Welcome to the Financial Rights Legal Centre E-flyer.
In this edition:
- What we do at the Financial Rights Legal Centre: Helping vulnerable clients
- Getting Access to Super Early: Pros & Cons
- Solving Problems
- Credit Reporting Concerns
- Credit where credit is due
- 30th Anniversary Party Pics!
- Financial Rights’ viewpoint
- Financial Rights in the media
Every E-flyer we like to give our colleagues and readers an insight into what we do and how we work at the centre. In previous editions we have explained the limitations of what we can do, what we do about credit repair companies and notices to vacate. This month we take a look at a recent case that we won for a single mum who was sold nearly $4000 worth of photos in a mall after she told the company she could not afford it.
The name of our client and the company involved have been changed to protect our client’s identity.
Photo shoot on finance
Tanya was a 21 year-old single mum with 2 young sons, when she was approached by Amazing Family Photos in a shopping mall while grocery shopping. She was offered a free photo shoot and the chance to win $10,000 if she stepped into the pop-up store and had her sons photographed. No contract or product list was provided. Amazing Family Photos told her to return in 2 weeks and view the photos – obligation free.
Tanya returned 2 weeks later and expressed an interest in 3 of the 21 photos. She only wanted these 3 photos and ideally put on a canvas. She was told by Amazing Family Photos it was not possible. She would have to buy a package ($3,900) which would include all the photos, the 3 canvases, a photo album, a black and white print and a magnet! Tanya told them she was only on Centrelink and couldn’t afford $75 per week, but they told her to check her Centrelink account online on the spot and it would be fine. Tanya continued to express doubt and Amazing Family Photos told her if she didn’t buy them on the spot, the photos would be destroyed.
Tanya signed the contract in the middle of the shopping mall, with no time to read or consider it. She was never told the total cost was $3,900 nor that there were no cooling off rights or termination rights (breaches of the Australian Consumer Law for unsolicited contracts). Tanya paid the first two instalments, then couldn’t afford it. Amazing Family Photos reduced the weekly instalment. Tanya resumed payments, then defaulted again and so it went on for 2 years. She paid $750 in total.
Amazing Family Photos started threatening to list a default on her credit report if she did not make the payments. At this stage, Tanya came to us for help. Our office started engaging in discussions with Amazing Family Photos but the company stopped responding and started sending threatening demands to Tanya directly.
Amazing Family Photos are not in EDR (a free ombudsman service for consumers), so we lodged a claim in the NSW Consumer and Administrative Tribunal (“NCAT”). NCAT granted us leave to represent Tanya. Our complaints were, in brief, that Amazing Family Photos had engaged in misleading and unconscionable conduct, the contract contained unfair terms, Amazing Family Photos were continuously breaching the ASIC Debt Collection Guidelines and since Amazing Family Photos was not in EDR, it did not have the power to list any default on a customer’s credit report (breach of s21D Privacy Act).
A conciliation was held over the phone. Settlement was reached – Tanya was released from the remaining debt ($3,200) and could keep the photos. She never received the whole package – just 21 5”x7”. No canvases.
Superannuation (super) is a protected asset intended to fund your retirement.
Generally you can access your super:
- when you turn 65 (even if you haven’t retired);
- when you reach preservation age and retire (depending on when you were born between ages 55-60); or
- early, before you reach your preservation age, in very limited circumstances mainly related to specific medical conditions or severe financial hardship.
The Pros and Cons of Accessing Your Super Early
Just because you can access your super, does not mean you should access it. As with all financial decisions, you need to think through the consequences and the pros and the cons. You should consider talking to a free financial counsellor too.
You will have access to funds which may relieve your financial burden.
- You will lose an asset that is protected in bankruptcy and otherwise protected from creditors until you take it out of the fund.
- The money will be taxed by the Australian Tax Office on release.
- If you use all of your super, you may lose your insurance benefits (e.g. income protection, death or total and permanent disability) that you may not have known you had. If your severe financial hardship is as a result of a permanent incapacity to work you may be losing valuable benefits.
- It may not solve your financial problem and you will have less money available for your retirement.
- It may take too long. It can take months to get your super released, if at all. If you do not provide all of the correct information your application may be sent back to you and you will be sent to the back of the queue. If you are relying solely on early release of super your financial circumstances may get worse while you are waiting.
- It may result in you having to:
- pay more tax;
- pay more child support;
- accept lower Centrelink payments; and/or
- receive less child support.
