Sharkwatch October 2005

Notes & Notices

Telstra introduce spending limit on 190 calls

In a move that will be applauded by most financial counsellors, Telstra have introduced a spending limit on 190 InfoCall services, in order to help protect customers from unexpected high bills from the use of these services.

As of October 1, 2005, InfoCall (190) information services became subject to a default spend limit of $550 (including GST) per calendar month, for each fixed and mobile service (unless Telstra has individually notified the customer otherwise). Telstra has written to a number of customers who are frequent high users of these services and has notified them that they will be subject to a different (higher) spend limit but also offering them the option to choose the default lower spend limit.

Charges for making calls to InfoCall services with a prefix 19025 (i.e., mass calling services such as ‘voting’ type services, which are often used for television and radio competitions) and surcharges for making calls to InfoCall services from a mobile will NOT contribute to the monthly spend limit for the fixed or mobile service.

Once the spend limit for InfoCall calls from a fixed or mobile service has been reached, access to all 190 information services (including mass calling services) will be restricted from that service for the rest of that month.

Please also note, it is possible for a customer to go over the per service monthly spend limit in a limited number of circumstances (eg. if the monthly spend limit is exceeded during a call, they will be able to complete the call and be charged accordingly). This means that the $550 or other individual limit may be somewhat exceeded in these circumstances, and the customer will still be responsible for all charges incurred.

Robert Morsillo from Telstra notes that “this issue has, of course, been front and centre for consumer representatives, particularly community Financial Counsellors, in forums such as Telstra’s Credit Management Working Group, for quite some time. Hopefully we can all feel some satisfaction that it has now been properly addressed.”

Questions about the new limit can be answered by Telstra Customer Service on 1800 035 055.

Government recommends higher spending on financial counselling services

Richard Brading from the Wesley Community Legal Service drew our attention to the following recommendation from the Senate Report on Poverty and Financial Hardship “A hand up not a hand out: Renewing the fight against poverty”, from March 2004.

Recommendation 39 of the Report suggests that:

“ … the Commonwealth and State and Territory Governments increase funding to financial counselling services.”

Code for telecommunications providers open for comment

The Australian Communications Industry Forum (ACIF) have released their ACIF Credit Management Consumer Code for public comment.

The code includes a number of welcome clauses, including a provision that all telecommunications providers must have a hardship policy.

Although adherence to the code will be technically voluntary, the office of the Telecommunications Industry Ombudsman (TIO) records breaches of the code and can issue formal warnings and enforceable directions in regard to those breaches.

For more information, the draft code can be downloaded from www.acif.org.au .

Complaining About Lawyers

Richard Brading
Wesley Community Legal Service

“I’m beginning to think that my lawyer is too interested in making money.”

“Why do you say that?”

“Listen to this from his bill: ‘For waking up at night and thinking about your case: $250.00.”

And so we provide some helpful hints about how to complain about lawyers. Each State and Territory has a different complaints process and changes are occurring everywhere. All States and Territories have recently agreed to adopt a National Legal Profession Model, which will allow lawyers to operate in a national legal services market rather than be restricted to one jurisdiction. Each State and Territory is changing its law to incorporate the Model Bill. However the rules for complaints about lawyers will still differ somewhat between States.

Victoria, Queensland and New South Wales have an independent investigative body called the Legal Services Commissioner (or similar) who will receive and investigate complaints about lawyers (in Victoria and Queensland this was previously called the Legal Ombudsman). The other States may establish similar bodies soon.

The Legal Services Commissioner will investigate allegations of misconduct by lawyers, including overcharging, poor communication, mistakes, delay and poor service. They will also provide some assistance in disputes between consumers and their lawyers. There is no charge for making a complaint, and lawyers are not permitted to charge their clients for responding to complaints.

The Legal Services Commissioner can prosecute lawyers in a specialist tribunal:

In NSW, it is the Administrative Decisions Tribunal, (ADT),
In Victoria it is the Victorian Civil and Administrative Tribunal (VCAT),
In Queensland it is the Queensland Legal Practice Tribunal,
In South Australia it is the South Australian Legal Practitioners Conduct Board.

Where the client of a lawyer can establish a direct loss caused by a lawyer’s wrongdoing, it is possible for the Legal Services Commissioner or the specialist tribunal to order compensation.

In NSW this compensation can be up to $10,000 from the Commissioner, and up to $25,000 from the Tribunal;
In Victoria compensation can be up to $25,000 from the Tribunal;
In Queensland, compensation can be up to $7,500.

The Legal Services Commissioner may assist in the resolution of disputes between consumers and lawyers by arranging mediation.

The rules regarding lawyers costs are complex. Once a lawyer’s costs have been assessed or taxed, they may be enforceable as a judgment, or at least the ability to dispute them will be severely restricted. Clients who want to dispute their lawyers costs should seek information from their State Law Society or Bar Association or from the Legal Services Commission.

