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Major National Debt Helpline campaign: act early if you’re experiencing financial stress

The National Debt Helpline has launched a campaign encouraging people in financial stress to contact a free and confidential financial counsellor.

The launch of the campaign follows the end of the various financial support arrangements put in place by Government and industry during the pandemic.

The JobKeeper and JobSeeker supplements finished at the end of March, meaning that many Australians now have less money to make ends meet.

Other financial support is also tapering or has ended. These supports include standard loan deferrals from banks, rental moratorium arrangements and protection from energy disconnection.

“The next few months are going to be tough and worrying for many people. We want them to know there is free assistance available through the National Debt Helpline,” said Fiona Guthrie, CEO of Financial Counselling Australia.

“The time to act is now. Don’t wait for your bills and debts to spiral out of control. We care, we can help, and we are free,” she said.

The awareness campaign involves sponsored social media content, posters and short videos in medical clinics across the country, and advertisements on taxis and buses.

The National Debt Helpline is a not-for-profit service that helps people in Australia tackle their debt problems.

Its website has helpful guides on how to deal with bills and debt and there is a helpline on 1800 007 007, which is staffed by professional financial counsellors who provide a independent and confidential service.

Financial counsellors can advise people about how to get through the next few months. For example, by providing guidance about accessing hardship arrangements with lenders and utility providers.

“Financial counsellors are trained to deal with people in financial stress. We help people who are worried about their debt and bills to get back on track financially,” Ms Guthrie said.

“We’re also warning people to be wary of services offering to negotiate your debts or fix your credit report for a fee.

“These services do not always act in the best interests of the people they purport to help. They can cost thousands of dollars, for not much in return,” Ms Guthrie said.

National Debt Helpline vehicle advertisements:

 

 

For more information call Maura Angle on 0418 334 121 or email [email protected]

Report shows telcos must improve responses to customers facing financial hardship

A new report by Financial Counselling Australia clearly shows that the telecommunications industry must improve its response to customers who are experiencing financial hardship.

The report, ‘Telcos and Financial Hardship: Feedback from the Frontline’, has two parts:

  • A survey of financial counsellors
  • Desk top research on other relevant studies and data

Every financial counsellor who took part in the survey said they have clients struggling to pay their telco bills. A quarter of respondents said more than 50% of their clients are struggling to pay.

Telcos refer their customers to financial counsellors and benefit when the customers get back on track.

Other key findings of the report show:

  • Overall, telco hardship practices are poor
  • Mis-selling is common throughout the industry, with around 80% of financial counsellors saying they have clients with debts where mis-selling has occurred
  • Affordability checks are inadequate, which places people under financial stress

Financial counsellors rated the three major telcos on the way they treated customers in hardship, where 1 was the lowest rating and 10 the highest. Telstra scored 6.2, Optus 5.6 and TPG/Vodafone 4.4. These ratings are poor.

Nearly a quarter of Australia’s 950 financial counsellors took part in the survey. This was a remarkable result, given the survey was only open for the three days immediately before Easter.

The timing of the survey coincided with changes in the level of government support that took effect at the end of March 2021: the end of JobKeeper and a reduction in the JobSeeker payment.

These changes emphasise the need for telcos to improve their hardship practices and to work collaboratively with financial counsellors, to help struggling customers manage with less income following the pandemic.

Financial counsellors assist people experiencing financial difficulty. They provide information and advice to help people tackle their financial problems and to minimise the risk of issues occurring in the future. Financial counselling services are free, confidential and independent.

Quotes from the CEO of Financial Counselling Australia, Fiona Guthrie AM:

“One of the major drivers of people being unable to pay their telco bills is mis-selling. Too many people end up with devices they don’t need, don’t understand and can’t afford.”

“Financial counsellors gave example after example in the survey of mis-selling to people who were vulnerable. These groups of people then end up in financial hardship.”

“Telco financial hardship practices just aren’t good enough. Some of the problems financial counsellors pointed to included telcos not offering hardship arrangements to customers at all, or not offering affordable arrangements.”

“As Australia recovers from the pandemic, telcos must ensure that people in financial hardship are treated fairly.”

“Telcos provide essential services. Without a phone or internet, people miss out on jobs, can’t make medical appointments or stay in touch with government services. That’s why telcos must support their vulnerable customers.”

