For telephone support services
(information, casework discussion, debriefing, general support)
National Financial Counsellors’ Resource Service Participants phone 1800 647 409
All others phone 02 9951 5514
Robert Morsillo, Telstra’s Manager of Consumer Affairs, has passed on to Sharkwatch the following warning from Telstra regarding a new scam that targets Telstra customers. This scam is similar to a number of existing scams, and, as always, our clients should be encouraged to ignore such correspondence. Robert’s message is as follows:
“Telstra has urged customers to ignore a hoax fax that resembles Telstra correspondence and asks customers to provide bank account details. The scam fax advises customers that Telstra has overcharged them and that if they provide details Telstra will reimburse their bank account.
“Telstra does not reconcile customers’ accounts in this way and people should be wary of the scam. These faxes are not genuine and they should be ignored.
“The hoax advises recipients that an audit has found Telstra overcharged the customer “sometime in the 2nd quarter of the last financial year”. It then asks people to provide bank details promising a refund will be electronically transferred within 30 days.
“Customers who have any queries about the authenticity of faxes of this nature should contact Telstra on 13 22 00, (or their local Telstra Country Wide office on 1800 687 829), or the Australian Consumer Fraud Taskforce on 1300 302 502, or visit www.scamwatch.gov.au
The Insolvency and Trustee Service of Australia replaced the old Debtor’s Petition, Declaration of Intent, Consent to Act and Controlling Trustee Authority forms with new forms in November 2006. Financial counsellors are reminded to replace any outdated ITSA stationery with new forms. Phone your nearest ITSA office for paper copies or download them from www.itsa.gov.au
John Pinnock, the Telecommunications Industry Ombudsman since 1995, has recently moved on from the TIO. John was an outstanding Ombudsman, respected by Government, industry and consumers alike. John’s approach was marked by his integrity, strength of character and high intelligence, and he will be sorely missed.
The new Ombudsman is Deirdre O’Donnell. Deirdre was the Deputy TIO from 1999 to 2002, and has most recently been the State Ombudsman for Western Australia. Deirdre has considerable experience in external dispute resolution schemes and a strong knowledge of the telecommunications industry, and her appointment has been warmly received. We look forward to working with Deirdre in the future.
American Express has participated, in a limited way, in the Banking and Financial Services Ombudsman (BFSO) scheme since 2004. However the BFSO could only consider disputes that involved unauthorised EFTPOS transactions or foreign exchange matters. Since April 2007 American Express have increased the range of matters that the BFSO can resolve, including consumer credit and charge cards and personal loans. Corporate cards and merchant services are still not covered.
It is also pleasing to hear that the Perpetual Group of companies, who are often the credit provider for non-bank mortgage products, have joined the Credit Ombudsman Scheme (for more on COS, see page 4).
Wesley Community Legal Service and Credit Helpline gratefully acknowledge the sponsorship of LexisNexis, whose assistance has enabled our solicitors to have access to the Butterworths Direct Online package.
Over the last few months there has been a growing awareness of the Credit Ombudsman Service Ltd (COSL). Most financial counsellors have been aware of the operation of the Banking and Financial Services Ombudsman (BFSO), but there has been far less awareness of this service. So, what is the Credit Ombudsman Service, and how is it different from the BFSO?
The Members of COSL are more than 7300 brokers, non-bank lenders, originators and mortgage managers (among others) that “operate in the credit industry and who agree to be bound by the Credit Ombudsman Service Rules and any other recognised Code of Practice.”
The Credit Ombudsman Service is an external dispute resolution scheme that was established by the Mortgage and Finance Association of Australia (MFAA, formerly MIAA) in August 2001, under the supervision of the Mortgage Industry Review Committee. COSL is a not-for-profit company, and from July 2003 COSL has operated independently of the MFAA. The scheme has been approved by Australian Securities and Investments Commission (ASIC) and is overseen by a Board comprising of an independent Chairperson and equal numbers of consumer and industry representatives.
Like other alternative dispute resolution schemes, COSL provides consumers and members with an alternative to legal proceedings for resolving their disputes. According to their website, COSL aims to “provide independent and prompt resolution of disputes in accordance with:
“Individuals who refer their complaint to the Credit Ombudsman Service can have their complaint determined by the Credit Ombudsman. The Ombudsman’s decision is binding on a Member only if the consumer accepts the Ombudsman’s decision.”