Relevant contact details are:

NSW	The Legal Services Commissioner	(02) 9377 1800
Victoria	The Legal Services Commissioner	(03) 9462 0655
Queensland	The Legal Services Commission	(07) 3406 7737
South Australia	The Legal Practitioners Conduct Board	(08) 8212 7924
Western Australia	The Legal Practitioners Complaints Committee	(08) 9461 2299
Tasmania	The Legal Ombudsman	(03) 6234 4133
The Australian Capital Territory (A.C.T.)	The Law Society of the ACT	(02) 6247 5700
The Northern Territory	The Legal Practitioners Complaints Committee	(08) 8981 5104

For further information about your particular State or Territory go to www.complaintline.com.au and look under the category ‘lawyer’.

A Case Study

Sharkwatch would like to thank Alan Weeks from Creditline Nowra for sending in this case study.

“ A young man in his mid thirties came to Creditline Nowra with his Mum to discuss a financial problem. Bob (not his real name), who lives with his Mum, suffers from schizophrenia.

The client’s mother had to go to Sydney on urgent business for three days, and, unbeknownst to her, he found her ‘hidden‘ car keys and went for two drives over a two day period.

During this time he had two car accidents. Her car was uninsured, and the total damage caused was over $8,000. Police took Bob to a psychiatric hospital after the second accident.

In due course Bob received letters from the two insurance companies involved, but, as he is on the Disability Support Pension, he had no way of repaying these debts.

Whilst travelling in the train to do my volunteer work, I was reading the previous month’s FCAN minutes (as one would!). [FCAN is the Financial Counsellors’ Association of New South Wales]. In it was information from Tony Devlin in an article entitled ‘Debt Protocol Alive and Well‘.

Inspired by Tony’s suggestions, I spoke to my supervisor, Sandy, and we decided to approach the insurance companies to ask if they would waive the debts. After all, what could we lose (and to hell with the expense!).

I wrote to Robert Drummond (The General Manager of the Insurance Council of Australia) about this case, and also included letters to both of the relevant insurance companies for him to pass on.

In due course I received correspondence from both of the companies, requiring lots of information about Bob‘s financial situation, income and expenditure etc. They also asked for letters from Bob‘s doctors regarding his medical condition. I passed on all of the information that they asked for.

Over time I spoke often with the claims officers from both insurance companies, and eventually they both agreed to waive the debt owing!!! Importantly, letters from both companies were then sent to the client confirming the waiver. Mission Accomplished!”

Fuel Nightmare

Recently I paid $1.45 a litre for unleaded fuel, and it cost, for the first time in my life, over $100.00 to put petrol in my car (a battered old Ford Falcon).

Talking to financial counsellors around Australia, it is becoming clear that rising prices, particularly escalating fuel prices and increasing rental costs, are creating a growing problem for many of the clients we are seeing.

I was not surprised then, to read Alexandra Smith’s Sydney Morning Herald article on September 1, titled “Cars guzzling $200 a week”.

Alexandra’s article reported on new research from the NSW Roads and Motorists Association (NRMA) which tipped the price for standard unleaded petrol to reach $1.60 a litre, and then went on to detail just how much it costs to run a family car.

The study showed that Australia’s most popular family sedans — the Holden Commodore and the Ford Falcon — were costing families around $200.00 a week to run. That is, more than a quarter of the average weekly wage of $782.00.

Needless to say, very few of our clients are on the happy side of this average, and one can only wonder how difficult it must be getting for low income families to afford a family car.

Although the figure of $200.00 included insurance, registration and depreciation, fuel costs (which have risen significantly in recent months) account for a growing portion of the running costs.

Interestingly, the most expensive family car to run turned out to be my old bomb — the Falcon — with the least expensive being the Toyota Camry.

The most expensive medium car was the Subaru Liberty, with the cheapest being the Hyundai Sonata.

The most cost-effective cars in the survey turned out to be the Hyundai Getz ($107.00 pw) and the Holden Barina ($153.00 pw).

The least cost-effective car was the Toyota Landcruiser Sahara, which cost $346.00 per week to run.

Perhaps it’s time to trade in the trusty Falcon …

Statute-Barred Debts

Richard Brading
Wesley Community Legal Service

If there’s one thing that raises the blood pressure of financial counsellors, it is the way that debt collectors persuade debtors to pay statute barred debts.

The case of Collection House Limited v Leigh-Anne Taylor [2004] VSC 49 provides detail of how a consumer was able to fight back against a major debt collector with representation from the Consumer Credit Legal Service.

Leigh-Anne Taylor had borrowed money from AGC to buy a car back in 1992 and had a residual debt after the car was repossessed and sold. AGC apparently did nothing until 2000 when it sold the debt to Collection House, even though it was over 6 years old with no payment or judgment, and therefore statute barred.

By 2001 Leigh-Anne was unemployed, living in a domestic relationship in rented premises and struggling to look after her 16 year old deaf dependant child, for whom she received no government support. Her only assets were furniture worth $500 and jewellery worth $200.