Media contact:

Georgia Lenton-Williams, Communications Advisor
Phone: 0422 707 136 Email: [email protected]

Free financial counselling for flood victims

Financial Counselling Australia (FCA) is reminding individuals and small business owners who have been affected by the floods in NSW and Queensland that they have access to free financial counselling.

“Financial counsellors play a vital role in helping people respond, rebuild and recover from natural disasters like flood,” said Helen Davis, the General Manager of the Small Business Financial Counselling Support Line.

Financial counsellors support people by providing free, confidential and independent advice.

“We want flood victims to know there are two helpful services they can access for free. The National Debt Helpline for individuals in financial stress and the Small Business Financial Counselling Support Line, for small business owners,” Ms Davis said.

Financial counsellors provide advice and assistance on a wide range of financial matters including:

  • Disputes with insurance companies, the pros and cons of cash settlements
  • Difficulties paying mortgages, rent or utility bills
  • Negotiating with banks and other credit providers
  • Assistance accessing government grants
  • Accessing Centrelink payments

It’s important to note that financial counsellors are not planners or advisors. They don’t provide investment advice nor are they lenders.

“These floods are having an enormous impact on the communities affected. These people now have to rebuild and recover and it’s important for them to know financial counsellors are here to help as much as possible,” said Ms Davis.

Anyone struggling financially due to the floods can contact the National Debt Helpline on 1800 007 007 or visit ndh.org.au. Small business owners can call the Small Business Financial Counselling support line on 1800 413 828 or visit smallbusinessbushfire.org.au.

Media Contact

Maura Angle, Director of Community Engagement: 0418 334 121 or email [email protected]

Buy now pay later sector must be regulated by Government NOT itself

 

Consumer groups have united to call for Federal Government regulation of buy now pay later (BNPL) services to protect consumers and put all credit providers on a level playing field.

Today the Australian Finance Industry Association released a self-regulatory code of conduct for BNPL providers. While it’s positive to see the industry introduce a code with contractually enforceable commitments, it is not a substitute for adequate regulation by Government under Australia’s credit laws.

BNPL is credit and should be regulated like other credit products.

Organisations at the coal face of consumer complaints and hardship – Financial Rights Legal Centre, Financial Counselling Australia, Consumer Action Legal Centre and CHOICE – are calling on the Government to follow the lead of the United Kingdom which just last month announced it would regulate the BNPL industry.

Consumer groups see the harm BNPL services cause first-hand. This includes an increasing number of people who end up in unaffordable debt through using them, poor industry hardship practices and excessive late fees.

While the promise of BNPL is that they do not charge interest, for some people the cost of late fees or account keeping fees can be just as expensive as a credit card. BNPL providers also charge a fee to retailers of between 3% – 6%. These costs will be passed on to all consumers.

A 2020 report by the Australian Securities and Investment Commission (ASIC) found that one in five people had missed payments on their BNPL debts. Worryingly, one in five people had also gone without essential items, such as food, in order to make a payment.

It also found 55% of users had at least two BNPL contracts on the go at once.

BNPL services are not currently required to hold a credit licence[1] and are not subject to consumer protections under the National Consumer Credit Protection Act 2009, despite the fact that some of these services loan large amounts up to $30,000.

This means that ASIC cannot take compliance and enforcement action for breach of lending standards by BNPL providers. The code only requires BNPL providers to assess if a borrower can make the first payment – there is no requirement to assess whether the subsequent payments are affordable.

[1] Comm Bank offers a BNPL product through a partnership with international BNPL provider Klarna and therefore has a credit licence. Klarna is not part of this code.

Quotes attributable to Financial Rights Legal Centre Chief Executive Officer Karen Cox:

These services are growing at a breathtaking rate, and ASIC’s research has shown that at least one in five consumers are missing payments. As this industry continues to grow, we will see increased debts and increased financial hardship.

Sadly, many people including Aboriginal and Torres Strait Islander people who are lured into BNPL are becoming embroiled in unsustainable, long-term debt. BNPL companies use a simple but seductive psychological trick to attract customers. Spreading out the cost of an item makes it feel less expensive, but that doesn’t mean you can afford it.