If you would like some information or advice about whether you can (and should) access your superannuation before you retire or before you reach 65 you should talk to a free local financial counsellor:
- the Financial Rights Financial Counsellor Search Tool (if you are in NSW), or
- the National Debt Helpline’s Find a Financial Counsellor Tool (anywhere else in Australia), or
- call the National Debt Helpline on 1800 007 007.
If you want to read more about accessing your super early you can see our recently reviewed and updated our Factsheet on Accessing Your Superannuation Early
The Motor Vehicle Accident Problem Solver has been launched and has seen a great amount of traffic. There have been over a thousand unique users in the last 2 months with several thousand sessions on the new tool. This is an encouraging sign but we want to promote this new tool as widely as possible. If you haven’t had a look yet you can visit the new website and problem solver tool here: mva.financialrights.org.au
In addition to the problem solver tool, the MVA website features a range of fact sheets and sample letters. By far our most popular insurance factsheets are:
The real innovation is the MVA Problem Solver tool. Click on the MVA Problem Solver button, answer a few simple questions and the Solver will lead you to the right advice, sample letters, detailed fact sheets and more. Information can be easily printed, emailed and shared from the tool. And if you really get stuck you can always email us your question.
In April 2017 the Privacy Commissioner announced that it was time for the Privacy (Credit Reporting) Code 2014 (CR Code) to be independently reviewed. The CR Code is a mandatory code that binds lenders (like banks and credit unions) and credit reporting bodies (CRBs – like Equifax and Experian). As a base, the CR Code is a set of rules to help these organisations put in place clear, effective and consistent credit reporting processes and to make sure they follow legal requirements in the Privacy Act. However, consumer groups argue that the CR Code should also be a consumer friendly set of commitments from lenders and CRBs that ensure best practice is being met in the credit reporting system.
The CR Code commenced in 2014 and was required to be reviewed after 3 years. Pricewaterhouse Coopers (PwC) has been contracted to conduct the review and consumer groups have been in contact with PwC about what we see as the biggest problems facing consumers when it comes to credit reporting. PwC’s final report on the CR Code review is due back to the Privacy Commissioner by the end of the year.
Although consumer groups have dozens of changes we would like to see to the current CR Code, here are our Top Ten Concerns:
1. Repayment History Information and financial hardship
One of the most pressing “unresolved” issues in the CR Code for consumer representatives is that as it stands it is unclear how Repayment History Information (RHI) will be reported on a credit file for a person who has applied for or has been offered a hardship arrangement by a credit provider. Consumers asking for hardship arrangements should be confident that RHI will not continue to be reported negatively if they have entered into a new payment arrangement with their lender.
2. Independent code governance
The current 2014 CR Code does not include an independent Code Governance Administrator or a Code Compliance Committee and we strongly support creating one in the next version of the Code.
3. Credit Scores on free credit reports
Consumer representatives strongly believe credit scores should be available to consumers for free when they request a free copy of their credit report
4. Ongoing problems with accessing free credit reports and marketing
Although the CR Code clearly states that credit reporting bodies must ensure that free access to credit reports is as available and as easy to identify and access as paid access to credit reports, consumer representatives still see ongoing problems with consumers trying to access their free credit reports. For vulnerable consumers that do not have access to the internet, or don’t have an email account, it is still very difficult to get a free copy of their credit report.
Another major concern that consumer groups have in relation to accessing free credit reports is the aggressive marketing of paid services made to consumers who have requested a free report.
5. Credit repair companies
Consumer advocates have long been concerned about the conduct of credit repair companies, and in recent years there has been an unprecedented consensus between consumer and industry groups on the need to better regulate these and other debt management firms. The CR Code could include certain requirements that would enable the OAIC to monitor problems caused by credit repair companies in the credit reporting space. Better promotion of free reports and complaint rights more generally by CRBs would assist with preventing consumers from falling for credit repair company pitches in the first place – we note that some companies are using “get a copy of your credit report for free” as bait to sign consumers up for other services including credit repair.
6. Mandatory default reporting
Consumer representatives (which include solicitors, financial counsellors and other caseworkers) regularly include agreements about the contents of credit reports in negotiated settlement outcomes. The CR Code should include protections for consumers when legitimate settlement negotiations are reached following disputes about a debt claimed, or when an EDR scheme (ombudsman service) has made a ruling in favour of a consumer regarding a debt claimed.
7. Court Judgments with no bearing on creditworthiness
Consumer groups are also very concerned about court judgments and other publicly available information that is included in credit reports but has no real bearing on credit worthiness. Consumer groups understand that currently the Courts only report default judgments to credit reporting bodies, in which case this should be reflected in the Code so that the rules are clear, not left to opaque behind-the-scenes arrangements between the Courts and the CRBs.
