Industry Links

Sharkwatch February 2005

Notes & Notices

Worthwhile websites: AFCCRA, SIRP, FCAN

A lot of work has recently gone into the web sites for AFCCRA and the Financial Counsellors Association of NSW (FCAN).

David Bell, from Centacare at Liverpool has done some great work on the FCAN site, which can now be found at www.financialcounsellors.asn.au . The site includes fact sheets, a guide to finding financial counsellors in NSW, a great set of relevant links to other websites, a restricted section for FCAN members, as well as plenty of other resources. It is well worth a visit.

Astrid Chapman from the Financial Counsellors Resource Project in Perth has done a lot of work adding resources and up to date information to the AFCCRA website, which can be found at www.afccra.org [Note that there is no .au suffix — if you add .au to the end of the web address, the link will not take you there.]

Of particular importance is the new section that provides resources for financial counsellors working in areas affected by the Sugar Industry Reform Package (SIRP). Astrid has put together a very comprehensive package of information documents, news sheets and other resources relevant to SIRP-funded financial counsellors. Those in SIRP areas really should visit this site to check out the resources available on it, and to keep up to date with developments in SIRP affected areas.

Hardship variation limit changes

The hardship variation limit set within the Uniform Consumer Credit Code has been raised from $125,000 to $340,670. This is a very large increase, and, in effect, means that many consumers who could not apply for hardship variations for their home loans (because their home loans exceeded $125,000) will now be eligible.

Given the huge rise in real estate prices in recent years, this is a welcome change, and offers relief to the many people in financial hardship who could not access this option past years.

Further information can be obtained at www.creditcode.gov.au or at www.cclcnsw.org.au .

Sharkwatch taken in by telephone hoax — oops!

In the last Sharkwatch, we printed a report from a NSW financial counsellor detailing a possible scam involving remote access to phone accounts. Embarrassingly, we have since learnt that this ‘scam’ is actually just a nuisance hoax — similar to a variety of hoaxes spread in Australia and the US over the last few years. Oops!

This hoax has certainly been doing the rounds, with papers like the Bay Post in NSW reporting the same telephone scam as recently as February the 19th this year! Fortunately, Fiona Guthrie and Robert Morsillo (Telstra’s Group Manager of Consumer Affairs) tipped us off to our mistake quite quickly. Fiona notes that the hoax usually comes in the form of an email. and that “in rare cases, the information in the email can be true. Some business telephone switching equipment that has been configured in a certain way may be vulnerable to the scam. If a particular type of PABX phone system requires users to dial “9” to get an outside line then it is theoretically possible for a scammer to take control of the line. However, since the information is false for the vast majority of home phone users, and certainly for mobile phone users, the email can be dismissed as a pointless hoax and should not be forwarded”. Robert Morsillo adds that “in Australia it [the scam] is completely bogus — doesn’t work, never did, never will”, and has drawn our attention to the Telstra website http://www.telstra.com.au/mobile/life/wireless/hoaxes.htm, which deals with this issue.

Unfortunately, part of the hoax involved contacting the Victorian Police, who have been inundated with calls about the hoax. Sharkwatch would like to apologise for our mistake, and advises that the Victorian Police should not be contacted about this ‘scam’. Special thanks go to Fiona and Robert. for their assistance.

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Tale of a Vacuum Cleaner

Richard Brading

Richard Brading is principal solicitor for the Wesley Community Legal Service. Richard is passionate about consumer law and enjoys bushwalking, kayaking and, indeed, most outdoor activities. Richard has also played a pivotal role in the Self-Help for the Hard of Hearing (SHHH) group and has been a regular contributor to discussion papers on issues such as bankruptcy, hardship policies, and other aspects of credit law.

ACCC v Lux Pty Ltd and Dennis Podger [2004]FCA 926

On the morning of Monday 26 August 1999, Mrs. Janis Standing and her husband were dining at McDonald’s Restaurant, Port Pirie. There they saw a man wearing an Electrolux badge, a Mr. Podger. A conversation ensued, in which the Standings told Mr. Podger that they had an old Electrolux vacuum cleaner and Mr Podger offered to come to their home and give their old vacuum cleaner a service.

Mr. and Mrs. Standing were both in receipt of a Centrelink disability pension, but had bought their home in Port Pirie with a Homestart loan.