Right now, there is no obligation for BNPL providers to assess a person’s ability to repay debt or handle a consumer’s complaint fairly. We are glad to see the new Code requires membership in AFCA, but that is no replacement for proper regulation.

Quotes attributable to Financial Counselling Australia Chief Executive Officer Fiona Guthrie:

BNPL providers run a mile at the mention of the word “credit”, telling their customers the service is all about better budgeting. What they tell retailers however is much closer to the truth – that BNPL encourages people to spend more.

What BNPL providers are really doing is turning a loophole in the law into a gaping hole. It is worth remembering that BNPL is available from just a few hundred dollars to $30,000 and the code contemplates even higher amounts.

If it looks like a duck and quacks like a duck, it is a duck. We should ditch ideology and recognise that BNPL is credit and should be regulated like other credit. If we fail to act, more and more Australians will be harmed.

Take Susan*, a client of a financial counsellor who was spending 40% of her income
on BNPL debts and didn’t have enough money left for day to day living expenses, including rent. Or John, a pensioner with early signs of dementia who was signed up to $14,000 of dodgy solar panels using BNPL when a salesman called at his home.

Quotes attributable to Consumer Action Law Centre Chief Executive Officer Gerard Brody:

The Financial Services Royal Commission Final Report identified the limits of self-regulation including inadequate standards, lack of compliance, weak monitoring and enforcement and no consequences for breaches. Too often self-regulation is just a fig leaf – while there are some standards, unfortunately this code does not require every BNPL loan to be suitable and affordable for the individual customer.

So-called innovation in the financial services sector is too often focused on exploiting regulatory loopholes. Innovation that benefits the community should be able to comply with consumer protection laws to enhance people’s financial wellbeing.

The unregulated BNPL market has grown substantially in the last few years, including substantial growth during 2020. There is no doubt that this unrestrained growth poses potential harms to consumers and it needs to be brought within regulation to both protect consumers and ensure it is sustainable.

Quotes attributable to CHOICE, Director of Campaigns and Communications, Erin Turner:

Self-regulation of the Buy Now, Pay Later sector will not be enough to fix the issues we’re seeing like high fees, inappropriate lending and pushy marketing of debt to Australians.

The Buy Now Pay Later sector is now selling debt for dental treatments, solar panels and other large purchases. It is credit in everything but name so the consumer protection laws for credit should apply in full, not a weak industry code.

The Code will see businesses that fail to comply with basic standards face “naming and shaming” rather than the penalties or legal action other lenders face for significant breaches of consumer credit protections. This sets an inappropriately low bar for a growing industry.

Media contacts:

For an interview with Fiona Guthrie at Financial Counselling Australia, contact Maura Angle on 0418 334 121 or email [email protected]

For an interview with Erin Turner at CHOICE, contact 0430 172 669

For an interview with Karen Cox at Financial Rights, contact Marianna Papadakis 0414 729 006

For an interview with Gerard Brody at Consumer Action, contact Mark Pearce on 0413 299 567 or email [email protected]

Financial counsellors label increase to JobSeeker nowhere near enough

Financial counsellors are disappointed with today’s decision by the Federal Government to only increase JobSeeker by $50 a fortnight.

“This is well below what is needed. We support a permanent and reasonable increase to JobSeeker, Youth Allowance and other income support payments,” said the CEO of Financial Counselling Australia, Fiona Guthrie.

The Australian Council of Social Services (ACOSS) had called for at least an extra $25 a day, but instead the Government has only announced an extra $25 a week.

“When JobSeeker was first introduced to help with the impact of COVID, demand for financial counselling reduced because many of our clients had enough money to live on for the first time in ages,” said Ms Guthrie.

“While any increase is better than nothing, this does not go anywhere near enough to help the most vulnerable.

“The Federal Government must ensure that people are given enough money to live on. This minuscule increase is simply cruel.

“This is not the sort of Australia we want,” Ms Guthrie said.

“We urge anyone in financial stress to contact a financial counsellor. They can speak with one by calling the National Debt Helpline (NDH) on 1800 007 007 or find their closest face-to-face service by going to www.ndh.org.au,” Ms Guthrie said.

Financial counsellors are skilled professionals who provide FREE, independent and confidential advice for people in financial hardship. They are not planners or advisers. They don’t provide investment advice or earn commissions.