A complaint can be made about a COSL member if the consumer believes that the member has:
The service has recently been empowered to also deal with matters relating to hardship provisions under the Uniform Consumer Credit Code, to deal with non credit-related financial products or services such as investment advice, and to order compensation for indirect or non-financial loss such as personal inconvenience, stress or anxiety. The Ombudsman can only deal with disputes where the amount of the claim is $250,000 or less.
COSL can not assist with disputes where:
For a full list, see Guidelines for COSL.
The service is free to a ‘natural person’ or a small business, but other complainants may be asked to pay whatever fees the Board prescribes.
Before making a complaint, the complainant must first have tried to resolve their complaint with the member. This is strictly adhered to by COSL. Every COSL member has to have an Internal Dispute Resolution (IDR) scheme, and no complaint will be heard unless the complainant has first tried to have it resolved through the member’s IDR. If there has been no satisfactory resolution from this process, then the complainant can contact COSL using the details below:
Ph: 1300 780 808; (02) 9273 8400; Fax: (02) 9261 2798
Postal: PO Box A252, Sydney South, NSW, 1235
Email: info@creditombudsman.com.au
Website: www.creditombudsman.com.au
Although COSL award various types of compensation, it should be remembered that they rarely award costs.
At Sharkwatch we were recently made aware of the operations of the lender, Amazing Loans, through a story from the Melbourne Age on May 9 by Chantal Rumble. Chantal reported that “under Victoria’s credit laws, fringe lenders can charge a maximum of 48 per cent interest for unsecured loans, as they can in other states. But, unlike in NSW, there is no limit on additional fees and charges, allowing lenders to effectively charge far more than the capped rate.” In 2005, NSW changed the laws so that fees and charges must be calculated within the 48 per cent annual interest cap.
Chantal reported that one fringe lender, Amazing Loans, had noted in a prospectus released after these changes that “as a result of compliance with this new legislation, Amazing Loans’ profit margin on loans in New South Wales will be affected. The company, therefore, intends to accelerate its strategy to open branches in other states (particularly Victoria and Queensland), which do not currently have similar restrictions.”
According to The Age, “one client, an elderly man with serious mental impairment and no assets or income beyond his pension, was given a loan of $750 at 45.5 per cent interest — but his contract also included fees of $855. Another borrower, with limited English language skills and on a fixed income, copped a fee of $2300 for a loan of $1500 at 7 per cent interest. They told The Age they did not understand the conditions of their loans.”
Consumer Action policy director Nicole Rich said the loans exploited vulnerable consumers. “The fees and charges are so high that once they take the loans out, they can struggle to repay them and find they are stuck in a debt trap,” she said. “These lenders are specifically targeting disadvantaged people with these predatory loans because they know that they won’t have other options and they won’t be able to fight back.”
In the view of many financial counsellors, this story highlights two ongoing issues. Firstly, avenues are needed for those on low incomes to have access to affordable credit. Although No-Interest Loans (NILS) schemes are invaluable, and some recent products from two mainstream banks are a step in the right direction, widespread, affordable credit from mainstream lenders is still needed. Secondly, it is clear that Australia-wide restrictions on the way fringe lenders can charge clients with fees other than interest need to be implemented. Those on the lowest incomes seem to be those most targeted by fringe lenders to take out small, short-term loans with very high fees attached.
Ian Macdonald
Solicitor, Financial Counsellors’ Resource Project, WA
“The first important thing to note is that all debts and liabilities which meet the tests of section 82 of the Bankruptcy Act are provable — that is, they are a part of the bankruptcy — irrespective of whether they are Australian or foreign. A debt payable in a foreign currency is generally converted to its Australian dollar equivalent as at the date of the bankruptcy (see Note).
“The second important thing to note is that debtors in Australia are protected against further action in Australia by foreign creditors if they become bankrupt in Australia. If a person becomes bankrupt in Australia, and then later travels to the foreign country where the debt was incurred, they are subject to the law of that foreign country in regard to the debts. The law of that foreign country may well disregard the fact that the debtor was bankrupt in Australia, and creditors may proceed as if the Australian bankruptcy had not occurred.
If the foreign creditor received a payment from a bankruptcy trustee of a portion of the debt, that should be taken into account in the foreign country.
Note:
Re: Griffiths: In the Matter of the Bankrupt Estate of Griffiths (2004) 139 FCR 185. The method of conversion of currency set out in Bankruptcy Regulation 4.04 for bankruptcy notices can be applied to proof of debt.”
Ian Macdonald
Solicitor, FCRP
(Original story in FCRP E-News No. 6, 2007)
Tess Evans and Ross Elgar
Ross Elgar has been a well-loved and well-respected financial counsellor in the Fraser District of Queensland for over 10 years.
