to be a fantastic writer or have a spectacular story to tell. Readers just want to know how other financial counsellors are getting along and what they are up to. Why not send us something? Our contact details are on page 2.
Bankruptcy Update
Jan Pentland
BLAB 2004
In December 2003, the Attorney General Phillip Ruddock announced proposed changes to the Bankruptcy Act. Another BLAB (Bankruptcy Legislation Amendment Bill) is in the process of being drafted. A briefing paper provided to Forum members in mid-December announcing the proposed amendments has been distributed for comment. Thank you to those who have provided comments to me.
The reforms are aimed at high income earners who utilise bankruptcy to avoid paying tax or otherwise hide assets/avoid paying creditors. Rorting by high profile bankrupts brings bankruptcy into disrepute, hardens attitudes to it and disadvantages our clients, in my view. It is important that the integrity of bankruptcy is maintained and I support moves to address abuse. However, I’m concerned to ensure as much as is possible that there are no unintended implications for our clients in the proposed amendments.
On 4 February I attended an all day meeting in Canberra of the Bankruptcy Reform Consultative Forum with the drafters of the legislation. The Government has made it clear that the policy decisions in regard to these amendments have been made and there was no opportunity to negotiate these. However, issues in relation to the implementation and efficacy of the amendments in terms of their intention were raised by Forum members.
There has subsequently been a further Forum meeting in Melbourne on 9 March at which Penelope Hill and I represented consumer bankrupts. My assessment and the feedback I’ve received is that these amendments will not affect the large majority of our clients who have low incomes and no unprotected assets. However, there may be an effect in the small number of cases we see where property is held by a third party, eg a spouse.
A trustee will be able to apply to the Court to examine the bankrupt’s interest in property which has wholly or substantially been bought with the bankrupt’s money. The Court has to consider various issues including use of the property and hardship to the third party. I’ve raised concerns about low value property being of interest to trustees, and the difficulty for third parties to access legal representation if an application is made to a Court. The proposed amendments will apply to bankruptcies current when the legislation is passed and future bankruptcies.
There will also be changes to how the Bankruptcy Act and the Family Law Act interact and these are additional to changes to the Family Law Act passed late in 2003. These changes may impact on asset protection options which have been available, eg to spouses of gamblers. There may also be benefits for non-bankrupt spouses where property is in the bankrupt’s name. Change is in the air and it will be even more important that the small number of our clients who may be affected get good Family Law advice.
The proposed amendment in relation to income contributions will only apply when the bankrupt is avoiding the current regime and will not affect our clients. Similarly, amendment of the Act to address ‘excessive voluntary superannuation contributions’ should not be a problem for clients of financial counsellors.
I understand that the BLAB 2004 will also propose amendments to Part X which came out of the Part X Review. These amendments will have little, if any effect on the work of financial counsellors, will strengthen Part X and I see no reason why we wouldn’t support them. The Part X Review and proposals for reform are available on ITSA’s website: www.itsa.gov.au.
Section 271 Review
ITSA received several submissions including from AFCCRA, Wesley Community Legal Service, West Heidelberg Community Legal Service, Financial and Consumer Rights Council (Vic), Council of Gamblers Help Services (Vic) in response to the Section 271 Discussion Paper.
The recent response of the Attorney General, Phillip Ruddock, was as expected in that there will be no amendment of the Bankruptcy Act, but the non-legislative proposals in the Discussion paper will be implemented and ITSA should commence work on these soon. This means that:
- ITSA will clarify its policy on referring and prosecuting section 271 matters;
- ITSA will develop a script covering the operation of section 271 for financial counsellors to use when advising clients;
- Financial counsellors will be able to discuss more complex matters involving problem gambling with designated ITSA staff in the course of advising clients.
Bankruptcy Congress
ITSA’s 5th National Bankruptcy Congress ‘Evolution and Revolution – Meeting the Challenge’ will be held in Melbourne on 13 and 14 May 2004. For up-to-date information visit ITSA’s website at www.itsa.gov.au
Attendance fees of $1000 ($915 early bird) for the 2 day Congress will be well beyond the capacity of most financial counsellors. ITSA is offering concessions fees for financial counsellors of $495, probably still well beyond the resources of most of our sector. Unfortunately, I am assured that no further concessions can or will be made.