To organise an interview with Fiona Guthrie, call Maura Angle on 0418 334 121 or email [email protected]

“The job is not yet done”: Banking Royal Commission implementation

 

Consumer groups respond to the two year anniversary of the Hayne Banking Royal Commission Final Report’s public release

“People expect tough action to be taken on the Banking Royal Commission recommendations. We commend the government on its work to date, including banning grandfathered commissions and the introduction of a best interests duty for mortgage brokers,” says CHOICE CEO Alan Kirkland.

“What the government does with the remaining recommendations will determine whether that year of Royal Commission hearings was worth it, or whether we’ll just allow the banking sector to slip back to bad old ways.”

“Landmark reforms including the Financial Accountability Regime are due to be implemented this year. One of the powerful lessons of the Royal Commission is the failure of executives and senior managers to be held to account when they break the law.”

Polling conducted in November 2020 found that 81% of Australians think there should be stronger laws that hold senior financial executives to account [1].

“A new Financial Accountability Regime with strong individual penalties will bring greater personal accountability to the financial system. There’s no point introducing an accountability regime unless it’s a tough one,” says Mr Kirkland.

Quotes attributable to Gerard Brody, CEO of Consumer Action Law Centre 

“Some improvements to consumer protection have been enacted, particularly in areas like the sale of junk add-on financial products and cold-calling—although industry are already seeking carve outs and exemptions. All outstanding recommendations need to be prioritised to ensure people are not left out-of-pocket.”

“We need a well-funded and broad-ranging Compensation Scheme of Last Resort to ensure victims of financial sector misconduct get paid fair compensation if the firm goes bust. The community won’t trust the finance sector unless they know that they will be remedied if something goes wrong, that’s why this overdue reform needs to be implemented as a priority.”

Polling conducted in November 2020 found that 82% of Australians think there should be compensation for people when they are wronged by financial institutions [1].

Quotes attributable to Karen Cox, CEO of Financial Rights Legal Centre 

Financial Rights Chief Executive Officer Karen Cox said removing Australia’s responsible lending laws would give borrowers access to credit they simply cannot afford, with lenders facing no penalties for failing to lend responsibly. It would remove the right for borrowers to take legal action against lenders.

“The Hayne Commission couldn’t have been clearer – responsible lending laws need to stay in place,” Ms Cox said.

“When I was called as the first witness to the Commission almost three years ago I recalled how thousands of people reached out to Financial Rights for help to solve problems with unsustainable debt.

“We all hoped the Royal Commission would lead to improved experiences for customers and fewer people overloaded with staggering credit they cannot afford. The Australian Government has clearly forgotten the plight of these people.”

“The fact is household levels of debt in Australia are still among the highest in the world. New home loan commitments reached record highs in December 2020. The Government’s proposal to axe safe lending in order to let credit flow more freely is illogical and economically irresponsible.”

Quotes attributable to Fiona Guthrie, CEO of Financial Counselling Australia 

“The Royal Commission has changed the financial services industry for the better. But we’ll be back here in a few years’ time if the industry forgets the lessons, returning to the bad old days of loopholes and profit before people.”

“The financial counselling sector is also very grateful that the Government took note of Commissioner Hayne’s comments about the power imbalance between consumers and financial services providers and the need for predictable and stable funding for financial counselling as a way to redress those imbalances. The subsequent review of the funding for financial counselling conducted by Louise Sylvan AM, recommended that industry contribute to funding, and this policy reform is now being explored.

“Financial counsellors however are incredibly concerned that the Government is proposing to wind back the responsible lending laws, contrary to the first recommendation of the Royal Commission. Our survey of the sector found that 97% of financial counsellors think the laws should stay [2]. The overwhelming majority of financial counsellors (93%) say they use the laws to help their clients.”

Media contact: Katelyn Cameron, 0430 172 669, [email protected]

Notes: 

[1] Polling was completed as part of the Dynata’s weekly “Omnipulse” omnibus.The fieldwork was conducted on 11-16 November, 2020. 1,014 people completed the survey and data was weighed to the latest ABS census data so results are nationally representative.

[2] Financial Counselling Australia’s Safe Safe Lending report was released on Monday 1 February. The report surveyed 235 financial counsellors.