Before becoming a financial counsellor, Ross had spent 32 years working in the banking industry. However, when the industry started to become more centralized, and local Branch Managers were given less and less responsibility, Ross began to feel that he needed a change.
At this time Ross was also beginning to look forward to a change in his home life, after spending 20 years helping his four children through their various University Degrees, Honours courses and PhD’s.
Ross left the banking world and began work as a volunteer financial counsellor at the Hervey Bay Neighbourhood Centre. He enjoyed this work, and when Lifeline Fraser District received some funding from the Commonwealth Financial Counselling Program, Ross began working three days per week at Hervey Bay and Maryborough.
Later, these centres also received some funding under the Sugar Industry Reform Package (SIRP), and Ross took on further specialized work providing financial counselling for those in his district who were affected by changes to the sugar industry.
Recently, Ross has also trialled working one day a fortnight at Kingaroy, and visiting the Maryborough Prison to talk to men preparing for release. The talks cover everything from budgeting to bankruptcy, and are geared to provide whatever information the men want. Apart from meeting a very important need, we understand that these talks are very well received.
All in all, Ross has been a financial counsellor (in fact, an outstanding financial counsellor) for more than ten years. In this time he has helped a wide range of people deal with a wide range of finance-related problems, and has developed considerable counselling skills. At recent conferences for SIRP financial counsellors, Ross impressed many with his wisdom in case conferences and his warm, competent, down-to-earth style when modelling the counsellor’s role during role-plays.
We at Sharkwatch are very sorry to hear that Ross is going to retire at the end of June. It has been a delight to watch him work in his quiet and gentle way, and financial counselling as a whole will miss his experience, his skills, his knowledge and his insight. Indeed, Ross will also be acutely missed by his clients and by the Fraser Coast community, where the need for financial counselling remains strong.
Ross has told Sharkwatch that one of the reasons for his decision to retire has been the loss of his Accreditation as a financial counsellor. This occurred when the Financial Counsellors Association of Queensland decided to remove Accreditation from counsellors who (1) had not completed the Diploma of Community Welfare (Financial Counselling) as of last year and (2) who had been Accredited after 2001.
Ross intends to travel once he retires. He will visit his daughter and her family in France, and then take a trip to Ireland.
Once he returns, Ross plans to continue his voluntary work as the President of the Hervey Bay Neighbourhood Centre and as a Management Committee Member of the Fraser Coast Community Rental Group.
In the meantime, Ross is training his replacement, Tess Evans (see photo), who is now working two days per week at Lifeline Maryborough and Hervey Bay.
Ross, we wish you the very best for the future. It has been a delight to know you and work with you, and we know that you will bring your unique blend of common sense, empathy and gentle wisdom to whatever tasks you undertake in the future.
Kelli Mullins
Financial Counsellor, Anglicare, Katherine
These case studies were sent to Sharkwatch by Kelli Mullins, the financial counsellor from Anglicare at Katherine. We would like to thank Kelli for sharing these cases with us, and to also thank Tricia Ross from Anglicare NT for her help in getting these cases to us.
An indigenous female client from Elliot, NT (about 500km South of Katherine) stated that she had had her Newstart Allowance cut due to not accepting a job in Newcastle Waters (approx 80km from her community). The client also added that she did not accept the job as she did not have access to adequate transportation to accept this job and she was suffering from a sore back from a previous job as a mango picker which she had neglected to seek medical advice for until recently.
Centrelink’s position was that, as the client had not reported her sore back before this job offer, she should have accepted the job. The client is currently in her third week without income to support herself. To further exacerbate her situation, a cultural ‘men’s business’ ceremony is taking place between Elliot and Katherine. During this period she is forbidden to pass through this area.
This ceremony is expected to last for a further 2–3 months which means she is isolated in Katherine with no family or income support and no shelter. This has forced her to approach community services for food vouchers, however, as various agencies have a strict policy to give out vouchers on certain days she was turned away. After contacting Centrelink, I was told her case is currently under Review by the Centrelink ARO but as it had reached the third day with still no response , the chances of her Newstart Allowance being reinstated were low. I am currently waiting for her to return to this office as she has not given her authority for me to follow up.
An indigenous female client from Elliot, NT stated that her Newstart Allowance had been cut due to her not attending a job interview, again some distance from her normal place of residence. This client too, is cut off from her community due to the ‘men’s business’ ceremony currently underway between Elliot and Katherine.
