media release (16-011MR)

ASIC releases report on debt management firms


ASIC today released a research report that aims to better understand the debt management industry in Australia and the consumer experience in using debt management firms. Debt management firms promise to help consumers in financial hardship or with listings of payment defaults on their credit reports.

The report, Paying to get out of debt or clear your record: the promise of debt management firms (REP 465), was commissioned by ASIC's Consumer Advisory Panel (CAP).

The research involved two phases:

  • a qualitative analysis and mystery shop of debt management firms by BIS Shrapnel Pty Ltd; and
  • a survey on the involvement of debt management firms acting for consumers in Ombudsman schemes covering the financial services, telecommunications and energy and water sectors.

Findings - qualitative analysis and mystery shop:

  • fees and costs were opaque making it difficult for consumers, often in significant financial hardship, to assess the cost relative to the purported value;
  • fees were often 'front loaded' – that is, fees were payable before services were provided thereby increasing consumer commitment through sunk costs;
  • some sales techniques create a high-pressure sales environment;
  • little information was given about important risks and some firms had a poor understanding of the relevant law and the consequences of particular strategies which may lead to unsuitable services for consumers.

Findings - Ombudsman survey data and analysis:

  • a growing number of firms are representing consumers at external dispute resolution (EDR)—this is concentrated among a few large players, with an increasing number of  small firms entering the market;
  • the disputes brought to EDR schemes by debt management firms relate almost exclusively to arguments about the removal of default listings on consumer credit reports (despite the breadth of other issues that can arise for indebted consumers);
  • while an increasing number of consumers are being represented at EDR by debt management firms, this is not leading to more credit reporting related disputes being found in favour of consumers.  

'Where consumers go to debt management firms, it is important they understand what they are getting and how much it will cost, so they can decide if it's worth it,' said ASIC Deputy Chairman Peter Kell.

'The promise is always more prominent than the price", he said.  "It is hard to find information about fees and they tend to be high, front loaded, and not refunded if the promise isn't delivered.

'It's also important for consumers to understand that they have alternatives to the use of such firms that may be free of charge, such as financial counselling services.

'Many stakeholders have raised concerns with ASIC and other regulators about potential harms posed by firms that may provide unsuitable services, act in ways not in the best interests of clients, or at worst, engage in predatory conduct leaving the consumer worse off,' Mr Kell said.


Debt management firms promise to help consumers in financial hardship or with listings of payment defaults on their credit reports by:

  • 'cleaning', 'fixing' 'repairing', 'removing' or 'washing' away default listings on credit reports
  • developing and managing budgets
  • negotiating with creditors, including lenders, telecommunications companies , utilities companies or debt collectors
  • advising and arranging formal debt agreements under Part IX of the Bankruptcy Act, 1966.

While the models are diverse, many debt management firms operate one-stop-shop models offering a combination of some or all of the above services.

The debt management industry has grown despite the fact that  consumers can freely access:

  • their credit report and challenge an incorrect listing at no cost;
  • help from financial counsellors or community legal services;
  • independent ombudsman schemes to help resolve disputes with lenders, telcos and utilities providers.

This suggests that there is a lack of consumer awareness about the potential benefits of alternatives to debt management firms.

There is no uniform regulatory framework for debt management firms and barriers to entry are low or non-existent. Consumers in financial hardship can be extremely vulnerable and behavioural research shows that financial stress can materially affect people’s ability to make good decisions.  

Case studies

The report includes case studies, which demonstrate that some consumers experience poor outcomes.

Tips for consumers in financial hardship or with credit or debt problems

Talk to your lender, telco or utility first about your financial hardship or credit listing.

Talk to the free ombudsman scheme for help before you pay a fee to a debt management firm.

Talk to a free and independent financial counsellor or community legal services for help.

ASIC has information and guidance for consumers about trouble with debt and credit repair on its MoneySmart website.


REP 465

Media enquiries: Contact ASIC Media Unit