Survey predicts dire consequences if safe lending laws are axed

A survey of Australia’s financial counsellors shows an overwhelming majority believe responsible lending laws should remain to prevent devastating consequences to people and the economy.

The “Save Safe Lending” survey was conducted by Financial Counselling Australia (FCA) after the Federal Government announced plans to amend the National Consumer Credit Protection Act 2009. A bill was introduced in December last year which, if passed, will remove responsible lending obligations for lenders, with the exception of small amount credit contracts (SACCs) and consumer leases.

“The very first recommendation of the report said the Act should not be amended to alter the obligation to assess unsuitability. So, Commissioner Hayne made it very clear our responsible lending laws should remain unchanged,” said Fiona Guthrie, CEO of Financial Counselling Australia.

Today marks two years since the final report of the banking royal commission was presented to the Governor-General.

“The Federal Government accepted this recommendation, but it now plans to axe the law, meaning vulnerable people will no longer be protected from getting into massive debt traps.

“Our survey shows most financial counsellors think this a terrible idea, with 97% saying they want the laws to stay and 94% believing the laws are an important consumer protection.”

Almost all (93%) of the counsellors surveyed say they use the laws to help their clients who have been affected by irresponsible lending practices and 92% agreed that they will see more clients with unaffordable debt if the laws are passed.

“These changes will harm individuals and families and are the last thing Australia needs as we chart a path to economic recovery. More debt is just a recipe for disaster.

“We urge all federal politicians to bear this in mind as they consider which way to vote on this bill,” said Ms Guthrie.

Financial counsellors work in community organisations and provide free, independent and non- judgmental assistance to people in financial stress. They’re different to financial planners or advisors.

The bill has been referred to the Senate Economics Legislation Committee for inquiry with a report due by 12 March 2021. The Government has stated it wants the new measures in place by March.

Key findings from the survey

  1. The majority of financial counsellors want the laws to remain. 97% supported this option, less than 1% said they should be removed while 2% did not have a view.
  2. The majority of financial counsellors agreed that the responsible lending laws are an important consumer protection, with 87% strongly agreeing and 7% agreeing.
  3. Nearly 93% of financial counsellors stated they use the responsible lending laws to advocate for their clients.
  4. The majority of financial counsellors expect they will see more clients with unaffordable debt if the laws are removed. A total of 92% are expecting an increase.
  5. Many of the respondents also believe that removing the laws will have a negative impact on the economic recovery, with 71% stating it would hinder the recovery from the pandemic.

Qualitative comments on the impact

“The repeal of the responsible lending laws would have a severe and negative impact on our community. Client presentations of financial hardship due to unaffordable and unsustainable debt will rise. The impact of financial hardship is an immense burden, which has such a negative ripple effect on a client’s mental health, physical health and relationships with family and friends, as well as the greater community.”

“Increased family violence and financial abuse.”

“Many of the clients that I have seen over the years struggling with unaffordable debt have expressed despair and had identified with suicide ideation.”

“Clients would have no protection from the predatory behaviour of some lenders.”

Examples of irresponsible lending

“Giving a personal loan to my client while she sat there with her partner. She had two black eyes from her partner and she never said a word through the interview. The partner spoke for her and told her to sign. It was all in her name.”

“I assisted an elderly couple who received the Age Pension, who had credit card debt of around $150,000. This was all waived under responsible lending laws. The couple were suicidal when I first met them, but with our assistance and responsible lending laws, we were able to negotiate waivers that left our clients in a better financial situation.”

“An $18,000 car loan for an 18-year-old on Youth Allowance with no other income. His living expenses were greater than his income before the loan was granted.”

“A solar panel contract for $19,000, where the client had no capacity to pay. The matter was resolved using responsible lending laws.”

Background

The responsible lending obligations protect people from exploitative lending by banks and other lenders and were introduced after the Global Financial Crisis.

Responsible lending obligations require lenders and brokers to:

  1. Make reasonable inquiries about the consumer’s financial situation, and their requirements and objectives;
  2. Take reasonable steps to verify the consumer’s financial situation; and
  3. Make an assessment about whether the credit contract is ‘not unsuitable’ for the consumer.