The client maintains that she made the trip to Katherine specifically to go to Centrelink enquiring about her ‘Breach’. The client is fortunate enough to have a sister in-law currently living in Katherine. However, due to over-crowding she will be forced to take shelter anywhere she can. As with case study 1 she has no income support and is relying on family members for food. Unfortunately, her sister in-law is surviving on only the parenting payment, and this is not stretching far enough to support her children and the extra family members from Elliot.
As we are in the middle of the wet season, people from indigenous communities come to Katherine before the rivers flood. When the rivers do flood, people from remote areas who are in Katherine become isolated with no money and no means to get back to their communities.
A client on casual employment as a cleaner (net wage $120 per week) was breached for not attending a Centrelink appointment because she was rostered to work on the day of the appointment.
The client argued that she called to tell Centrelink she could not make it due to her work roster, however, her call was not recorded and Centrelink did not receive her message. As a result of failing to attend the appointment, her parenting payment was cut.
The client reported that she was told that the new welfare legislation is strict in regards to fulfilling the directions of Centrelink, and that, even if a person is working they must take time off work to attend their Centrelink appointments, or they will be breached.
The client also maintains that she was told that after the 8 week period is over, she will no longer be receiving the Parenting Payment, but will start to receive the lesser payment of Newstart Allowance.
The client, who had already generated her own Centrelink Review, approached this service to gain further information on the Centrelink Appeals Process and on new welfare legislation, as she had become confused at Centrelink’s explanation of her breach.
Richard Brading
Principal Solicitor
Wesley Community Legal Service
Recent court decisions in New South Wales give new hope to consumers who are struggling to save their family homes from creditors. Sadly the first 3 cases described here were decided under the N.S.W. Contracts Review Act which does not apply to other jurisdictions in Australia, where consumers are left with lesser remedies such as equitable unconscionability, the Consumer Credit Code, the “wife” case of Yerkey v Jones (1939) 63 CLR 649 or the special disability case in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447.
However, there is no doubt that judges outside N.S.W. will be influenced by these decisions through the osmosis that occurs in the judicial business. In particular, the odious practice of asset-based lending to consumers is bound to come soon to the attention of a judge in a court near you. Perhaps the consumer might be your client!
In recent times, the most significant and surprising Contracts Review Act case on mortgages is probably that of Perpetual Trustee Company v Khoshaba [2006] NSWCA 41.
Mr and Mrs Khoshaba were pensioners and members of the Assyrian community in Sydney. They had limited education and no business experience. They were na�ve in relation to financial matters. In 2000 they decided to invest in a pyramid investment scheme with money that was borrowed by using their home as security. Many members of the Assyrian church were investing in this particular scheme and receiving high returns on their money. Mr and Mrs Khoshaba did not receive independent legal or financial advice before borrowing the money.
When the pyramid scheme collapsed and the mortgagee tried to obtain possession of the Khoshaba’s home, they put on a Contracts Review Act defence. Although the misrepresentations had been made by the broker’s agent and the lender had no actual knowledge of the circumstances of the Khoshabas, the court said that this was no excuse.
The N.S.W. Court of Appeal decided that the contract was unjust. It was particularly influenced by the fact that the lender was willing to lend on the value of the security alone and was indifferent to the purpose of the loan. It also considered that special consideration applied when the security was the home of the borrowers and the borrowers had demonstrated an inability to protect their own interests.
It is possible that a judge outside N.S.W. might have found for the borrowers on some other legal basis, such as the “special disability” defence in Amadio.
In the case of King Mortgages v Satchitanantham [2006] NSWSC 1303, Mrs Satchitanantham was born in Sri Lanka and obtained a university degree there. She later taught English to young children before coming to Australia in 1987. She is the full-time carer of her autistic son.
The husband of Mrs Satchitanantham became bankrupt in 2002 and was discharged in mid-2005. In February 2004, while he was still a bankrupt, the husband arranged a loan from King Mortgages to set up a business. All negotiations took place between the husband and the principals of Cash King. The loan for $100,000 at 48% p.a. was to be taken out in the name of Mrs Satchitanantham. It would be secured by a mortgage over the home of Mrs Satchitanantham.
Although Mrs Satchitanantham was in receipt of Centrelink benefits of $1,700 per month, Mrs Satchitanantham signed a loan application for which she was described as the Manager of Brightstar Properties and Holdings with substantial assets. One document she signed falsely stated that her salary was $104,000 per annum.