We also believe the CR Code should include a broad commitment to fairness, and give CRBs the ability to not record publicly available information, or remove it upon complaint, where it is not a reflection of a person’s creditworthiness.
8. Timely disclosure of RHI to consumers
The CR Code should require credit providers who are reporting RHI about their customers to notify those customers on their regular account statements about the information reported to the CRB and its meaning.
9. Problems with CRB Internal Dispute Resolution
The commitments in the CR Code regarding the Correction of Information (Sect 20) are inadequate and need to be extensively amended. These commitments are not best practice when it comes to dispute resolution in financial services. Not only are the timeframes currently set out in Section 20 weak, but they are not adhered to in practice.
10. Handling of statute barred debts
We have found that some lenders or debt collectors list a debt close to the time when a debt would become statute barred. We believe defaults should be removed immediately if the debt has become statute barred and creditors should have to prove a debt is not statute barred within 30 days of consumer’s request for removal, or the listing is automatically removed.
At long last there seems to be some action about to take place to rein in some of the more exploitative practices from credit card providers. The Federal Government has released and exposure draft bill introducing four new reforms to address some of the more egregious practices seen in Australia.
First, the government will tighten responsible lending obligations to require that the suitability of a credit card for a consumer is assessed on their ability to repay the credit limit within a certain period. This new time period will be decided by ASIC and could be different for different cards. While this is a good first step we think that the government needs to go further and limit this to a maximum of three years – to ensure that credit cards are used for short term purposes and do not become long term loans.
Second, the government intends to prohibit credit card providers from making any unsolicited credit limit increase offers and removing the current informed consent exemption. Credit limit increase offers and the resulting debt have long been the bane of financial counsellors and consumers alike.
Third, the government is planning to simplify the calculation of interest charges in relation to credit cards by prohibiting providers from retrospectively charging interest on balances.
And finally, with new credit card contracts, the new laws means that consumers will be allowed to reduce their limits and/or terminate the contract. Credit card providers will also be required to establish and maintain a website that enables consumers to make these requests online. While Financial Rights wholeheartedly supports the ability to do this, we have put forward suggestions to improve the drafting to avoid potential loopholes. Our submission can be read here.
With a busy legislative agenda in the financial services space Financial Rights is looking forward to these reforms being the first of many upcoming changes.
In July 2017 we celebrated our 30th Anniversary as an incorporated community legal centre. We were thrilled to have nearly 100 friends, ex-staff, and supporters from government, industry and the community sector attend our party in Woolloomooloo. A big thanks to Senator Katy Gallagher for speaking, Minister Kelly O’Dwyer for sending a heart-felt video message, Uncle Chicka Madden for welcoming us all to Gadagal land, and Greg Kirk, Gig Moon and Erin Turner for your great speeches.
Here are a few great photos from the event:
We use our expertise gained from our work with clients to help give voice to clients’ experiences. In doing so, we contribute to improving laws and legal processes to prevent many of the same problems from happening to others. Financial Rights is regularly called on by Government and the financial service industry to assist in policy development and regulatory reviews. The following is a selection of our recent input into regulatory reform.
Submission to Treasury on Open Banking
While Open Banking offers opportunities to consumers, it also poses significant risks. Robust legal frameworks and regulatory oversight will be required to ensure that consumers are adequately protected and able to benefit from the Open Banking regime. Data sharing, competition and innovation in the financial system should be considered a means to deliver benefits to consumers, but not an end itself. In this joint consumer submission we urged the Review to consider the potential costs and risks to consumers, and the regulation needed to mitigate these, in much further detail.
Download our submission here
Submission to the Productivity Commission re: Competition in Financial Services
This joint submission with Consumer Action Law Centre and Financial Counsellors Australia made the broad point that for competition in the financial system to improve consumer outcomes, policy must be based on an understanding of how consumers actually make decisions. Consumers depend on the availability of safe products and fair sales practices to guide their decision-making. Effective regulation that empowers consumers to select appropriate products supports healthy competition, and ensures a level playing field amongst competitors.
In our submission we have provided examples of markets within the financial system where we believe competition has failed. This has led to poor consumer outcomes, particularly for vulnerable and disadvantaged Australians. Problematic sectors we have identified include insurance, credit cards, payday loans, consumer leases, mortgage broking, debt management advice and comprehensive credit reporting. We have argued that strong consumer protections and regulatory powers are necessary to ensure that consumers can benefit from increased competition in these markets.