Financial counsellors believe there are some fundamental flaws with the proposed changes, including:

  • The removal of individual rights. It will be much harder for people given excessive credit to obtain redress through the independent dispute body, the Australian Financial Complaints Authority (AFCA). There will be no rights for individuals to take breaches of responsible lending laws to court.
  • People who are vulnerable, such as those who are affected by family violence, who have low financial literacy or mental health issues, will be at risk of significant harm because lenders may take advantage of that vulnerability.
  • The Bill removes civil and criminal penalties against credit licensees for irresponsible lending.
  • Banks will be able to return to the bad old days of loading people up with excessive credit card debt. This is because the Bill removes the obligation for banks to assess whether a credit card limit is affordable based on whether it could be repaid within three years.
  • The proposal unwinds Australia’s successful and much emulated twin peaks model of regulation, with the (APRA) focusing on prudential regulation and (ASIC) focusing on conduct. We will be left with APRA lending standards, which are designed primarily around system stability – not individual harm.

ENDS

To download a copy of the survey report, click here.

To speak with Fiona Guthrie or a financial counsellor contact: Maura Angle, FCA Director of Community Engagement – 0418 334 121 or [email protected]

Top five consumer-driven New Year’s resolutions

 

 

 

 

 

 

 

 

 

 

Like so many of us, Australia’s financial counsellors are happy to see the back of 2020 and are ready to welcome a new year.

We’re also determined to start 2021 with consumer-driven New Year’s resolutions. These are our top five and we invite you to join the party:

1. We vow to continue our “Save Safe Lending” campaign, to ensure consumers are protected from irresponsible lending. The Federal Government plans to axe responsible lending laws in March next year. Don’t let this happen! It will create a #DebtDisaster.

So far more than 19,000 people and 125 organisations have signed an open letter to parliamentarians. Make it your New Year’s resolution.

2. Our push to have Buy Now Pay Later services subject to the same legal framework as other lenders will continue in earnest.

As this market grows in Australia, so does the risk to consumers who use it. At the moment, providers aren’t required to check if customers can afford repayments, leaving them vulnerable to mounting debt if they miss payments.

To get on top of your Buy Now Pay Later debt, you can use this helpful guide from the National Debt Helpline.

3. We want to make it easier for people in financial stress to get assistance from a free, independent and confidential financial counsellor.

Our sector works hard to help people and small businesses get back on track financially. This work will continue in 2021, a year we expect will be very busy as Australia recovers from the COVID-19 induced recession.

If your New Year’s resolution is to get back on track financially, visit ndh.org.au or call 1800 007 007.

4. We remain committed to the campaign to “Raise the rate for good”. When the Federal Government introduced Job Seeker in response to COVID-19, many people had enough money to live on for the first time. We urge the Federal Government to permanently increase this payment (formerly Newstart Allowance).

Make a difference in 2021 and sign up to the campaign.

5. We promise to urge banks, creditors, utility companies and other financial service providers to treat their customers with extra consideration and respect in 2021. So many people have been doing it tough and the new year may bring added financial pressure.

Please ensure your hardship departments are well- staffed and your repayment arrangements are suitable for your customers. They need kindness and deserve dignity.

ENDS

Media contact

Maura Angle, FCA Director of Community Engagement: 0418 334 121 or [email protected]

ABA report confirms credit card funded gambling doesn’t have community support

A new report by the Australian Banking Association (ABA) shows it’s time to immediately ban the use of credit cards for gambling.

The ABA today released the results of its consultation process about the use of credit cards for gambling. A survey conducted to inform the report found that 81% of Australians believed that gambling on credit cards should be restricted or banned. Only 7% of Australians thought there should be no restrictions on gambling with a credit card.

In the light of these very clear findings, and the harm caused by credit-card gambling, Financial Counselling Australia (FCA) calls on all banks to commit to a ban on the use of credit cards for gambling transactions. If the banking industry fails to act, the Federal Government will need to step in and regulate instead.

“The community have spoken. It no longer meets community expectations for banks to finance gambling debt and set their customers up to fail,” said Lauren Levin, FCA’s Director of Policy and Campaigns.

“Gambling on credit cards is a double whammy. First, you lose your money gambling. Then, you pay credit card interest rates often over 20%. It is a no-brainer that this is harming Australians.”

Mid-tier financial institutions, including Latitude, Bank Australia and Macquarie, have stepped up and do not allow their credit cards to be used for gambling. However, so far, the Big Four have failed to act.