Mrs Satchitanantham was referred to a licensed conveyancer and a financial adviser, who both regularly undertook work for Cash King. The explanation provided by the conveyancer to Mrs Satchitanantham was cursory and he failed to explain to Mrs Satchitanantham that she stood at risk of losing her home in the event that repayments were not made in accordance with the agreement. The husband also attended the interview between Mrs Satchitanantham and the financial adviser and told the financial adviser that his wife had a significant income. In reliance upon that information, the financial adviser certified that Mrs Satchitanantham had the ability to meet her loans without substantial hardship.
When everything fell apart, Cash King sued Mrs Satchitanantham to take her home. She put on a defence under the N.S.W. Contracts Review Act, which empowers a court to reopen contracts that are unjust. She tried a Yerkey v Jones defence, but this was rejected by the judge.
Mrs Satchitanantham won the case. The judge considered all the evidence and concluded that the loans were unjust because Cash King was prepared to lend on the strength of the security of her home without regard to her inability to make payments under the loan. However, victory for Mrs Satchitanantham was not total. The judge was not willing to release her from all liability to repay Cash King, but rather to only reduce the interest and charges to be paid, still leaving her with a debt for the principal sum borrowed.
For more about unjust mortgages and Cash King, see the article about Permanent Mortgages v Cook [2006] NSWSC 1104 discussed in the December 2006 issue of Sharkwatch.
There are some really kind, generous people in the world. Some of them are willing to risk their home to help out a friend, with no expectation of reward. No Fuss Finance v Miller [2006] NSWSC 630 is a rare legal fairytale story with a happy ending.
Ms Miller was a 50 year old sole parent who survived on a mix of casual work, child support and welfare. She had been friends with a property developer named Mr Rampling for many years.
One day he asked: “Would you let me use your home for a business project? This is a once in a lifetime opportunity and I didn’t want to see it slip.” She replied: “Yes. But I don’t know what that means, you do whatever needs to be done for your business. I don’t know that side of business.”
This was true. Ms Miller had an almost complete ignorance about loans and financial matters, and also an extremely trusting and generous attitude as regards favours done for those persons she considered to be friends. She was willing to mortgage her modest home as a favour with no expectation of reward.
The lender arranged for Ms Miller to meet with a solicitor, but Mr Rampling was present and all the solicitor did was read out some documents that Ms Miller did not understand. So she did not receive independent legal or financial advice. Nor was she informed that the lender was charging Rampling interest on the loan of $190,000 at the considerable rate of 72% per annum.
You will not be surprised to read that Mr Rampling disappeared and the loan was not repaid. The lender tried to enforce its mortgage, and Ms Miller obtained legal representation and filed a defence.
The judge found that the contract was unjust in the circumstances. The most significant factor was that Ms Miller did not have the means to service the loan in the event of default by Mr Rampling. In this case, the judge released Ms Miller from all liability under the mortgage and she lived happily ever after.
It was once thought that hardship variations under the Consumer Credit Code could only be made before expiry of the statutory s.80 Default Notice. This has now been changed by the case of Permanent Custodians Limited v Upston [2007] NSWSC223, in which an application for a hardship variation was made as a Defence in Supreme Court possession proceedings.
Carolyn Upston borrowed a total of $264,000, comprising $180,000 to buy out her brother’s share of her home and another $84,000 to buy Bimbo’s Takeaway shop. So the loan was predominantly for consumer purposes and regulated by the Consumer Credit Code.
Bimbo’s Takeaway turned out to be a financial disaster and Ms Upston eventually sold it after encountering serious losses. However, she was able to secure well-paid employment and her budget showed available funds sufficient to service her debt to the lender.
However, the lender had already issued a s.80 Default Notice and when it expired had taken court proceedings to obtain possession of her home. The lender was unwilling to negotiate.
Ms Upston then made an application for a hardship variation under s.68 Consumer Credit Code. The lender opposed the hardship variation application claiming that s.68 applications can only be made before the expiry of a s.80 Default Notice and that the cause of hardship was failure of the business, not a consumer problem.
The judge rejected the lender’s arguments and held that Ms Upston was entitled to make her application for a hardship variation, even when court proceedings had been taken against her.
The judge was impressed with the fact that Ms Upston had maintained regular payments to the lender since she went back to work and had listed her home for sale with a real estate agent. He felt confident that she would be able to fulfil her obligations to the lender with enough time. The judge made orders postponing the arrears and extending the term of the contract. This enabled Ms Upston to save her home.
Download the Bankruptcy Contribution Calculator (PDF format, 87kb). Figures are as at March 30, 2007.
Use the column for the correct amount of dependents
Calculate the client’s gross 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.