Bankruptcy and the Defence Services
On February 5, together with ACT financial counsellors, I met in Canberra with Defence Department officers in response to an AFCCRA letter to General Cosgrove in October 2003. The letter raised issues related to Defence Department attitudes and practices with indebtedness and bankruptcy for defence personnel. The meeting clarified the issues raised by us and provided an opportunity to share information about financial counselling.
The Defence Department officers provided information on procedures within the services on these issues, and on the Defence Community Organisation (DCO). They were keen to promote the development of effective working relationships between financial counsellors and the DCO. A formal response to the AFCCRA letter which addresses the issues raised is expected. Please let me know if you have a particular interest in this and I’ll include you in the group email for up-dated information.
Part IX Research
During 2002, ITSA commissioned an independent research study into the experience of debtors who had proposed a debt agreement within the previous 4 month period. A copy of that report released last year is available from ITSA’s website.
ITSA intends to implement further independent research from debtors about their experiences with the administration of debt agreements over 2 to 3 years after having an agreement accepted by creditors. ITSA has invited financial counselling input into the design and drafting of proposed research questions. If you would like to be involved in this process, please contact me.
Please contact me if you have any queries or comments about any of the above on 0407 042 483 or at janpentland@hotmail.com
Centrepay
The origins of Centrepay
Most financial counsellors are aware of Centrelink’s Centrepay system, but it is perhaps timely to bring it into focus again, because the scope of the scheme continues to expand.
Centrepay is a free direct bill paying service offered to those who are receiving Centrelink benefits. In its original form, Centrepay allowed customers to put a minimum of $20.00 per fortnight toward their Telstra bills, thus reducing the amount (and impact) of the regular Telstra accounts received. Centrepay has proven to be a powerful budgeting tool for Telstra accounts and is very simple to implement.
The process for doing this has not changed — Centrelink clients need to approach Telstra to convert their account to a FLEXCAB account, then take the Telstra bill number and account number to Centrelink and complete a Centrepay deduction form.
It is important to note that while a minimum payment amount applies to Telstra accounts, the customer can set how much they want to pay above this each fortnight — many pay just the $20.00 minimum, but others with higher phone usage often opt to pay more.
All in all, Centrepay has proven to be a very effective system for ‘smoothing’ the impact of people’s regular Telstra accounts.
Recent developments
The scope of the Centrepay scheme has been significantly extended, and is growing all the time.
Depending on the credit provider, Centrepay can now be used to have regular deductions made toward electricity bills, rent, gas bills, and whitegoods (for example, whitegoods purchased under a NILS scheme).
As time progresses, more and more service providers are agreeing to use the Centrepay system. I suspect this list will continue to grow quickly, because the system provides a win-win — customers are less likely to have debt problems with their service providers and the providers themselves get regular payments from a guaranteed source.
For services other than Telstra, the minimum payment is just $10.00 per fortnight, making the scheme more accessible for those who are really struggling financially.
Because not every service provider uses the system, Centrelink clients who wish to make prepayments through Centrepay should call 13 1021 to find out if their service providers do use Centrepay, or to get more information about the Centrepay system.
Teleconference
Growing Workload, Increased Case Complexity and Tougher Credit Providers: Responding to Recent Changes in Financial Counselling
On the 16th of April 2004, a teleconference was held on recent changes in financial counselling. Sixteen financial counsellors/solicitors from all states took part and all indicated they were experiencing similar problems.
The areas of discussion were:
- Growing workload
- Increased complexity of case work
- An increase in the para-legal component of case work
- Recent trends for creditors to become increasingly intransigent
- Off shore “front of house” for some creditors
- Future trends
- Strategies to cope with these changes
- The role of AFCCRA and other peak bodies in making an Australia-wide response
Growing Workload
All financial counsellors agreed that they have a growing workload. Agencies have to close their books more often and waiting lists are extending.
Some of the underlying reasons put forward for this increase included a greater number of scams operating across the country, more fringe credit providers moving into the mainstream credit provision areas, and, of course, the fact that banks are doing very few income checks on customers to whom they offer increases on credit card limits. It seems that if a person is successfully making their minimum monthly payments, the creditor considers that they are suitable for a credit increase. What is happening with many financial counselling clients is that they may have managed to meet their minimum payments, but when the limit is increased and the minimum payment also increases, then the client is unable to meet that increased monthly payment.
One of the problems with this trend toward a growing workload is that financial counsellors are becoming dissatisfied with their work and are beginning to show signs of burn-out.
