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18-163MR ASIC warns consumers about paying high fees for credit repair and debt advice services
ASIC is warning consumers about companies that claim they can fix a poor credit rating. ASIC is running a month-long campaign, with other Commonwealth, state and territory agencies, to help consumers understand that by using credit repair and debt management firms they may end up paying high fees.
Consumers should be aware these companies often fail to fix credit and debt issues, which can leave people in a worse financial situation.
ASIC Deputy Chair, Peter Kell said consumers may not realise that free services exist to help them fix credit reports or resolve their debt problems, such as the National Debt Helpline.
‘Consumers experiencing money or debt problems don’t need to put themselves under further financial stress by paying high fees to firms providing credit repair and debt solution services’, Mr Kell said.
‘If people are having difficulty obtaining loans because of an incorrect default listing on their credit report, there are actions they can take that are free of charge to have it corrected.
‘If you think you have had a credit default wrongly listed against you, contact the creditor and ask for it to be removed. If you aren’t satisfied with the response you receive you can contact the relevant dispute resolution service for help’, added Mr Kell.
People experiencing debt problems can seek free help and guidance from financial counsellors and the National Debt Helpline on 1800 007 007 or go to ndh.org.au.
In 2016, an ASIC report found debt management firms:
- were offering services where fees and costs were not well explained;
- often required payments be made before services were provided;
- sometimes used high-pressure sales techniques.
Mr Kell suggested consumers can consider alternative services like financial counselling before engaging a debt solutions firm.
Consumers should be aware that lenders will review their credit report when they apply for credit or a loan and they should check their credit history details are correct. Consumers are entitled to obtain one free copy of their credit report each year from a credit reporting agency.
ASIC is the lead Australian Government agency for financial literacy, consistent with its strategic priority and statutory objective to promote confident and informed consumers and investors. ASIC's financial capability program includes:
- leading the National Financial Literacy Strategy;
- providing consumer information via ASIC's MoneySmart; and
- delivering ASIC's MoneySmart Teaching program.
The National Financial Literacy Strategy, led and coordinated by ASIC, is a framework to guide policies, program and activities that aim to strengthen Australians' financial capability.
In addition to ASIC, other agencies involved in the campaign include the Australian Competition & Consumer Commission (ACCC), Consumer Affairs Victoria, NSW Fair Trading and the Queensland Office of Fair Trading.
The Federal Court recently found, in proceedings brought by ASIC, that credit repair business Malouf Group Enterprises Pty Ltd and its director Jordan Francis Malouf breached the Australian Consumer Law by making false and misleading representations and engaging in unconscionable conduct. In addition to penalties imposed by the Court, the Malouf Group will pay $1.1 million to consumers (refer: 18-114MR).
Free financial services available to consumers
Financial counselling is a free service offered by community organisations, community legal centres and some government agencies. Financial counsellors can help consumers solve their money problems.
National Debt Helpline
The free hotline - 1800 007 007 - is open from 9:30am to 4.30pm, Monday to Friday (opening hours can differ in different states) to help consumers struggling with debt. Consumers can visit the National Debt Helpline website for information and resources.
The Department of Agriculture runs a Rural Financial Counselling Service to support primary producers, fishermen and small rural businesses that are suffering financial hardship, for further details call 1800 686 175.
ASIC’s MoneySmart website provides a financial counsellor online search tool to locate a financial counsellor near you.
External Dispute Resolution (EDR) services
A credit repair company may offer to contact an External Dispute Resolution (EDR) service to resolve a consumer case. The company could charge a fee, even though those services are free and are designed to be easy for people to use. Consumers can save time and money by contacting an Ombudsman directly, rather than going through a credit repair company.
Credit and financial services EDR schemes
Financial Ombudsman Service (FOS) - 1800 367 287
FOS handles complaints about banking, credit, loans and debt collection, life insurance, superannuation, financial planning, insurance broking, stockbroking, investments, managed funds, timeshares, general insurance, finance and mortgage broking. They do not deal with complaints about compulsory third party, private health, public liability and workers' compensation insurance.
Credit and Investments Ombudsman (CIO) - 1800 138 422
CIO handles complaints about credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, lenders and debt collectors, credit licensees and credit representatives.
Other dispute resolution services
Energy, water and telecommunication ombudsman services provide free advice and conciliation services for consumers with complaints about providers in those industries.
- Telecommunications Industry Ombudsman Limited (TIO) - 1800 062 058
- Ombudsman Western Australia - (08) 9220 7555 or 1800 117 000
- Energy and Water Ombudsman NSW (EWON) - 1800 246 545
- Energy and Water Ombudsman Victoria (EWOV) - 1800 500 509
- Energy and Water Ombudsman Queensland (EWOQ) - 1800 662 837
- Ombudsman for the Northern Territory - 1800 806 380
- Energy and Water Ombudsman South Australia (EWOSA) - 1800 665 565
- Energy Ombudsman Tasmania - 1800 001 170
- Ombudsman Tasmania (for water) - 1800 001 170
- ACT Civil and Administrative Tribunal (ACAT) - 02 6207 1740
 ASIC Report 465, Paying to get out of debt or clear your record: The promise of debt management firms, January 2016