When Mr. Podger arrived that afternoon, only Mrs. Standing was home. He stayed about an hour. He examined the old vacuum cleaner. On examination he discovered that liquid had entered the vacuum cleaner and all the components needed replacing. He told Mrs. Standing that the old vacuum cleaner was going to ‘blow up’ and repeated that statement a number of times during the demonstration of a new Electrolux vacuum cleaner. He told Mrs. Standing that he would give her $50 cash for her old vacuum cleaner if she traded it in on a new one. Mrs. Standing accepted this because she needed the money.

Mr. Podger gave Mr.s Standing a credit application for completion. She filled in her name, address and date of birth, then told him that she was having trouble filling in the form because she “can’t spell too good”. After that Mr. Podger filled in the rest of the credit application form.

Mr. Podger then produced a Lux purchase contract. He filled out the contract form and Mrs. Standing signed it. He did not explain the terms of the contract to her. Mr. Podger considered whether Mrs. Standing should take some independent advice before signing, but did not suggest that to her.

Mrs. Standing felt a little frightened by Mr. Podger and wanted him to leave her home. This led her to think that she could only get him to leave if she signed the contract.

Mrs. Standing was obviously a person of some vulnerability because she was substantially illiterate and unable to understand commercial matters in any depth.

The Court heard evidence from Joan Rudd, a financial counsellor at the Armadale Information and Referral Service, and other witnesses, about the ability of the Standings to manage their own affairs.

The court found that the Standings were able to live independently and manage their lives from day to day within a central range of activities. They had purchased motor vehicles and a house on finance before. However, the Standings also received, benefited from, and needed, assistance with the management of their financial affairs from time to time.

The case was brought by the ACCC in the Federal Court on three grounds.

1. unconscionability under s.51AB of the Trade Practices Act 1974,
2. harassment under s.60 of the Trade Practices Act 1974,
3. coercion under s.60 of the Trade Practices Act 1974.

The ACCC sued both Mr. Podger and Lux. Lux was liable because Mr. Podger was its agent and authorised and empowered to act on its behalf.

The only ground on which the ACCC was successful was that of unconscionable conduct under s.51AB of the Trade Practices Act 1974. This is a very important consumer protection law that has been overlooked for many years.

In order for the Federal Court to find that Lux had engaged in unconscionable conduct, Justice Nicholson had to consider all the circumstances of the transaction. The judge relied on the following factors in deciding that Lux had engaged in unconscionable conduct:

• The relative bargaining strengths of Mrs. Standing and Mr. Podger;
• Mrs. Standing’s limited capacity to understand the contract, due to her illiteracy and limited understanding of commercial matters;
• Undue influence or pressure and unfair tactics, in particular that Mrs. Standing was not given the opportunity to seek independent advice before signing the contract.

Although the court found that Lux had engaged in unconscionable conduct, it rejected other grounds of complaint, namely those of “undue harassment” and “coercion”.

As the matter was brought as a test case on behalf of consumers generally, no specific remedy was granted to the Standings regarding the vacuum cleaner, which was partly paid for and never returned. Rather the case provides guidance as to when consumers can seek help from the courts against aggressive selling practices of all kinds.

In the writer’s opinion, although the conduct of Mr. Podger was unconscionable, he was nowhere near as bad as many other salespeople you have probably encountered.

Because the court did not make any finding that Mrs. Standing had an intellectual disability, the case has a wider application to consumers who may have some lesser impairment or disadvantage. This might include persons with limited education, literacy, commercial understanding, the elderly, the young, migrants etc. It is a case that would be extremely useful when assisting clients who have been pushed into buying something they can’t afford by high pressure salespeople.

To obtain a full copy of the case, go to www.austlii.edu.au and look it up under Federal Court cases.

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CFCP People

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Round Up

New South Wales

EWON launches online complaint service

The Energy and Water Ombudsman of NSW (EWON) has launched a new website which features general information about the service and incorporates an online form (in 13 languages!!) for NSW residents who wish to complain about their electricity, gas or water supply.

Once an online form has been submitted (in any language), it is automatically translated into English and forwarded to the EWON Investigations Team. The form can also be printed out and returned to EWON using their freefax or freepost numbers.

EWON contact details:

FreeCall: 1800 246 545

FreeFax: 1800 812 291

FreePost: EWON, Reply Paid K1343, Haymarket, NSW, 1240

Email: info@ewon.com.au

Website: www.ewon.com.au

Energy Australia join Centrepay

Electricity provider, Energy Australia, is now participating with Centrelink and is offering the ‘Centrepay’ option to their customers. Customers simply nominate the amount of money they wish to have deducted from their pension payment (the amount must be greater than $10 per fortnight). Centrelink will electronically transfer this amount to Energy Australia to be credited to a customer’s energy bill. Customers have total control of their payment amounts, and can change or stop the deduction at any time by ringing Centrelink.