Add assessable income items that would increase the net income, such as fringe benefits, and calculate the client’s assessed income for bankruptcy contribution purposes.
Subtract the AITA assessable income threshold amount (A) from the clients assessable income (B)
ITSA will take 50 cents in the dollar of any excess above the AITA threshold. Divide the income in excess of AITA threshold amount © by two. This will give the amount of the contribution towards the bankruptcy that ITSA is likely to ask for.
For further assistance, there are actual examples in Sharkwatch Vol. 5 No. 4 — November 2004.
A teleconference was held on May 25th to discuss issues related to dealing with micro-lenders and issues related to funding.
Discussions on funding centred around several ongoing issues: the need for higher levels of funding, the need for state government funding in Queensland, the difficulties that arise for small regional services when funding monies are delayed, the difficulties that arise when funding cannot be rolled-over from financial year to financial year, and the true costs of running community based services increasing more quickly than the Consumer Price Index.
The discussion then moved on to the proliferation and behaviour of micro-lenders. It was noted that many pay-day lenders and other fringe credit providers have now created a peak body, the National Financial Services Federation Inc. (NFSF), who describe themselves as “the peak organisation representing micro and alternative finance providers throughout Australia”.
The NFSF have been very active, hiring lobbyists such as Philip Smiles to represent their interests and provide submissions to the Productivity Commission’s Review of the Consumer Policy Framework and to the Uniform Credit Code Management Committee. Many of the participants were surprised to learn that Mr Smiles (along with a Mr Peter Grantham) had portrayed his clients in the latter submission as struggling mum and dad businesses being strangled by repressive over-regulation (go to http://www.pc.gov.au/inquiry/consumer/trans/sydney070416.html for a transcript). Participants, all of whom had seen the flip side (e.g., very high interest rates; schemes to avoid regulation under the Uniform Consumer Credit Code; Bills of Sale over all the possessions in a house etc.), were less than impressed by this line of argument.
Participants also discussed the operation of a new business in Queensland who are ostensibly setting up a budget for the client, but who (a) take all income by direct debit, bar a small sum, usually around $100 pw, (b) charge high administration and set-up costs, and © appear to be setting up a Part IX Debt Agreement without stating explicitly to the client that this is what they are doing. Participants agreed that they should investigate further, and raise findings at a later link-up.
It was also noted that mainstream businesses who target the working poor seem to be appearing in increasing numbers in the suburban shopping centres of poorer suburbs. Clearly the proliferation and practices of such lenders will continue to be an issue for financial counsellors and their clients.
Jan Pentland
AFCCRA representative on the Bankruptcy Reform Consultative Forum
The Consultative Forum meeting was held in Melbourne on the 17th of May. Reports were received from those representing creditors, registered trustees, the Australian Tax Office, the Attorney General’s Department, debt agreement administrators and financial counsellors.
On behalf of financial counsellors I reported on the rising numbers of bankruptcies we are seeing, including the higher amount of bankruptcies due to credit card debt; and also on continuing problems with debt agreement administrators, especially their advertising.
With the introduction of the Part IX amendments on 1 July, we hope that many of our problems with debt agreements will be addressed. However, advertising continues to be within the Australian Securities and Investment Commission (ASIC) jurisdiction and I plan to follow this up with ASIC soon.
The amendments to superannuation were briefly discussed and there was a brief up-date of the review of offences under the Act. More information is available at www.itsa.gov.au
Of particular interest to financial counsellors is the review of the ‘prescribed information’ which all debtors must acknowledge they have read as part of lodging their debtor’s petition. This booklet is being redrafted in a briefer, simpler format supported by single page ‘facts sheets’.
I encourage you to take this opportunity to consider this proposed change and provide feedback to ITSA: contact Nikki Sweeney on 02 6270 3430 or at: Nicki.Sweeney@itsa.gov.au
Part of my feedback will be that it is not my view that “The booklet emphasises bankruptcy over other alternatives.”
The minimal review of trustees’ remuneration has been commenced by ITSA and will be progressed over the coming months. The project, funded by the Consumer Credit Fund and being undertaken by Eastern Access Community Health (EACH), is progressing and the report will feed into the review. Again, many thanks to those of you who have assisted me with this project — your help is much appreciated.
If you would like to discuss any of the above, please ring me on 0407 0424 483 or email me at: janpentland@hotmail.com.
Jan Pentland
AFCCRA representative (Victoria)
AFCCRA is involved in three forums to be held in Sydney in July 2007:
Programs are posted on the AFCCRA website at www.afccra.org.