At 6.30 pm, on 23rd April 2001, Leigh-Anne received a telephone call from a debt collector named Peter Hempenstall. He said to her that he was “calling from ALR Lawyers, phoning on behalf of our client Collection House” and that “our client has purchased a ledger of debts from AGC, one of which is in your name”.

He told her that the debt was currently $10,870 and asked if she was in a position to pay the debt in full. When she said that she was not, he asked Leigh-Anne a series of questions about her personal and financial circumstances and her ability to raise funds with which to pay the debt.

Hempenstall talked Leigh Anne into agreeing to settle the debt for $5,000. Leigh-Anne said that she would pay $4,500 of it immediately on her credit card, and gave the details and authorisation to Hempenstall to enable him to debit her card immediately. She said that she would arrange a $500 increase in her credit card limit in order to pay the balance.

However, the next day Leigh-Anne received advice from the Good Shepherd and Citizens Advice Bureau that the debt was statute-barred. She immediately telephoned Mr Hempenstall and complained that he should have told her that the debt was statute barred.

Mr Hempenstall responded with the words “The statute of limitations does not prevent ALR Lawyers from pursuing the debt on behalf of our client.”

Leigh-Anne took Collection House to the Victorian Civil and Administrative Tribunal, where an order was made that Collection House refund the $4,500 she had paid.

Collection House then appealed to the Supreme Court. One issue related to the role of Mr Hempenstall, who apparently was employed by Collection House, even though he worked in the offices of ALR Lawyers and gave debtors the impression that he was a legal person. Unfortunately the court did not decide whether such conduct was misleading or not.

In his judgment of 3rd March 2004, Judge Nettle considered whether Mr Hempenstall had used misleading and deceptive conduct in saying that the “Statute of Limitations doesn’t prevent ALR Lawyers pursuing the debt on behalf of our client”.

Collection House argued that the statement was true, because it was made after Leigh-Anne had paid $4,500 and unwittingly revived the statute barred debt. Unfortunately Judge Nettle did not decide whether or not the statement was misleading and deceptive, but said that it might have been.

However, Judge Nettle did consider that the conduct of Mr Hempenstall was “unconscionable”.

In order to obtain a remedy in the situation of unconscionable conduct, Leigh-Anne had to establish that she was in a “position of special disadvantage” and that Collection House had taken advantage of her position by unfair or unconscionable means and was in breach of the Fair Trading Act. The judge said:

“In my view the fact that any impoverished debtor is willing to pay $5,000 in settlement of a 10 year old statute barred finance company debt of $11,000 is probably sufficient without more to raise in the mind of a reasonable person the possibility that the debtor does not know of the limitation period and might not have agreed to pay it if they had known.”

He also said:

“In my opinion the fact of someone from a firm of lawyers “cold-calling” a woman of the respondent’s socio-economic standing at home at 6.30 in the evening, and interrogating her as to her personal and financial circumstances while insinuating that in the absence of her agreement to pay, legal proceedings may be instituted, is capable of constituting pressure of a very high order. The fact that she bore the burden of a deaf dependent child can only have exacerbated her predicament.”

This case is important in that the debtor took the creditor to court to recover money she had paid based on the misrepresentation that the Statute of Limitations did not protect her. She was successful because she was “in a position of special disadvantage” and because there was clear evidence of the content of her conversations with the debt collector.

Alternative Dispute Resolution Schemes

Jan Pentland

The following is from Financial Counsellor training at Lismore, NSW, in March 2005.

ASIC Requirements under the Financial Services Reform Act

All banks and licensed financial institutions are required to belong to an External Disputes Resolution Scheme (EDR).
Licensees must also have an Internal Disputes Resolution (IDR) process.
A notable exception to the licensing regime is credit which is regulated by the states under the Uniform Consumer Credit Code.
ASIC has broad consumer protection powers in relation to conduct by credit providers, e.g., misleading and deceptive conduct, unconscionable conduct in financial services including credit.
ACCC/ASIC draft Debtor Harassment Guidelines are currently being reviewed and will assist us in dealing with creditors and debt collectors.

There are 7 ASIC approved External Disputes Resolution (EDR) schemes:

Banking and Financial Services Ombudsman (BFSO)
Credit Unions Disputes Resolution Centre (CUDRC)
Financial Cooperatives Disputes Resolution Scheme (FCDRS)
Insurance Ombudsman Scheme (IOS)
Insurance Brokers Disputes Scheme (IBD)
Credit Ombudsman Scheme Limited (COSL)
Financial Industry Complaints Services (FICS)

Six of the above schemes share a single entry point: the phone number 1300 780 808.

Note that the FCDRS has its own contact number: 1300 139 221.

The 1300 780 808 number is also the contact point for complaints to the Superannuation Complaints Tribunal (SCT), a statutory scheme to deal with consumer complaints about superannuation trustees, and the Code of Banking Practice Monitoring Committee.