The service is free, and customers still receive a quarterly bill (for the residual amount or credit).

To access the Centrepay option, Energy Australia customers can call Centrelink or complete a Centrepay deduction form (available at www.centrelink.gov.au). Applications will need the following information:

1. Energy Australia�s �Centrepay Reference Number�: 55058802H
2. Energy Australia�s address: 570 George Street Sydney
3. Energy Australia�s telephone number: 13 1535
4. The customer�s �energy account number�: a 9-digit number shown on each energy bill.
5. The customer�s Centrelink reference number.

FCAN Conference

The Financial Counsellors association of NSW will hold its 2005 annual conference at the Port Pacific Resort, 6 — 14 Clarence Street Port Macquarie. It commences Sunday May the 15th and concludes on Wednesday May the 18th.

The conference coordinator is Alick O’Har from Creditline at Fairfield, who can be contacted at: alick.ohar@wesleymission.org.au, or on (02) 9754 1600.

Enquiries about the resort should be addressed to Deirdre Gordon at jaynedee@priority1.com.au [phone (02) 6584 0704], or Kate Eastham at keastham@priority1.com.au [phone (02) 6584 0704].

Further information is also available from the FCAN website at www.financialcounsellors.asn.au.

NSW Government to clarify the operation of the 48% interest rate cap

The NSW Minister of Fair Trading has issued a press release foreshadowing measures to outlaw the excessive fees and charges for which the ‘fringe lending’ industry has become notorious. By way of background, since the Consumer Credit Code (the “Code”) was introduced in 1996, NSW has had an interest rate cap of 48% p.a. in place. If lenders charge interest in excess of 48% p.a. for loans regulated under the Code then the lender is in breach of the Code. The NSW Government introduced legislation in 2001 to ensure that “payday lenders” were covered by the Consumer Credit Code and fees charged were calculated as interest for the purpose of the interest rate cap. Payday lenders are fringe lenders who typically target clients through newspaper advertisements, offering quick cash till payday for payment of a fee. They tend to lend relatively small amounts of money that is either repaid in cash, or by direct debit from a bank account, within one to two weeks of taking out the loan. The loan period is less than 62 days.

This created a loophole where fees and interest were used to calculate an annual interest rate for the purposes of the interest rate cap for loans under 62 days but not for loans over 62 days. So what happened, of course, is that many fringe lenders lent for terms over 62 days then charged high interest of around 40–48% p.a. and also charged fees as well leading to an effective interest rate of well over 100% p.a. The NSW Government will release for public comment draft legislation to address this problem. The new laws will extend the maximum annual percentage rate inclusive of fees and charges to credit providers who have increased the term of their loan products. This will hopefully be a great outcome for those disadvantaged consumers currently being charged exorbitant fees and interest on loans from fringe lenders.

(Reprinted from CCLC Flyer, December, 2004)

Website for Lismore and District Financial Counselling Service well worth a look

The Lismore and District Financial Counselling Service, headed up by Steve Snelgrove, has an excellent website which is definitely worth a visit. It is constantly being updated and has a wide range of very helpful links. The website can be found at http://www.financialcounselling.org.au

SIRP News

The Editors of Sharkwatch have been delighted to see so much work being done to create a network of information and support for financial counsellors working in Sugar Industry Reform Package (SIRP) affected areas. Of particular note are the efforts of Astrid Chapman from the Financial Counsellors Resource Project in Perth and the efforts of Jan Pentland, the Chairperson of AFCCRA.

As already noted, Astrid has set up an outstanding section on the AFCCRA website offering excellent resources for SIRP-area counsellors. Astrid has also been instrumental in setting up and coordinating an email discussion group which has encouraged the sharing of important information and has been instrumental in the growing sense of camaraderie amongst some SIRP-area counsellors. Astrid’s email address is astrid@fcrp.org.au.

Jan Pentland has also been very busy, lobbying on behalf of SIRP area counsellors in a variety of domains, and sending regular emails giving up to date information about relevant issues.

The outstanding work of Astrid and Jan has been made easier by the willingness of many SIRP-area workers to share resources and become involved in a network of support. Many names come to mind, with Ken Campbell from Maroochydore and John Mayfield from Bundaberg standing out as being particularly active.