Increased complexity of case work
Clients are experiencing more problems in dealing with their creditors. Creditors are less inclined to accept reduced payment offers or are demanding payments which are impossible for clients to maintain. Also, many creditors are refusing to negotiate with clients at all, and so financial counsellors have to be involved right from the beginning. Many teleconference participants reported that when letters are sent to creditors they rarely write or phone back and counsellors have to contact again and again to get any response. When there is a response in writing, the creditor often has only a reference number with no name or identifying details. Account numbers and other identity requirements can be incorrect and it takes time to work out which client the creditor is talking about.
Several financial counsellors said that the credit providers are taking legal action against clients when formal hardship applications have been presented but not yet dealt with. In addition, more cases are being referred to Internal Dispute Resolution Schemes because creditors won’t negotiate at the first or second level. Generally, there is less satisfaction with these IDR schemes.
Increase in para-legal component of case work
Financial counsellors are finding that they need more and more assistance from legal centres and need to make reports or complaints to State Fair Trading Offices, ACCC, ASIC, and other bodies more often than in the past. Also, more cases are being taken on by solicitors from Community Legal Centres and Legal Aid because of their complexity.
Recent trends for creditors to become increasingly intransigent
As mentioned above, financial counsellors are finding that they need to complete formal variation applications more often rather than the informal ones accepted by most creditors previously. Also, as mentioned above, creditors are beginning legal action while hardship applications are in the process of being filed with State Fair Trading Offices. Also, there were several reports of GE offering more money to clients when hardship letters had been sent. Overall, there appears of late to be much less co-operation from creditors when financial counsellors are contacting them on behalf of clients than has been the case in the past.
Although it is true that the problems our clients experience with credit card debt are in the minority compared with the total numbers of people who manage their credit cards without any problems, it is also true that the numbers of card debts that clients present with, and the total amounts involved, is also growing. For example, there are now more middle income clients presenting with debt problems.
Off shore “front of house” for some creditors
A brief discussion was held on the problems being faced by clients and financial counsellors in trying to deal with creditors whose workers are based off shore. Poor English and lack of knowledge of credit laws by these workers means greater problems for our clients and the work we do with them.
How these changes affect the nature of financial counselling
It was generally agreed that these trends mean more complex work with clients, and in turn, that counsellors are needing to take more time with each case. It also means that financial counsellors need assistance from legal centres more often. Instead of dealing with matters with a couple of phone calls, workers have to confirm everything in writing and then follow up those letters with many phone calls because the letters are not being acknowledged. Some workers spend a lot of time lobbying government departments and agencies and contacting various Dispute Resolution Schemes to obtain assistance for their clients.
Strategies to cope with these changes
Participants generally agreed that the sorts of changes we seek in relation to creditor behaviour and government regulation of the credit industry can only come about if the relevant bodies keep getting a loud and clear message that there are problems and that we will keep speaking loudly about them until they are fixed. In practical terms, this means making complaints to the relevant bodies when such complaints are warranted, (even though we are all overworked as it is), and sending relevant case studies and information to those in a position to bring these problems to the attention of the relevant bodies. For example, several financial counsellors and other workers are on various committees and government bodies that advise on policy in many areas of concern. All participants agreed that it would be desirable to create a list of these workers and the committees they are on, so that complaints can be made directly to them. Unless these workers know about the problems, they cannot take them to their committees and changes to the system will not be made. In simplest terms, financial counsellors need to take the time to write down a few details when problems arise, and then send them on to the people on the committees.
Participants also agreed that further discussion on these issues is needed, and to this end a second teleconference discussing these issues will be held late in May.
In terms of recent developments, it was noted that the ACT government has changed the laws so that all banks must obtain an update of a person’s financial position before an increase in the credit card limit can be issued. The banks are fighting this step being made nationwide. Mastercard are releasing a statement to say that this step by the ACT is not important. They are saying that what is needed is positive credit reporting.
The role of AFCCRA and other peak bodies in making an Australia-wide response.
The greatest problem with taking national action is the fact that neither AFCCRA nor the CFA have any funding. Any work that is done by members of these organisations is done in their own time, or at the expense of their local agencies. As all financial counsellors know, if ITSA had to handle all their bankruptcies without assistance from financial counsellors, they would need to employ a lot more people. However, ITSA gives no financial assistance to financial counsellors. Most participants, however, were pessimistic about the chances of ITSA providing much needed funding for AFCCRA.