Download our submission here
Submission to Treasury re: Credit Cards: Improving Consumer Outcomes and Enhancing Competition – Exposure Draft
Financial Rights has long argued the need for these reforms to a regime that has led to significant over-commitment for many credit card users. Financial Rights therefore strongly supports the introduction and passing of the bills to tighten responsible lending obligations for credit card contracts, prohibit unsolicited credit limit offers, simplify interest charge calculations and reducing credit limits and empower consumers to terminate credit card contracts including online.
Download our submission here
Submission to APRA re: Towards a transparent public reporting regime for life insurance claims information, Discussion Paper
Financial Rights has long argued the need for greater transparency of insurance data and we welcome the introduction of a collection and publishing regime.
Greater transparency and more consistent data in life insurance claims relating to claims, claims outcomes, claims handling and disputes across all policy types is an important step that will not only help Australian Securities and Investments Commission and Australian Prudential Regulation Authority to monitor claims trends and identify any potential issues of concern from changes in data, but if appropriately published will also go some way to address problems of information asymmetry that face consumers.
It is critical that as much data and analysis is made available to the public in an accessible, easy to read manner that has been designed with consumers in mind. This is an era where big data is having a huge impact upon the insurance industry, largely favouring the insurance industry to sell more through increased targeting of products and advertising, as well as improving risk models and increasing risk segmentation and price discrimination., The data collection and publication being considered here provides an important opportunity to rebalance the impact of datasets in favour of the consumer.
Download our submission here
Submission to ASIC Enforcement Review Position and Consultation Paper 4: Industry Codes in the Financial Sector
The Financial Rights Legal Centre has long argued the need for a stronger Industry Code regime and we strongly support the development of a co-regulatory scheme.
Download our submission here
Joint submission to the ASIC Review of Mortgage Broker Remuneration
Consumers use brokers as guides for what is often their life’s most significant financial decision – buying a home. Getting a poor loan, even if the consumer can afford to pay it, can have significant financial consequences, with consumers paying tens of thousands or even hundreds of thousands of dollars more over the life of a mortgage. In some instances, mortgage brokers appear to be targeting consumers in clearly vulnerable situations and recommending harmful borrowing strategies that leave the broker with a sizable commission but the consumer with debt they can’t afford to repay. The high-level solutions to these problems are two-fold. First, conflicted remuneration that drives poor consumer outcomes must be addressed through an industry-wide solution with strong enforcement arrangements and sanctions for non-compliance. Second, mortgage brokers must be held to higher standards to protect consumers from harmful advice
Download our submission here
Joint submission to Treasury re: Review of the financial system external dispute resolution framework – Supplementary Issues Paper
Arising out of the Ramsay Review into the External Dispute Resolution Framework, the Government is investigating the establishment of a last resort compensation scheme. This joint consumer submission argues that a compensation scheme of last resort is well overdue and must be established to prevent the well-documented harm caused by uncompensated losses, and to rebuild trust and confidence in Australia’s financial system. A last resort compensation scheme is the missing piece of our financial services regulatory architecture.
Download our submission here
Financial Rights Coordinator Karen Cox, and Principal Solicitor Alexandra Kelly regularly appear in the media to speak out on a range of systemic issues facing our clients. Below is a selection of recent coverage:
Life Insurance Code of Practice Launches
In July 2017 the new FSC Life Insurance Code took effect. Financial Rights played an important role in the development of this code, and still plays a big role since Alexandra Kelly is now on the Code Compliance Committee. You can read some of the media coverage here:
- FSC life insurance code takes effect
- Life Insurance Code of Practice launches with minimum medical definitions
- Insurers held to account with new FSC code
Consumer groups call for end to mortgage broker commissions
When a joint consumer submission that we endorsed called for an end to all mortgage broker commissions there was a media storm around the push back that we got from the mortgage broking industry. Read some of the coverage here:
- Scrap all mortgage broker commissions, say consumer groups
- Give mortgage brokers a break. Their goods outweigh their bads!
- MFAA blasts consumer groups for commission call
- Curbs on mortgage broker pay ‘risks return to dark days’
Great TIPS from Financial Rights on Network 9 News
Alexandra, Karen and our financial counsellors gave several television interviews over the last few months to Network 9 News offering a variety of helpful financial tips. You can watch the interviews here:
- How one phone call could help get you out of debt for free
- How to get the resolution you want when making a complaint
- How you can avoid debt and dangerous repayment schemes
Financial Rights’ provides comment on a range of debt, credit and insurance related issues for print, radio, television or the internet. We can provide expert commentary on issues facing consumers of financial services, offer detailed background information and, where possible, supply case studies. For media enquiries email Drew MacRae at firstname.lastname@example.org and remember to follow us on Twitter @Fin_Rights_CLC