It is just terrific to see the spirit of cooperation amongst SIRP-area workers. Financial Counselling as a whole can only benefit from their approach.

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The Law Matters

Richard Brading
Solicitor
Wesley Community Legal Service

Financial counselling is a tidy process. We strive to help our clients create order out of chaos. Insolvent companies need to be killed off and bankrupt directors need to be tidied up. It is illegal for a bankrupt to operate a company, so the client must notify ASIC, and may wish to deregister the company.

The “solvency resolution”

Annual ASIC returns for companies were abolished on 1 July 2003, but ASIC still requires companies to pass a “solvency resolution” each year and pay an annual fee (currently $212)ⁱ. Where the fee is late, ASIC charges a late payment fee of $65 within the first month, then $205 thereafter. For late notification of changed details, there is a late fee of $270.

The law requires company directors to pass the “solvency resolution” within 2 months of the review date. If the directors pass a “negative solvency resolution”, or fail to pass any resolution, they are required to lodge a Form 485 Statement in relation to company solvency with ASIC within 7 daysⁱⁱ. The wording of the “negative solvency resolution” is that “The directors resolve that, in their opinion, the company will NOT be able to pay its debts as and when they fall due.”

Note that if the company incurs fresh debts after a negative solvency resolution is passed, the directors commit an offenceⁱⁱⁱ and may become personally liable for those debts^iv.

Deregistration of solvent companies

A solvent company can be deregistered if all of the following are true:

• All shareholders agree to deregister
• The company has ceased trading
• The company’s assets are worth less than $1000
• The company has paid all outstanding fees and penalties to ASIC
• The company has no outstanding liabilities and
• The company is not a party to any legal proceedings^v

The procedure to deregister a solvent company is to use a Form 6010 Application for voluntary deregistration of a company. A fee of $33 is payable. ASIC will then publish a notice about the proposed deregistration in the ASIC Gazette. The notice simply says that the company will be deregistered 2 months after publication.

A creditor or aggrieved person can write to ASIC and request the cancellation of the deregistration, giving reasons why the cancellation is opposed.

Deregistration of insolvent companies

ASIC may deregister a company if:

• the response to a return of particulars given to the company is at least 6 months late; and
• the company has not lodged any other company documents in the past 18 months; and
• ASIC has no reason to believe the company is carrying on a business.

Alternatively, ASIC may deregister the company if the company’s review fee has not been paid in full within 12 months after the due date^vi.

For some years I have recommended that clients write to ASIC and explain that:

1. They are in a personal financial crisis
2. The company is no longer trading
3. The company is insolvent
4. They cannot afford to pay for liquidation, or even to pay the annual ASIC fees
5. They would like ASIC to deregister the company

ASIC have deregistered companies in response to this type of communication, although it can take some time.

If ASIC decides to deregister the company, it must give notice of the proposed deregistration to the directors and the company itself. It will list its intention to deregister the company in the ASIC Gazette and on the ASIC website for 2 months prior to deregistration^vii.

Notification of bankruptcy

Where a client who is a company officer is declaring bankruptcy, the client must complete and send a form 296 Notification of disqualification from managing corporations — Bankruptcy or Part X arrangement to ASIC. There is no fee payable.

I recommend that the client attach a letter explaining that the company is no longer trading, has no assets and has outstanding liabilities that will never be paid, and that they do not believe any creditor will take any action to liquidate the company. A specimen letter is attached.

Bankrupts disqualified from running companies

Bankrupts and insolvents under Part X administration are automatically disqualified from managing a company^viii. (Note that Part IX debt agreements do not result in automatic disqualification.)

It is illegal for the bankrupt to control a company behind the scenes. The law states that a bankrupt commits an offence where the bankrupt:

• Participates in making decisions that affect the whole, or a substantial part of the company;
• Exercises the capacity to affect significantly the corporation’s financial standing; or
• Communicates instructions or wishes to the directors of the company knowing or intending that the directors will do as they are told^ix.

Reincarnation of deregistered companies

Once a company is deregistered, it has no legal existence so is unable to trade or take any legal action^x. Any property the company has belongs to ASIC^xi.

Note that the former director of a deregistered company is required by law to keep the company’s books safely for 3 years after the deregistration^xii.

However, sometimes it is necessary or desirable to bring the company back to life. This can be done by making an application to ASIC for reinstatement or a court order^xiii.