ASIC is currently working to develop a policy for IDR (Internal Disputes Resolution). This policy work will assist ASIC to identify gaps in the effectiveness of IDR in the financial services industry, including obstacles consumers face in having disputes resolved at the first point of contact.

Non-ASIC Alternative Dispute Resolution

Telecommunications Ombudsman Scheme (TIO) phone 1800 630 614
Utility ombudsman schemes regulated by states/territories
Australian Finance Conference Complaints — phone 1800 231 587.

Gaps in complaint resolution include finance companies, some mortgage brokers, and real estate investment spruikers.

If you have any enquiries about the above, Jan Pentland can be contacted by phone on 0407 042 483 or by email at janpentland@hotmail.com

The Law Matters

Richard Brading
Principal Solicitor
Wesley Community Legal Service

The Meaning of Pawn

The High Court recently examined the meaning of pawn in Palgo Holdings Pty Ltd v Gowans [2005] HCA 28 (25 May 2005). Palgo Holdings traded as “Cash Counters Byron”, lending money to the poor and vulnerable at extortionate rates of interest. Yet despite the evidence that it looked like a pawnbroker, charged like a pawnbroker and people thought it was a pawnbroker, a majority of the High Court held that it was not a pawnbroker.

Consumer evidence

All but one of the customers of Palgo Holdings were required to leave goods with the lender as ‘security’. They assumed that they had to give possession of their goods “because that is the way a pawnbroker normally works.” The only exception was a man who borrowed $100 on the security of his car and was not required to leave it at the counter.

Enter Kelvin Gowans, a public officer employed by the NSW Office of Fair Trading. Mr Gowans and his associates prosecuted Palgo Holdings for being an unlicensed pawnbroker in the Lismore Local Court. However, Palgo Holdings refused to take its $6,000 fine quietly, and appealed all the way to the High Court. And it was there, on the tranquil shores of Lake Burley Griffin, that poor Mr Gowans got a beating around the ears.

Majority verdict

The High Court majority judges (i.e., judges McHugh, Gummow, Hayne and Heydon), examined the long and illustrious history of pawn, beginning in Roman times, and passing through the Victorian era to the Pawnbrokers Act 1902 and finally resting in the Pawnbrokers and Second-hand Dealers Act 1996 (NSW). Rather than looking at the broader facts of the case, they concentrated on the fine print in the loan contract.

The fine print

Palgo Holdings presented borrowers with a “Secured Loan Agreement” form. In one case it lent $70 for one week at the rate of 10% per week, which is a rate commonly charged by genuine loan sharks. Palgo Holdings secured that debt with a “Bill of Sale/Goods Mortgage” over a microwave and 2 speakers. These goods were stated to be “in storage at mortgagors request”. When asked why all the borrowers requested Palgo to store their secured goods, Palgo claimed it was because they were required to insure the goods and did not have insurance.

The meaning of ‘pawn’

The majority judges held that ‘pawn’ means ‘pledge’, and can never mean anything else. So, if the lender’s paperwork describes what would otherwise be pawn as a “bill of sale” or “goods mortgage”, then it cannot be pawn.

Kirby dissents

Against the majority stood the strong but single voice of Michael Kirby, who blasted the majority judges in the media, as well as the judgment.

Kirby “delivered a stinging attack on his fellow High Court judges” and “accused the majority of failing to take notice of the purpose behind the legislation, which he said was to cover money lent for pawned goods”. Justice Kirby said “we should be on guard against any temptation to return to the dark days of literalism.”

Courts should do more than simply look at a printed contract, prepared by the lender and presented to borrowers who are scarcely in a position to quibble about its terms.

So what about the contracts?

It appears that the Cash Counters Byron contract would be regulated by the Consumer Credit Code. Although the contracts are short term (i.e., less than 62 days), the interest rate greatly exceeds the annual percentage rate of 24% prescribed by s.7(1)© of the Code. That would give the borrowers some rights under the Code. In practice, the regulatory requirements of the Code are far less onerous for a lender than the strict requirements of pawnbroker law.

The N.S.W. Government steps in

But Mr Gowans was not defeated by the disappointing High Court judgment. The N.S.W. government moved quickly to change the law in parliament stating “without the amendment to the Act contained in this bill, unscrupulous persons operating for all intents and purposes as a pawnbroker will be able to require consumers to sign documents that prevent them from accessing rights they would otherwise have under the Act. Consumers who use the services of pawnbrokers are often amongst the most disadvantaged members of our community. It is critical that they can continue to receive the protection provided by the legislation.”

Interestingly, the new N.S.W. law states that when determining whether goods are pawned, courts are to give “regard to the substance of the loan transaction rather than its form or other legal technicalities”.

What does this mean for our clients?

Financial counsellors in States other than N.S.W. should ask their local Fair Trading Department if it intends to follow the N.S.W. government’s approach and amend their pawnbroking laws.