Whilst AFCCRA do not have the resources to contact all their members directly about the sorts of matters that were discussed, information is regularly sent out through AFCCRA Council members to disperse through their state and territory networks and newsletters. Also, the AFCCRA Chair reports in national newsletters and AFCCRA publishes the News twice a year. If the various state associations, along with agencies such as Credit Helpline in Victoria and NSW, and the WA Resource Project, were given updates of committees and agencies, as well as lists of contact people, phone numbers and email addresses, these could be passed onto financial counsellors in the field.
It was also felt that more openness and information sharing is needed between agencies and states. Lists of committee members could be posted on the websites of as many state organisations and agencies as possible, so that those financial counsellors who may only access one or two on a regular basis can be kept up to date on changes and the progress being made across Australia.
In Conclusion
There was not enough time to cover all the issues completely. It was agreed that the next teleconference will also look at the same issues and try to see both the ‘big picture’ and the ‘small picture’ separately. In the meantime, those who are on various committees are asked to notify Jennifer Gracie on 1800 647 409 between 9.00 and 3.30 (EST) or 0401 716 945 between 9.00 and 7.00 (EST). We will keep a list of these committees and let people know who to best contact when issues need to be raised.
In the Media
Fools and their money are soon parted, but at least you’ll be warned
By John Garnaut
Sydney Morning Herald, February 24, 2004
Children will be taught to control their mobile-phone accounts and retirees guided to avoid “rorts and scams” under a new financial literacy drive by the Federal Government. The cradle-to-grave education initiative was aimed at shaping school children into “financially savvy teenagers and successful adults”, the Assistant Treasurer, Helen Coonan, said yesterday.
Consumers would also be equipped to defend themselves from the expanding ranks of get-rich-quick operators. “There’s not just one age group that has a monopoly on gullibility,” Senator Coonan said, launching a new financial literacy taskforce yesterday. The taskforce will consist of 15 business and consumer leaders and will be led by the financial adviser and commentator Paul Clitheroe. Financial acuity was like “cleaning your teeth”, simple if someone shows you how”, he said.
The taskforce will look at school and community education programs and recommend ways to improve them. It is expected to build on initiatives already provided by consumer groups and regulators such as the Australian Securities and Investments Commission.
It is scheduled to deliver its final report in August.
The formation of the taskforce signals a recent shift by the Treasurer, Peter Costello, and his department to recognise and redress consumer vulnerability. But the taskforce has no follow-up funding and no mandate to suggest regulatory reform.
Senator Coonan said recent campaigns against property spruikers such as Henry Kaye had succeeded “because the regulatory and legislative framework is in place”. But last week ASIC’s director of financial services regulation, Ian Johnston, told a Senate committee that property scammers were designing their operations to “walk between the jurisdictions of various governments”.
Senator Coonan’s financial literacy program was announced the day after Labor released its plan to teach children to minimise fees and manage credit cards.
Rich could fund poor: Rent report
Original story by Adele Horin
Sydney Morning Herald, February 23, 2004
A report jointly released by the Committee for the Economic Development of Australia and the Brotherhood of St. Lawrence, has urged institutional investors (such as superannuation companies) to invest in affordable rental properties, and has asked the government to support such a scheme by offsetting the risks and ensuring reasonable returns for the investors.
A report by The Allen Consulting Group says that a government subsidy to the private sector of $100 million per year, growing to $1 billion a year, could provide low-cost housing for more than 150,000 households. It would also generate new housing investment of about $2.67 billion and produce substantial economic and social benefits. The report says that that scale of such a government program is dwarfed by the $21 billion provided to owner-occupied housing each year, mainly through not taxing capital gains.
Such a scheme could help to offset the current serious shortfall in affordable housing (742,000 low-income households pay more than 30% of their income in rent and have insufficient left over to meet basic needs).
NSW clubs’ pokie revenues top $3 billion
Original story by Paolo Totaro
Sydney Morning Herald, May 3, 2004
NSW clubs, who are locked in a bitter dispute with the state government over proposed tax increases for the top 500 clubs in NSW, have taken a record $3.1 billion from poker machines in 2003, up $114 million in just 12 months. In fact, revenues from NSW pokies have jumped $656 million in just 5 years. After paying taxes, clubs made $2.6 billion from poker machines in 2003, a staggering jump of $761 million since 1998. This represents an average profit growth of about $152 million per year!