Further information and forms

Contact ASIC for more information. ASIC information and forms are available at www.asic.gov.au.

1. Section 347A Corporations Act 2001
2. Section 347B Corporations Act 2001
3. Section 588G Corporations Act 2001
4. Section 588M Corporations Act 2001
5. Section 601AA Corporations Act 2001
6. Section 601AB (1) & (2) Corporations Act 2001
7. Section 601AB(3) Corporations Act 2001
8. Section 206B(3) & (4) Corporations Act 2001
9. Section 206A(1) Corporations Act 2001
10. Section 601AD(1) Corporations Act 2001
11. Section 601AD(2)-(4) Corporations Act 2001
12. Section 601AD(5) Corporations Act 2001
13. Section 601 AH Corporations Act 2001

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Snapshot!

AFFCRA Update

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Jan Pentland
Chairperson of AFCCRA

AFCCRA held it’s Annual General Meeting in December 2004. The Annual Report will soon be available on the website at www.afccra.org and will also be a part of the ‘AFCCRA News’ to be distributed soon. The outcome of the election of Office Bearers is:

Chairperson

Jan Pentland (Victoria)

Vice-chairperson

David Tennant (ACT)

Secretary

Joanne Lowth (WA)

Treasurer

Phil Powell (Tasmania)

Council members

Tony Devlin (NSW)

Tricia Ross (NT)

Lola Mashado (QLD)

Peg Mellior (SA)

We were very sorry to say farewell to Rosemary Warren after many years of sterling service to AFCCRA as Council representative for South Australia, AFCCRA Secretary and Editor of the ‘AFCCRA News’. Thanks for all your hard work, Rosie!

Over the 2003/04 year, AFCCRA was involved in:

• Facilitating discussion of the changing landscape of financial counselling with the growth of fee-for-service debt counselling and debt agreement administrators;
• Drawing these changes and their negative consequences to the attention of Governments, regulators and the broader consumer movement;
• Continuing representations on behalf of low income and vulnerable debtors for appropriate administration and reform of the Bankruptcy Act;
• Continuing our work with ASIC on the implementation of the exemption under the Financial Services Reform Act which provides conditional relief for financial counselling agencies;
• Continuing facilitation of information sharing on implementation of the National Competency Standards and the Diploma of Community Services (Financial Counselling);
• Facilitating information sharing from our representatives and nominees on telecommunications forums towards change to benefit our constituency;
• Lobbying the Commonwealth Government for increased funding to the financial counselling sector;
• Building stronger relationships with the Department of Family and Community Services (FaCS) which funds the Commonwealth Financial Counselling Program;
• Making a substantial contribution by representing financial counsellors from across Australia at the June 2004 Disputes Resolution Forum in Melbourne;
• Reviewing and proposing overdue change to AFCCRA’s Constitution;
• Keeping AFCCRA’s profile and the work of financial counsellors on the national radar through participation in conferences and forums, media appearances and contributions to various newsletters and publications across Australia;
• Maintaining relationships within the broader consumer movement in Australia;

The challenge to continue this work on behalf of low income and vulnerable consumers without on-going Government funding remains. Yet again AFCCRA has been assisted through the much appreciated sponsorship by Telstra of AFCCRA Council’s bimonthly teleconferences. Our thanks to Telstra and in particular, to Robert Morsillo, for his continuing support.

The work of AFCCRA’s representatives on various forums is gratefully acknowledged:

• Lola Mashado (now Tricia Ross) on the Telstra Consumer Consultative Council,
• Anne Marie Paulsen on the Optus Consumer Liaison Forum,
• Lola Mashado on the Consumers Telecommunications Network Board,
• Jan Pentland on the Bankruptcy Reform Consultative Forum,
• Jan Pentland on the ASIC Consumer Advisory Panel.

Plans for 2005

• In addition to our on-going work in the above forums and the issues outlined, there are a number of initiatives planned and underway for 2005:
• Involvement with FaCS in the Financial Counselling program of the Government’s Sugar Industry Reform Package (SIRP);
• Launch and further development of the AFCCRA website: www.afccra.org;
• Working towards a clearer overall map of financial counselling services Australia wide;
• Encouraging states and territories to pursue sector funding in their jurisdictions;
• Representation on the ACCC Consumer Consultative Committee
• Support and attendance at State Association conferences;
• An AFCCRA Conference in Melbourne on June 17 to follow the national Consumer Forum.