It is likely that fringe lenders will adopt the practices of Palgo Holdings where they can. The practice of fringe lenders taking security over the basic personal property of poor people continues to cause hardship for many families and is one that needs to be addressed by all Australian governments.

Unfortunately the Palgo Holdings judgment does not only affect fringe lenders and pawnbrokers, but will influence all types of lending transactions. Lenders of all classes will be encouraged to make sure that their contracts give them all the rights they can and leave as little as possible to the borrowers. Where a loan contract document is quite different to the actual practice of the lender, the courts are likely to decide in favour of the lender’s document rather than the lender’s actual practice.

AFCCRA Update

Jan Pentland

Meeting with Senator Kay Patterson

On 1 September I met with the Minister for Family and Community Services, Senator Kay Patterson to discuss a range of issues related to financial counselling. I thanked her for her support to AFCCRA over the last year or so. For the first time since 1996, AFCCRA has received Government funding. Through the Sugar Industry Reform Program (SIRP), the Minister has funded AFCCRA $20,000 in 2004/05 and $20,000 in 2005/06 to facilitate the effective implementation of the financial counselling aspect of SIRP, and to build capacity in the financial counselling sector.

She also provided $20,000 of funding for the AFCCRA Conference held in June 2005 in Melbourne, the first national financial counselling conference since 1996. Papers delivered at the Conference are on the AFCCRA website at www.afccra.org, and will be joined in the next week by the two Conference workshop reports. Please access these papers and reports and other information provided there. Development of the website has only been possible with provision of this Department of Family and Community Services (FaCS) funding.

AFCCRA is pleased to be continuing to enhance its effective relationship with FaCS over recent years towards working together to build future capacity for AFCCRA and financial counselling. This has recently been strengthened by the establishment of the ‘Financial Wellbeing Taskforce’ within FaCS which incorporates a range of funding programs, including the Commonwealth Financial Counselling Program (CFCP).

I spoke with the Minister about the current landscape of financial counselling and the challenges and opportunities this presents including:

Current research on the sector, eg Sharon Barker’s thesis and Conference paper (www.afccra.org) and the current CFCP survey of the sector including rural financial counsellors
The national implementation of the Diploma of Community Services (Financial Counselling) and the impetus this will give to professional accreditation within the sector
The proliferation of fee charging debt and money management services and the challenge this presents for our services and our clients.
Partnerships with industry including AFCCRA’s current work with the ANZ bank and Telstra, and Good Shepherd Youth and Family Services’ work with the NAB.

We spoke about the Commonwealth’s current work on financial literacy and inclusion in indigenous communities and I look forward to AFCCRA’s future engagement in this work.

Senator Patterson has an active interest in gambling and is the Commonwealth Government Minister with responsibility for this area. We talked about:

Her proposal for a National Gambling Research Institute
Problem gambling in a consumer protection context
Problems with access to ATMs in venues including $400,000 accessed at ATMs from line of credit home mortgages by two gamblers
The world’s best practice integrated model of service provision to problem gamblers and their families that we have in Victoria.

Finally, I raised the issue of the need for increased funding to financial counselling nationally and invited her to explore with AFCCRA possible ways to fund what has been demonstrated as a cost efficient and effective service. I look forward to discussing with her staff a proposal to levy industry, with such a levy being collected and administered by Government to ensure independence. I encouraged the Minister to consider the recommendations in CFCP reports from 1990 to establish a Commonwealth/State advisory group on financial counselling.

ANZ MoneyMinded Review

AFCCRA council, together with Sue Fraser from Kildonan Child and Family Services, is the advisory group for the review of the ANZ Bank’s financial literacy package, MoneyMinded, and we met for the second time in Melbourne on 5 September. The review aims to evaluate and modify MoneyMinded to enhance its value and ease of use for facilitators. ANZ has run a number of training courses for facilitators across Australia and will recommence this initiative in 2006, after the launch of the ‘new’ MoneyMinded.

The AFCCRA Council continues to develop its partnership with ANZ around its financial literacy and inclusion initiatives. These include international benchmarking of ANZ’s work in this area, and the modification of MoneyMinded for indigenous communities, young people and possible newly arrived refugees.

AFCCRA Council Meeting

After the consultation with ANZ, Council members took the opportunity to have a rare face-to-face meeting to discuss a range of issues including bankruptcy reform, review of Part IX of the Bankruptcy Act, development of the AFCCRA website to include a ‘tool box’ section and a casework ‘chat’ facility, bank fees, gambling issues, and proposals for an AFCCRA Conference in 2006.

The reports from the two workshops run on the afternoon of the AFCCRA Conference in Melbourne in June are now completed and on the AFCCRA website at www.afccra.org under ‘papers’ and I encourage you to read them as well as the papers which were delivered at the Conference. The Council considered the recommendations from the two reports and has started work on developing a national statement on Principles for Financial Counselling.