The forums will be held at the Citigate Sebel Hotel at 28 Albion Street in Sydney. For further information, or to register, please contact Jan Pentland on 0407 042 483 or by email at janpentland@hotmail.com.
A focus of the AFCCRA Conference will be an independently facilitated discussion of conflict of interest. AFCCRA will facilitate a national discussion of this issue during 2007. The discussion paper “Partnerships with industry and conflict of interest” is available at www.afccra.org. Your comments are welcome.
Together with other consumer organisations, AFCCRA has made a submission to the Productivity Commission Review of the Consumer Policy Framework. Some state associations and financial counselling agencies have also been involved in the review.
The Review of the Community Services Training Package which includes the Diploma of Community Services (Financial Counselling) is underway and AFCCRA has made a submission informed by a national working group under the leadership of Jillian Fletcher. Jillian is also undertaking additional work on the Diploma to assist with national implementation.
A priority for AFCCRA over recent months and into the future is to explore funding options for AFCCRA itself and for the financial counselling sector. This is a work in progress.
Policy areas include:
For further information on any of the above, please contact David Tennant at david.tennant@carefcs.org or Jan Pentland at janpentland@hotmail.com
News, views and information on what’s happening in financial counselling around Australia.
The website for the Financial Counsellors’ Resource Project (FCRP), which is an outstanding resource for financial counsellors, has created a new section called ‘From Ian’s Desk’. Regular readers of the FCRP News would be aware of this valuable column from the FCRP solicitor, Ian Macdonald, which deals with a range of legal issues that are relevant to financial counsellors. The web resource of the same name has links to copies of all of Ian’s columns from the FCRP E-News versions.
The FCRP have also upgraded the capabilities of their website, adding a ‘Search’ facility that is linked to its all papers and documents. To see for yourself, go to www.fcrp.org.au.
The Consumer Credit Legal Service of Western Australia (CCLSWA) has launched a new website. The site, which provides a brief background of the service, a run-down of what services can be obtained, a number of interesting case studies, and links to relevant government, community and welfare services, is located at www.cclswa.org.au.
“The SWaP (Saving Water and Power) program run by Environment House offers metropolitan concession-holders a free home visit to help them cut their energy and water bills. A home visit typically takes 2 hours and free hardware will be fitted if it will make a difference (e.g. compact fluoro globes, hot water pipe installation, draft stoppers, lower-flow showerheads, tap washers, etc.) Available until August 7th. For more information contact Environment House on (08) 9271 4488 or visit their website at www.environmenthouse.org.au.”
(This item reproduced from FRCP E-News no. 7, 2007).
Sharkwatch has received reports of a ‘budgeting service’ which takes and disburses most of the client’s income see report on page 13) as well as reports of other lenders working marginally outside the Uniform Consumer Credit Code by using various forms of fees and charges that are not ‘interest’ per se (e.g., see report on page 4). We are particularly interested in hearing from any readers who have had dealings with such services, especially any service that directs to itself most of the client’s income. Call or email Jennifer or Wayne (contact details on page 2).
Dyanne Harvey (Anglicare Eden) and Alick O'Har from Creditline, Fairfield
Sandy Dawson from Creditline, Nowra
Cliff Banks (Wagga Wagga and Best Bet FC Service)
Tui Babbington (San Remo FC Service) celebrates her birthday in style
The Financial Counsellors’ Association of NSW (FCAN) held its Annual Conference and AGM last April. Terry Harvey from the Lismore and District Financial Counselling Service was installed as President.
In a June 7 press release, the NSW Minister for Fair Trading, Linda Burney, announced a 17% increase in funding for financial counselling in NSW. Ms Burney noted that interest rate increases and more easily obtained credit had left more and more people “struggling to make ends meet”. The press release also noted a 23% increase in March quarter bankruptcies in NSW, a 4.7% increase in average Australian credit card limits (now up to $7,719 per card!!) and a total personal debt in Australia of a staggering $777.7 billion.
The increased funding is for 3 years and has been spread across 27 organisations that operate a total of 43 separate community-based services. There will be new services in Griffith, Hurstville and Wagga Wagga.
At Sharkwatch we were disturbed to read Kaily Goodsell’s regional report from the Riverina in the FCAN Annual Report for last year. Kaily notes that there have been tough times in her region, and that “the past twelve months has seen a rise in the number of clients who have either attempted or contemplated suicide due to their financial situation”.
This is a worrying trend, especially if it turns out to be more widespread. Readers of Sharkwatch are encouraged to contact Wayne or Jennifer (1800 647 409) to let them know whether a similar trend has been noticed in their region.