My thanks again to AFCCRA Council members and others who have contributed to our work this year on behalf of low income and vulnerable consumers.

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Report: Bankruptcy Reform Consultative Forum

Jan Pentland
Chairperson of AFCCRA

The last few years have seen constant reform proposals for bankruptcy law and administration. Financial counsellors across Australia will be aware of AFCCRA’s continuing involvement in these issues and strong advocacy for our clients, low income and vulnerable consumers. Representing our sector in the Forum over the last year has included the range of issues below:

1. 1. Proposal to impose a fee for processing of debtor’s petitions: The Commonwealth Government has embarked on a cost recovery policy which is being imposed on all Government Departments. Under this policy, ITSA has conducted an internal review of its fees and charges and proposes to change their current fee charging regime. The significant issue for financial counsellors was ITSA’s proposal to introduce a $200 fee to lodge a debtor’s petition.
   AFCCRA, together with other financial counselling and community legal services around Australia has lobbied strongly against the proposal. ITSA’s response to this has been a revised proposal increasing the fee to $250 but exempting holders of pension and health care cards. While this is welcome, it is the sector view that no fee should be imposed. AFCCRA continues its opposition and awaits the Attorney General’s decision.
2. 2. Bankruptcy Legislation Amendment (Anti-Avoidance and Other Measures) Bill 2004: AFCCRA supported in principal the proposed reforms aimed at high income earners who utilise bankruptcy to avoid paying tax or otherwise hide assets/avoid paying creditors. These rorters are not our clients and bring bankruptcy into disrepute.
   AFCCRA and other groups in our sector made submissions to the House of Representatives Standing Committee on Legal and Constitutional Affairs and the controversial elements of the Bill were subsequently removed.
   The remainder of the Bill became the Bankruptcy and Family Law Legislation Amendment Bill 2005 and is currently before the Parliament having been amended by both Houses.
   ITSA has just released a Discussion Paper to canvas other options to address the controversial issues removed from the Bill and AFCCRA will participate in consultation processes.
3. 3. Section 271 ITSA Policy and Procedure Statement: Progress has been made on an ITSA statement of its policy and procedures relating to potential offences under the Act where gambling may have contributed to a bankrupt’s insolvency. A draft statement has been distributed for comment and we expect this finalised early in 2005.
   While we would prefer to have S 271 amended or removed, the policy statement is a step forward and we await further work within ITSA on this issue.

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Review of Debt Collection Guidelines

Richard Brading
Wesley Community Legal Service

Bless their little souls! The good folk at ACCC and ASIC have put together their resources to review the debt collection guidelines put together in 1999. They have released a Discussion Paper and 39 page draft debt collection guideline, both of which are available on the ACCC website, www.accc.gov.au. What’s more, they have asked for input from people like us, by 31st March.

The laws

The draft guidelines clarify these laws:

Section 60 Trade Practices Act
A corporation shall not use physical force, undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer.

Section 12DJ ASIC Act
A person contravenes this subsection if:

1. (a) the person uses physical force or undue harassment or coercion; and
2. the person uses such force, harassment or coercion in connection with the supply or possible supply of financial services to a consumer or the payment for financial services by a consumer.

The draft guidelines also refer to the laws against misleading conduct, deceptive conduct and unconscionable conductⁱ.

Why have a review?

• ASIC is now responsible for debt collection complaints in relation to financial services, while ACCC keeps complaints about the rest.
• A number of cases relating to s. 60 Trade Practices Act have been decided by the courts.
• The debt collection industry has undergone significant change and development.
• Since 1999, ACCC and ASIC have received “significant numbers of complaints on debt collection”.

What’s hot?

• Threats regarding default listing on a credit report where there is no intention to list or malicious listing.
• Sale of debt (debt buyouts)
• The undesirability of sending letters marked �To the Householder�
• Misrepresentations regarding statute barred debts
• Debt collection after bankruptcy
• Issuing proceedings in a different State
• The hours when creditors can ring clients
• How often creditors can make house calls

Sweet and gentle debt collectors

The draft explains to collectors that their role is to communicate with debtors for a reasonable purpose, such as to convey a demand for payment. It states that “it is not reasonable or acceptable to contact a debtor to:

• Frighten or intimidate them
• Make the debtor feel ‘under siege’
• Tire out or exhaust the debtor or
• Embarrass the debtor in front of other people

In fact the draft says that “a debtor is entitled to respect and courtesy.”

