20th April 2016 – Today’s announcement of a user-pays funding model for ASIC – effectively a levy on the banking industry – is good news for ASIC, but a missed opportunity for financial counselling.
The user-pays model should also be extended to include funding for free financial counselling.
Financial counsellors work in not for profit community organisations and assist consumers in financial difficulty, providing information, support and advocacy.
The large majority of financial counselling clients have debts with financial service providers they are struggling to pay. The finance industry benefits enormously when customers are able to get back on top of their finances because of the assistance of a financial counsellor. FSPs however do not contribute to the direct cost of service provision.
In adopting a user-pays funding model for ASIC, Australia is partly replicating what happens in the United Kingdom – we need to replicate the full model.
The UK user-pays system funds the financial services regulator (the Financial Conduct Authority) as well as debt advice services (what we call financial counselling) and the Money Advice Service (financial literacy initiatives). The UK levy raises 34 million pounds per annum for debt advice services.
Across Australia, funding for financial counselling continues to be ad hoc, inconsistent and uncertain. Governments increase, decrease or in some cases defund services almost at a whim. Responsibility for funding however should not simply to be shared responsibility between the Federal and State Governments. It is time for the industries that benefit from financial counselling and refer their clients to financial counselling, to also fund financial counselling.
Demand for financial counselling far exceeds supply. A user-pays funding model would provide much needed additional funding for financial counselling, in addition to current government funding. Financial counsellors could then help the many thousands of Australians who remain trapped in debt, sometimes unable to put enough food on the table or to keep the lights on.
(All comments above can be attributed to FCA CEO Fiona Guthrie)
MEDIA CONTACT: Fiona Guthrie – 0402 426 835