arca

Proposed legislative and regulatory reform of debt management firms must be supported by increased consumer education

The Australian Retail Credit Association (ARCA) supports the Joint Statement issued by industry and consumer groups calling for increased consumer protection and regulatory supervision of debt management firms. Although other financial services firms need to abide by a range of consumer protection and regulatory obligations, the debt management businesses do not. The Joint Statement calls for the federal government to consider much needed reform.

 

The Roundtable of 18 February was attended by around forty representatives of consumer advocacy organisations, government agencies, regulators, ombudsman schemes and industry associations. It was led by the Consumer Action Law Centre in conjunction with the Financial Rights Legal Centre, and was set up in response to concerns expressed by the Australian Securities and Investments Commission (ASIC) in a recent report entitled Paying to get out of debt or clear your record: The promise of debt management firms. ASIC’s report found that businesses providing for-profit financial solutions to consumers, or debt management firms, can pose a significant risk to consumers in financial distress – and often charge high fees to provide services which consumers can gain for free.

 

Damian Paull, Chief Executive Officer of the Australian Retail Credit Association (ARCA) said: “ARCA Members play a leading role in responding to consumer concerns over credit reporting issues, including assessment of credit worthiness and the handling of credit reporting corrections.

 

“It is essential that consumers are covered by the same protections no matter what part of industry they are dealing with.

 

“Consumer education is also critical to demonstrate to consumers that they can fix problems themselves for free - without having to resort to expensive for-profit debt management services. If a consumer needs support, it is available free of charge from their financial institution or a free financial counselling service”.

 

ARCA Members are promoting an increased focus on consumer education regarding credit reporting including the new safeguards for consumers in the credit reporting system. Initiatives include the launch of the award winning CreditSmart website (www.creditsmart.org.au) in 2014, and the recent commencement of CreditSmart online training for advisers who assist consumers with credit reporting issues - including financial counsellors, mortgage brokers, accountants and frontline staff of credit providers. The CreditSmart online training, developed with Kaplan Professional, is available at

http://www.kaplanprofessional.edu.au/creditsmart-online-training/

 

“ARCA is grateful to the Customer Owned Banking Association (COBA), a Member of ARCA, for sponsoring CreditSmart training for 200 financial counsellors across Australia. This online training, which is rolling out nationally, means that financial counsellors will have up-to-date information on the changes to credit reporting and the new consumer safeguards.

 

“In summary”, said Mr Paull, “we support continued industry and regulatory dialogue, with wide stakeholder engagement including from the debt management sector itself, for consideration of legislative and regulatory reform of the debt management sector. In the meantime, industry wide consumer education efforts are key”.