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17-130MR ASIC crackdown on misleading advertising by debt management firms
Capital Debt Solutions Australia Pty Ltd (Capital Debt Solutions) has paid an infringement notice of $10,800, and Debt Assist Aust Pty Ltd (Debt Assist Aust) and Bankruptcy Experts Pty Ltd (Bankruptcy Experts) have removed misleading statements online, following an ASIC crackdown on misleading advertising by debt resolution firms.
These firms offer to assist customers struggling to pay their debts by providing a range of services including bankruptcy advice, informal debt agreements, debt consolidation and formal debt agreements.
Following ASIC raising concerns:
- Capital Debt Solutions has removed false claims from its website, claiming it was 'trusted and recommended by more than 6,000 Australians' when there was no basis for this claim
- Capital Debt Solutions and Debt Assist Aust have removed false statements online, claiming their debt agreements were 'Government Approved'
- Bankruptcy Experts hasremoved testimonials on their websites from customers that were unable to be substantiated
Although debt agreements and debt administrators are regulated, this does not mean they are 'approved' by the govermment.
ASIC Deputy Chair Peter Kell said, 'Recommendations and statements, like 'Government Approved' can have a strong influence when vulnerable consumers in financial hardship are seeking help with their debts.'
'Firms must ensure their marketing materials and promotional statements are based on fact.'
The compliance with the infringement notice is not an admission of guilty or liability, and Capital Debt Solutions is not taken to have contravened subsection 12DB(1)(e) of the ASIC Act.
Under the ASIC Act, a person involved in the supply or promotion of financial services must not make false or misleading representations in relation to the service having any sponsorship or approval characteristics.
Debt management firms offer debt agreements whereby the creditor agrees to accept a certain sum of money (which the debtor can afford) over a defined period of time to settle the debt. Debt agreements are not programs run by the Government, and do not receive Government approval.
Debt agreement proposals are lodged with the Australian Financial Security Authority (AFSA). AFSA is the regulator of the personal insolvency system in Australia, and registers debt agreement administrators. ASIC and the AFSA have ongoing engagement to promote good conduct in the insolvency sector. Further information can be found at AFSA's website.
ASIC's recent report, Paying to get out of debt or clear your record: the promise of debt management firms (REP 465) looked at the debt management industry in Australia and the consumer experience in using debt management firms.
More information about debt agreements and managing debt generally can be found at ASIC's MoneySmart website.