Tricia Ross, AFCCRA’s representative on the Telstra Consumer Consultative Committee has been working hard on telecommunications issues. Currently we are compiling the results of the national survey of financial counsellors’ experience of Telstra and this will be presented to the TCCC in November. A report on the survey will also be produced to inform AFCCRA’s continuing work in this area. Tricia has also been liaising with AAPT in regard to their draft hardship policy but this has stalled until we get an undertaking from AAPT to remove the requirement for their customers to see a financial counsellor in order to access the hardship process.

Canberra

On 8 and 9 September, I was in Canberra where I met with FaCS about financial counselling generally and in particular about the new ‘Financial Wellbeing Taskforce’ that has been set up; with the Department of Agriculture, Forests and Fisheries (DAFF) about their Rural Financial Counselling Service Program (RFCSP) and the Sugar Industry Reform Program (SIRP); Centrelink about Centrepay and debt collection; as well as ASIC and the ACCC. This liaison assists AFCCRA to progress the profile of financial counselling as well as to work on current issues.

Bankruptcy Update

Jan Pentland

Review of Debt Agreements

Instructed by Attorney General, Phillip Ruddock, ITSA has announced a review of Part IX Debt Agreements. An issues paper has been released and is available at www.itsa.gov.au — submissions are due by 18 November 2005. It is expected that state and territory financial counsellors associations, as well as AFCCRA, will respond to the issues paper, as may other consumer advocacy organisations. AFCCRA’s response will be informed by the research on Debt Agreements currently being undertaken by Consumer Credit Legal Service Victoria and Eastern Access Community Health. The report from this research should be released in September/October. Thank you to all those who have participated.

Elizabeth Terry, experienced financial counsellor in Sydney and ex-President of FCAN, is AFCCRA’s representative on the ITSA advisory group for the review. As AFCCRA’s representative on the Bankruptcy Reform Consultative Forum, I will also be directly involved in the consultation process.

Stakeholder forums for the review are currently being planned. Victoria was invited to send one representative to the financial counsellor stakeholder focus group to be held in Sydney on 6 September. John Hartnett who has had considerable experience with debt agreements, has agreed to be that representative. Carolyn Deane will represent South Australian financial counsellors, and several NSW financial counsellors will be involved, along with Richard Brading from the Wesley Community Legal Service and Katherine Lane from the Consumer Credit Legal Centre in Sydney.

Anti-avoidance Reform Bill

The Attorney General has announced that he will introduce in this Parliamentary sitting, a Bill to reform the Bankruptcy Act to strengthen existing anti-avoidance provisions. His media release is available at www.itsa.gov.au and these proposals will be addressed in the Bankruptcy training day on 13 September.

Round Up

SIRP News

Re-establishment Grant and Retraining Assistance

Centrelink have now made a new SIRP fact sheet available online.

The fact sheet is entitled “Sugar Industry Reform Program 2004 — Re-establishment Grant and Retraining Assistance for cane growers”., and is available at http://www.centrelink.gov.au/internet/internet.nsf/ publications/se054.htm

The website also notes the following:

A Re-establishment Grant is available to cane growers who choose to leave the sugar industry for at least five years, perhaps diversifying into other crops, or sell their property and leave agriculture altogether. For eligible cane growers the amount of Re-establishment Grant payable is:

up to $100 000 if you leave the sugar industry between 1 February 2003 and 30 June 2006
up to $50 000 if you leave the sugar industry between 1 July 2006 and 30 June 2007..

Cane growers who receive a Re-establishment Grant will qualify for Retraining Assistance, which is designed to help cane growers and their spouse develop the skills to enter other careers after they leave the sugar industry.

For those cane growers who are eligible and decide to leave the sugar industry and agriculture altogether, then the Re-establishment Grant is exempt for income tax and social security purposes. For those cane growers who are eligible and who choose to lease their sugar industry enterprise or diversify into some other form of agriculture, then the Re-establishment Grant is not exempt from income tax however, it is exempt for social security purposes.

A good news story

This is reprinted from the SIRP Newsletter, The Sweetener, which is put together by Astrid Chapman from WA. The original story is from ABC news online (25.5.05), and, apart from being a good news story, has turned out to be correct in predicting a firming in sugar prices.

World sugar prices to rebound?

By Richard Hudson

Some positive news for the cane industry today — an industry desperate for a good news story. A manager from the world’s leading agricultural bank is quietly confident world sugar prices are about to increase. Rabo Bank only lends money to primary producers and one of its north Queensland managers, Brian Brown, says he has recently re-financed cane farmers because bank research suggests there are some positive signs for an improvement in the cane industry.

How to use the BITA calculator to work out likely income contributions

BITA Calculator, as at 20 Sep 2005 (PDF format, 28kb)

Step 1. Obtain gross income.

Work out the client’s gross income.
Step 2. Calculate net income.

Calculate the Tax Payable and the Medicare Levy using the guidelines in the tables at the bottom of the page, and work out how much child support or maintenance the client is paying if applicable. Subtract those amounts from the gross income.
Step 3. Calculate assessable income.