For an example of improper behaviour, the draft refers to the case of ACCC v Davisⁱⁱ, where repo agents pinned a man to the ground during a vehicle repossession. Despite the fact that the repo agents had the legal right to take the vehicle, their assault of the man was a breach of section 60.

The guidelines also warn collectors to “avoid pressuring a debtor to pay in full, in unreasonably large instalments, or to increase payments in a payment plan when they are unable to do so.” ⁱⁱⁱ

When does harassment become “undue”

Section 60 permits collectors to harass our clients; but draws the line at “undue” harassment. So the draft guidelines say a collector can ring our clients 3 times a week or 10 times a month. Undue harassment is defined as “frequent unwelcome approaches requesting payment of a debt… calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely convey the demand for recovery.” ^iv

Revival of statute-barred debts

One nasty practice of debt buyout companies is to talk debtors into making a payment on an old debt, thus extending the life of the debt or bringing it back to life. The draft guidelines provide clear directions on what is not acceptablev, particularly against telling people that a statute-barred debt is payable^vi.

The role of financial counselling

Page 7 of the draft provides the following advice to debtors:

“Making these arrangements will often be possible, particularly if the debtor acts before their situation becomes unmanageable. A community-based financial counsellor or other qualified professional may be able to assist the debtor with a debt negotiation. More generally, we recommend that debtors experiencing financial hardship consider seeking assistance from a financial counselling service to help them manage their affairs.”

Financial counsellors are also recognised in section 11 of the draft where collectors are warned against direct contact with clients who are represented by financial counsellors.

Why you might like to write a submission

The draft guidelines are possibly the best thing the ACCC and ASIC have done for our clients for a long while. It would be fair to assume that the mighty debt collection industry is not going to let these guidelines be set in concrete without attempting to water them down. It would be helpful if all financial counselling organisations wrote to the ACCC in support of the draft guidelines. As well, you might wish to comment on specific issues — such as the abuse of the client authority requirement by collectors.

Remember, it may be a lot longer than 5 years until the next review!

What happens after the review?

The ACCC and ASIC will fine-tune the draft guidelines and issue a final document. The final document can then be used by financial counsellors to assist and protect their clients.

Note: The final guidelines will not have the effect of a law, rather they explain how ACCC and ASIC believe the law should apply, and when debt collectors could face prosecution or other enforcement action.

1. Sections 51AA, 51AB, 51AC, 52 Trade Practices Act; s. 12DA(1) & subdivision C ASIC Act;
2. ACCC v Davis [2003] FCA 1227
3. Part 12, at page 19
4. ACCC v The Maritime Union of Australia [2001]FCA 1549
5. Part 17, at page 21
6. Refers to Collection House v Taylor [2004]VSC 49 on page 22

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Sugar Industry Reform Package Conference, Cairns, 2004

In early October 2004, the Commonwealth Financial Counselling Program (CFCP) provided some extra funding to assist financial counsellors in areas affected by the Sugar Industry Reform Package (SIRP). Part of this was set aside to provide a conference for the SIRP workers and some remote financial counsellors from around Australia.

The decision to hold the conference in Cairns was made so as to make it easier for the majority of the SIRP workers to attend. The accommodation and food was organised by our wonderfully competent Conference Co-ordinator, Maree Crosbie, a financial counsellor from NSW and she chose the venue — the Cairns Colonial Club Resort. The surroundings, accommodation and food were most conducive to our participation and enjoyment of the conference.

The program was developed by Jennifer Gracie and Wayne Warburton from the CFCP program.

There were 22 attendees at the conference. They came from all states, and all but three SIRP agencies were able to send representatives. The conference was judged by attendees as being extremely successful. Even though the majority of content was specifically for SIRP workers, the remote counsellors (whose contribution to the program was very well received), said that much of the content was also just as useful for them.

Some of the SIRP workers were newly employed financial counsellors and others moved into the SIRP program from regular financial counselling, so their experience was quite varied. However, the whole program was new to everyone and it was good to get together to look at what had already been started and what ideas people had to promote their programs.

The conference (30th November to 2nd December) opened with a welcome to Cairns by two young dancers from the Gimuy Cultural Development Aboriginal Corp and was followed by the Keynote Address from Fred Marchant, the Cairns Sugar Executive Officer. A panel of local people involved in various aspects of the sugar industry in Far North Queensland gave information and answered questions from those attending. This set the tone for a particularly successful and interesting few days.

