ASIC has commenced proceedings in the Federal Court against Bakken Holdings Pty Ltd (Bakken), an operator of the debt management business Solve My Debt Now, following concerns of substantial consumer harm.
ASIC alleges customers of Solve My Debt Now were in financial hardship and often had, or were about to, default on credit facilities such as personal loans and credit cards. Solve My Debt Now offered to manage their debt by collecting funds from them, on-paying their creditors and negotiating with creditors to reduce debt. In many cases, Solve My debt Now failed to pass on its customer’s payments to creditors in a timely manner or at all.
ASIC claims that from April 2020 to June 2022, Bakken collected $3.6 million from its customers but paid only $1.1 million of this money to creditors. 64% of customers did not have payments made to their creditors at all.
ASIC also alleges that in many cases, the fees Solve My Debt Now charged for its services exceeded the amount the debts were reduced, leaving clients worse off. Only 5.3% of Solve My Debt Now customers achieved a debt reduction after fees.
ASIC Deputy Chair Sarah Court said: ‘ASIC is deeply concerned by the impact on customers in this matter. To have customers engage a debt management company and be worse off in their debt, as we allege here, is completely unacceptable.
‘Debt management businesses are supposed to help people find a pathway out of debt, but instead, we allege, Solve My Debt Now signed customers up to a service that provided little to no financial benefit. In many cases, it worsened the client’s financial hardship situation. Unconscionable behaviour towards financially vulnerable people remains a key enforcement priority for ASIC.’
ASIC is also suing Bakken’s director and co-owner, Dr Merrilyn Mansfield, for her involvement in some of the alleged false or misleading representations made by the company when it made promises to manage and reduce consumer debt.
ASIC alleges that from April 2020 to June 2022, Bakken:
- engaged in a system of conduct or pattern of behaviour which was, in all the circumstances, unconscionable;
- made false and misleading representations to customers about the benefits and qualities of its service; and
- carried on a financial services business without the appropriate licence.
ASIC has previously warned credit providers and debt management companies that strong, targeted action against predatory lending, high-cost credit and misconduct impacting consumers experiencing financial difficulty was expected as part of ASIC’s continuing focus on protecting consumers (23-112MR).
ASIC is seeking declarations, pecuniary penalties and a disqualification order from the Court.
The proceeding is to be listed for case management on a date to be determined by the Court.
Debt management licensing regime
From 1 July 2021 and subject to transitional arrangements, providers of debt management services must hold an Australian credit licence with an authorisation that covers debt management services (21-162MR).
Under the licensing regime, debt management firms must be members of the Australian Financial Complaints Authority and, if something goes wrong, consumers can access that free and independent dispute resolution scheme.
If you are considering consolidating or refinancing your debts, consider all your options and make sure you will save money. There are free alternatives available to help you manage debt.
- If you are having trouble keeping up with bills or loan repayments, contact your lender and ask for help. ASIC’s Moneysmart has information on asking for financial hardship assistance.
- If you need additional support with getting on top of debt, call the free National Debt Helpline on 1800 007 007 and speak to a financial counsellor. You can also use the financial counsellors map available on ASIC’s Moneysmart website to find a counsellor in your area.
- Experiencing financial stress can impact your mental health. If you're concerned about your mental wellbeing, help is available. Contact Beyond Blue on 1300 22 46 36 (24 hours a day).
Editor's note 1:
A case management hearing has been listed for 6 September 2023.
Editor's note 2:
A further case management hearing has been listed for 15 February 2024.
Editor's note 3:
On 11 October 2023, a revised Statement of Claim was filed with the Court.