Add assessable income items that would increase the net income, such as a fringe benefit. This will give you an estimate of the client’s assessed income for BITA purposes.
Step 4. Calculate income in excess of AITA threshold.

Looking at the column with amount of dependents, find out the AITA (assessable income threshold amount) and subtract it from the clients assessable income.
Step 5. Calculate likely contribution towards bankruptcy.

ITSA will take 50c in the dollar of any excess above the AITA threshold. Divide the excess income over BITA amount by two. This will give the amount of the contribution towards the bankruptcy the ITSA is likely to ask for.

For further assistance, there are actual examples in Sharkwatch Vol. 5 No. 4 — November 2004.

Banking Issues: Meeting With The BFSO

Jan Pentland
Chairperson of AFCCRA

Unsolicited credit card offers and limit increases

Victorian financial counsellors will meet with staff from the office of the Banking and Financial Services Ombudsman (BFSO) on 13 September, primarily to discuss our sector’s experience since the BFSO release of the Bulletin on credit card maladministration. The increasingly hardline attitude of major banks over several months, which seems to have increased since the release of the Bulletin, will be explored and other issues will be followed up — see below.

Third Party Authorities

On 15 July, I met with Colin Neave, Diane Carmody and Margery Clark at the BFSO, to discuss a range of problems with Third Party Authorities (TPA). Thank you to those who had provided me with the case examples which I used as a basis for my discussions with the BFSO. On 13 September, Victorian financial counsellors will meet with BFSO staff and TPAs are one of the issues which will be discussed.

The BFSO wanted financial counsellors to be aware of the following:

Actual complaints with client details are the best way for them to address these issues and they are keen to have well documented cases. Where you have been unable to satisfactorily resolve a complaint directly with a credit provider (the BFSO has a list of contact details for senior customer relations staff on its website: www.bfso.org.au), you should consider referring the complaint to the BFSO;
The BFSO has the jurisdiction to compensate disputants for non-financial loss where such matters have led to personal inconvenience, anxiety or distress for the client — this is in relation to all matters, not just Third Party Authority issues (page 61 of the BFSO’s Guidelines, available at www.bfso.org.au, sets out the method in which claims for non-financial loss will be assessed);
It is reasonable for a credit provider to require the client to sign a statement of financial position as verification of the facts;
The BFSO is very interested to receive disputes in relation to systemic issues such as automatic dialling of clients directly after the credit provider has received your Third Party Authority specifically requesting that the client not be contacted;
Where the credit provider requires verbal authorisation from the client to confirm that you are acting, any further conversation beyond that (e.g., about a repayment arrangement), should not occur and may be grounds for a dispute (I’m continuing to clarify whether such verbal confirmation is necessary unless there is real doubt about identity and met with senior NAB staff on 31 August);
Continuing contact with a client after the credit provider clearly has your details and a request to deal with you, may be grounds for a dispute, depending on the circumstances, and could lead to compensation for non-financial loss.

This is an opportune time to raise this issue yet again in a variety of forums, as the ASIC/ACCC Debt Collection Guidelines are being finalised and a review of the Code Compliance Monitoring Committee (CCMC), which monitors compliance with the Banking Code, is currently being finalised. When the Guideline is released in September/October it will clarify the requirements for a Third Party Authority and hopefully finally establish that as long as the TPA meets the Privacy Act requirements, credit providers will be obliged to accept it.

As I haven’t had any feedback to the contrary, I assume that the AFCCRA approved TPA in the last newsletter is acceptable. Please contact me at jpentland@each.com.au or 0407 042 483 if this is not the case or if you have further TPA cases as I continue to work on this.

Cancelling direct debits

Another issue discussed with BFSO in July was some continuing problems with clients cancelling direct debits despite the BFSO and the Banking Code being crystal clear on the customer’s right to cancel direct debits on their transaction accounts.

Note that cancelling direct debits on credit cards is a separate and more complicated matter.

I have lodged a complaint in regard to an experience I had with a client late last year and will hopefully have the fees that he incurred over a period when he unsuccessfully tried to cancel a direct debit on his savings account reversed. I encourage all other financial counsellors and consumer advocates to lodge complaints where this is a problem.

Bankruptcy, GE and Westpac

I am aware that there seems to be a systemic problem with GE and Westpac when a client bankrupts. I know of four instances where, when their customer bankrupted, GE would have been notified of the bankruptcy electronically by ITSA within 3 to 5 working days, but where, subsequently (about 6 weeks later), the bankrupt received a letter from a debt collector who was collecting or had bought the debt. I am aware of two instances where Westpac contacted their customer or sold a debt several weeks after the customer had lodged voluntary bankruptcy papers. I have checked with ITSA, and they have confirmed that creditors are notified electronically within 3 to 5 working days.