“We have to call this out. Failure to act on known harm means these banks are turning a blind eye to the harm that debt financed gambling is creating for their own customers,” Ms Levin said.

Predictably, some in the gambling industry argued that this lucrative revenue source should be maintained. In a Orwellian twist on public policy, this was couched because of the benefits to Government tax revenue.

“The money has to come from somewhere and we know that it comes at the expense of Australians being able to afford to pay for their living expenses, including food or medications” said Ms Levin.

“It can never be good policy for gambling to be debt financed.”

“There are so many other ways to pay for gambling. Each online wagering company has about 10 payment choices, including debit cards. Stopping credit card gambling won’t break the industry, but it will help a lot of people avoid debt issues.”

As the report notes, in the UK when the banks failed to act, the government stepped into the breach and within a few months all credit card betting was banned.

FCA is the peak body for the financial counselling profession. Financial counsellors offer free, independent and confidential assistance to people who are in financial stress or struggling with debt. They are not planners or advisors. They don’t provide investment advice nor are they lenders.

FCA’s submission to the ABA consultation is available here.

For comment, contact Lauren Levin on 0411 050 035.

Financial counsellors dismayed as bill to axe safe lending tabled just before Christmas

Financial counsellors from across the country are dismayed that the Federal Government is pushing ahead with its plan to axe safe lending laws.

This week the Government introduced a bill that amends the National Consumer Credit Protection Act 2009. If passed, it will remove responsible lending obligations for lenders, with the exception of small amount credit contracts (SACCs) and consumer leases.

“It’s so disappointing that the Federal Government wants to repeal laws that protect vulnerable people from getting into massive debt traps,” said Fiona Guthrie, CEO of Financial Counselling Australia.

“These changes will harm individuals and families and are the last thing Australia needs as we chart a path to economic recovery. More debt is just a recipe for disaster,” said Ms Guthrie.

The bill was tabled after only two weeks consultation. The government wants the new laws in place by March next year.

“The government wants to introduce these laws just as consumers are traditionally recovering from the expensive Christmas period, not to mention the extra costs of setting up children for school at the start of the year,” said Ms Guthrie.

The responsible lending obligations protect people from exploitative lending by banks and other lenders and were introduced after the Global Financial Crisis.

Responsible lending obligations require lenders and brokers to:

  1. Make reasonable inquiries about the consumer’s financial situation, and their requirements and objectives;
  2. Take reasonable steps to verify the consumer’s financial situation; and
  3. Make an assessment about whether the credit contract is ‘not unsuitable’ for the consumer.

Financial counsellors believe there are some fundamental flaws with the proposed changes, including:

  • The removal of individual rights. It will be much harder for people given excessive credit to obtain redress through the independent dispute body, the Australian Financial Complaints Authority (AFCA). There will be no rights for individuals to take breaches of responsible lending laws to court.
  • People who are vulnerable, such as those who are affected by family violence, who have low financial literacy or mental health issues, will be at risk of significant harm because lenders may take advantage of that vulnerability.
  • The proposal unwinds Australia’s successful and much emulated twin peaks model of regulation, with the Australian Prudential Regulation Authority (APRA) focusing on prudential regulation and Australian Securities and Investments Commission (ASIC) focusing on conduct. We will be left with APRA lending standards, which are designed primarily around system stability – not individual harm.

Financial counsellors work in community organisations and provide free, independent and non-judgmental assistance to people in financial stress. They are different to financial planners or advisors.

They work with people who are struggling with debt on a daily basis and witness the devastating impact of irresponsible lending on individuals and families.

If these laws are removed, many people will forgo other essentials like groceries and medicine. Unaffordable debt is often a pathway to poverty.

Australia already has a massive debt problem. We have the second highest debt to income ratio in the world and financial counsellors fear there is a looming debt disaster if these laws are axed.

Finally, let’s not forget the Banking Royal Commission. The very first recommendation of the Commission (Recommendation 1.1) accepted by the Government was:

The NCCP Act should not be amended to alter the obligation to assess unsuitability.

That is to say, our responsible lending laws should remain unchanged.

ENDS

Media contact

Maura Angle, FCA Director of Community Engagement: 0418 334 121 or [email protected]

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