Presentations were made by:

• Charmaine Howe, Deputy Official Receiver ITSA regarding proposed changes to the Bankruptcy Act, including charging a fee of $200 for all bankruptcies.
• Jan Pentland, President of AFCCRA, on the ASIC Relief from Licensing Requirements for financial counsellors.
• Tania Buck and David Lawson, SIRP financial counsellors from Cairns and Bundaberg, provided case studies for discussion.
• Remote financial counsellors Di Bessell from Katherine NT, Sue Happ from Meekatharra WA, Kevin Woon from Coober Pedy SA and Jon O’Mally from Narromine NSW, on working with Aboriginal Communities in their areas.
• John Mumford, financial counsellor from Wonthaggi VIC, gave a talk on hardship provisions among utilities providers.
• Jan Pentland gave a session on Counselling the Reluctant Client, which involved role plays and which all participants found extremely valuable.
• Joanne Lowth and Astrid Chapman from the Financial Counsellors Resource Project in WA provided a session on Financial Control Issues in Relationships.
• Wayne Warburton, CFCP Co-ordinator, also provided a timely session on The Forgotten Duty of Care: Looking After Oneself.

The conference wound up with a general discussion on the SIRP program and what workers would take away from their training and discussions. All the workers expressed their appreciation at being able to meet together in large and small groups to learn from each other and to make friendships and contacts. They went away feeling refreshed and ready to face another year with new challenges.

In the Media

PM gets tough on indigenous welfare payouts

Original story by Mark Metherell

Mark Metherell writes that “the Prime Minister, John Howard, has signalled his support for a more hardline approach on payments to indigenous people, placing more onus on parents to ensure their children are clean and healthy.”

“Proposals for unprecedented changes to indigenous welfare policy are reported to have been put to the government in confidential cabinet documents.”

“Asked yesterday [November 10] about the reported proposals, Mr Howard said the government did not have any particular timetable for introducing policies aimed at behaviour change. ‘We believe very strongly that the new approach to aboriginal affairs is the right approach’, Mr Howard said.”

The article goes on to say that the reforms include a requirement that indigenous families and individuals modify their behaviour in return for payments.

For example, income support payments to indigenous families would be conditional on parents meeting the requirement that their children undergo health checks. Also, work on public housing would only be carried out if children of families living there attended school.

There were also proposals to “issue payment cards that can store information and set electronic limitations to dictate what indigenous people could purchase using government-funded payments, particularly to stop them buying alcohol.”

“A Kimberley community reportedly promised it would ensure children were showered and attended school daily and that children would undergo regular infection checks. In return, the government would finance two-thirds of the cost of installing new fuel pumps.”

In some communities there is already a ‘no school, no pool’ rule in which students who miss classes are banned from the community swimming pool.

Sydney Morning Herald, November 11, 2004

New Official Receiver for Western Australia

Mr Andrew Henderson has been appointed as Official Receiver for the Bankruptcy District of Western Australia and also as Branch Head of ITSA in Western Australia, the Inspector-General in Bankruptcy, Mr Terry Gallagher announced. Mr Henderson commenced in the new role on Monday 10 January 2005.

Mr Henderson was admitted as a legal practitioner in Western Australia in 1997. He worked for a legal firm in Western Australia before being appointed as Research and Administrative Assistant to the Chief Justice of Western Australia, the Hon David K Malcolm, AC during 1998/99. Recently he has been a senior lawyer in the Commonwealth Attorney-General’s Department in Canberra, working on matters which included bankruptcy law reform and tort law reform. Mr Henderson has also been the Attorney-General’s Department liaison officer in the Office of the Commonwealth Attorney-General, where his responsibilities included bankruptcy.

from ITSA Media Release, January 13, 2005

Government gives benefits to millionaires

Labor has called on the federal government to close a loophole that allows millionaire families to receive social security payments. Rebates of up to $3,000 a year — designed to help single parents — were handed out to 31 families earning $1 million or more in 2002–03. Documents handed to a Senate committee by the Department of Family and Community Services in response to questions last year from Labor senator Jacinta Collins, also revealed that 39,044 families earning $100,000 or more a year also received the benefits.

The rebate, distributed under the Family Tax Benefit (Part B) provision, is available to two-parent households, where one parent is the main income earner. Their income is not means tested. This contrasts with such benefits as Youth Allowance which are means tested. A student living independently of their family and earning $362.65 a week — just $45 above the poverty line — is not entitled to any benefits at all.

The Melbourne Age, March 2, 2005