GE are checking their internal processes but I am aware of at least one complaint lodged with BFSO by a financial counsellor about such an incident on the basis that his client has suffered non-financial loss as a result of GE’s conduct.

Centrelink and Proof of Marital Status

The Centrelink policy on proof of marital status changed as at July 1, this year. Following is an excerpt from an article by Adele Horin, which appeared in the Sydney Morning Herald on June 30. Adele’s article provides some insight into the nature of these changes.

Sole parents may need to prove their single status to Centrelink with two references, preferably from a lawyer or a doctor, in order to get benefits.

The new policy, which [started on July 1st], is aimed at single parents who report a change of address, and it could strip many of them of their welfare payments if Centrelink believes they are living in a de facto relationship.

Every year, about 55,000 recipients of the Parenting Payment Single benefit report a change of address, and Centrelink will ask about 20,000 of them to attend an interview to discuss their relationship status.

Most will have to return two signed referee statements, preferably from “persons of some standing in the community”, to confirm their single status, Centrelink documents say. Unless the references are provided within two weeks of the interview, their benefits will be suspended.

The policy is aimed at detecting single parents who wrongly claim a welfare payment when they are living in a de facto relationship or are still with their spouse.

The Government’s surveillance of what it calls “marriage-like” relationships is expected to save $4.1 million over four years.

However, Centrelink will exclude from the review those who have been widowed in the past 12 months, those who have moved into crisis accommodation and those who have received benefits either in the long term or for less than three months. …

Single mothers and unemployed men who share accommodation can together gain about $127 a week in benefits if paid to them separately rather than as a couple.

Centrelink will issue all referees a form explaining the factors they need to take into account. These include “the financial and social aspects of the relationship, the nature of the household, whether there are children of the relationship and the nature of the commitment between the two people”.

In cases where couples have separated but still live under the same roof, reviews can be repeated every three months.

For further information, Centrelink can be contacted on 131 021. Centrelink also have a message service. You simply email Centrelink a question and they will reply by either phone or email. The web-link for this service is at https://secure.centrelink.gov.au/sims/ frm_send_message.cfm

In the Media

Shire Councillor takes hard line on council debts

(Reprinted from the The Sweetener)

“People in debt to the Busselton Shire Council should have their refrigerators taken away until they pay their debt” said new Cr Alan McGregor last week. At the Shire council meeting last week, he said he was concerned the council was not being tough enough on its debtors. The council was about to write off several small debts including non payment of dog and vehicle impoundment fees and airport landing fees when Cr Mac Gregor suggested his self described “radical” solution. He said if debtors did not adhere to a repayment schedule they should be threatened with a bailiff to collect their refrigerators. The council deferred any immediate action and will instead rework its policy at a later date.”

Capes Herald (WA), May 31, 2005

Alarm at increases in cash advances

Story by Matt Wade

Australia’s 12 million credit card holders put a record $14,000 each on plastic over the past year, but consumer advocates warn that a jump in cash advances shows some families are under financial pressure.

Cash advances drawn on credit rose by a surprisingly large 9 per cent in May, the latest credit card figures from the Reserve Bank of Australia reveal.

The record 3.3 million cash advances were worth $998 million, the second-largest dollar figure on record.

The highest monthly value of cash advances — $1 billion — was recorded in the pre-Christmas spending spree in December last year.

The Reserve Bank said in its most recent review of the country’s financial stability, in March, that cash advances, which attract very high fees and interest rates, were a “barometer of household cash-flow problems”.

Khaldoun Hajaj, the director of policy and research at the University of NSW’s Financial Services Consumer Policy Centre, said the recent surge could foreshadow a rise in credit defaults.

“It could be an early sign that high levels of household debt are catching up with a critical mass of consumers who are, in desperation, relying on one of the most expensive forms of finance available,” he said.

Mr Hajaj said card users should be “hyper-vigilant” about using cash advances.

This form of borrowing totalled $11.1 billion in the year to May 31.

The Reserve Bank revealed in May that credit card fees earned by banks rose by $180 million, or 30 per cent, to $800 million last year, driven by rising annual membership fees.

The average credit and charge card debt was $2575 and the typical card limit was $7142 in May, the Reserve Bank figures show. Cardholders paid off more than $14 million on outstanding card balances in that month.

The value spent on cards in the year ending May 31 was $162.84 billion. Average spending per card exceeded $14,000 for the first time, even though national retail spending growth slowed to a below-average rate of 2.8 per cent in the same period.

The total amount of debt outstanding on cards rose by $186 million to a record $30.8 billion in May.

Sydney Morning Herald, July 25, 2005

Millionaires cry poor

Original story by Kirsty Needham

A survey of 12,000 millionaires found that only 5% considered themselves to be prosperous, and more than 50% preferred the term ‘reasonably comfortable’. In households worth $3 million or more, only 20% considered themselves to be ‘prosperous’, and, amazingly, 7% said they were either ‘just getting along’ or ‘poor’. ???!!!???

Sydney Morning Herald, July 7, 2005

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