We note from the March FCAN News that David Bell from Centacare Liverpool is “having a run, at the moment, of lenders … who are lending to consumers in the form of Promissory Notes and Bills of Exchange in order to avoid the provisions of the [Uniform Consumer Credit] Code. … A couple of examples: if we calculate the rate in accordance with the most recent amendment are City Finance 230% pa and Cash Loan Money Centres 170%. I have spoken to others who have had a similar experience.”
Again, it would be great if Sharkwatch readers could provide further examples to take to the relevant bodies. Ring 1800 647 409 or email Jennifer or Wayne (email addresses on page 2).
The NSW Consumer Credit Legal Centre is about to launch a new “National Insurance Hotline”. The service, which will be Australia-wide, will be able to deal with issues such as rejected claims, refusal of cover, harsh and unfair terms, inability to claim due to excess, and claims against uninsured third parties, as well as other issues.
The service will begin operation from July 1. The contact phone number is 1300 663 464.
Any contributions to “Round Up” would be most welcome. Our aim is to include some news from each state and territory. Contact Wayne Warburton on 1800 647 409 if you have anything you would like to have included. Alternatively, you can email to: wayne.warburton@wesleymission.org.au
Original story by Jessica Irvine
Sydney Morning Herald, May, 30, 2007
In this story it is reported that “the average monthly repayment needed to buy a typical first home in Sydney has hit $3000, … up $442 on a year ago, and second only to Perth-based first-home buyers who shell out $3009 a month”. According to the Housing Industry Association (HIA’s) latest housing affordability report, about “half the increase is due to last year’s three interest rate rises, which added almost $200 a month to repayments on a $400,000 loan”, and the rest is due to “rising home prices, which have forced people to take out bigger loans.” (According to CBA figures collected for the report, “the median Sydney first-home price rose 9.6 per cent to $507,400 over the year to March”).
The NSW executive director of the HIA, Graham Wolfe, was quoted as saying that this was a structural problem rather than “a cyclical market trend that will correct itself”. He suggested that even assuming interest rates remained low, housing affordability in NSW would not return to acceptable levels until 2022.”
Given that ‘housing stress’ is defined as a situation where 30% or more of a person’s disposable income is used for mortgage repayments or housing, and that in Sydney the average first home buyer is spending 38.5% of their income on housing, then this increase in average repayments means that a great many first home buyers are now experiencing housing stress.
“Recent testimony to a Senate committee by the Inspector-General of the Insolvency and Trustee Service Australia, Terry Gallagher, indicated Australian families are under increasing financial stress. Mr. Gallagher said bankruptcies had risen 12.5 per cent in the nine months to March. “You could go back 10 or 15 years, when bankruptcy numbers were 13,000 a year, and now they are 30,000 a year,” he said.”
“The Opposition’s treasury spokesman, Wayne Swan, noted that eight consecutive interest rate rises over the past five years had added about $140,000 to mortgage repayments over the life of a loan for the average median-priced Australian home.”
Original story by Jessica Irvine
Sydney Morning Herald, May, 29, 2007
This story reports that the Australian Tax Office (ATO) has successfully trialled the use of debt collectors to pursue the tax debts of small businesses and individuals in an effort to recover $10 billion in unpaid tax, and to stop businesses getting an unfair advantage over competitors by deliberately avoiding tax.
According to the story, “people with unpaid tax bills as low as $100 face after-hours telephone calls, text messages and emails from a private debt collector”. The Sydney Morning Herald reports that although the ATO “has promised that debt collectors will adhere to strict guidelines about privacy and professionalism, small business representatives are concerned heavy-handed tactics may be used”.
For example, tender documents show that “debt collectors will be allowed to make calls from as early as 7.30am on weekdays and 9am at weekends”, and “no upper limit is specified on the number of times contact can be made. Emails will be sent to a home address to protect confidentiality at work. Home visits will not be allowed”.
Our own David Tennant, chairperson of AFCCRA, is quoted as noting that “many small businesses [are] caught in a “tail spin” at tax time and incur … debts because they [are] unsure what taxes they have to collect”.
He also notes that the system is complex and has “effectively outsourced tax collection to people who don’t have the skills or wherewithal to do it” (i.e., that small businesses are themselves becoming de-facto tax collectors). David suggests that this factor has itself contributed to the failure of some small businesses.
The chief executive of Taxpayers Australia, Tony Greco, said a payment structure rewarding collectors for recovering more debt could lead to aggressive tactics by them.
