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Financial Rights E-flyer: December 2020

Welcome to the Financial Rights Legal Centre E-flyer.

In this edition:

  1. What we do at the Financial Rights Legal Centre: Save Safe Lending Campaign
  2. Funeral insurance a risky business for the Indigenous community
  3. COVID-19: Motor vehicle accident insurance claim delays
  4. Radical overhaul of privacy laws required
  5. The risks and opportunities of Open Insurance
  6. Consumers warned to avoid Christmas debt

1. What we do at the Financial Rights Legal Centre: Save Safe Lending Campaign

The Australian Government shocked the consumer advocate sector when it announced proposals to scrap responsible lending laws on September 25.  The government’s plan was to introduce a reform bill at the end of this year that will remove responsible lending obligations from the National Consumer Credit Protection Act 2009.

This is a serious blow to consumer protection and has been devastating to advocates, including the financial counselling community, community lawyers and consumer groups. These protections are the foundation of much of the credit and debt advice we give our clients.

In response Financial Rights has worked closely with a coalition of consumer groups including the Consumer Action Law Centre, CHOICE, Financial Counselling Australia, Consumer Credit Legal Centre South Australia, Consumer Credit Legal Service WA, CARE ACT, ICAN, NILS Tasmania and other consumer and financial counselling organisations across Australia.

While we do not know yet how this campaign will turn out, we have been successful atquickly, getting meetings with Members of Parliament and Senators, mobilising thousands of grassroots supporters and getting our arguments prominently in the media. Our coalition of consumer groups had a very successful campaign launch in November where we unveiled an open letter to parliament asking them to vote against these reforms. The letter was endorsed by more than 120 organisations across Australia and has since been signed by thousands people concerned about unleashing unaffordable debt into an already struggling economy.

In the last sitting week of Parliament the Government introduced the legislation and it passed the lower house. It has now been sent to the Senate Economics Legislation Committee for inquiry and report by 12 March 2021. Submissions are now being accepted and the closing date is 3 February 2021.

It is not an over-statement to say this is one of the most important campaigns we will ever run.

We would urge any readers that are interested in joining this campaign to visit our campaign website to take action:! You can email your MP or Senator and sign the open letter. We would also strongly suggest that people put in a short submission to the Senate Economics Legislation Committee urging them to recommend this bill is not passed! This fight is far from over, and if the Government has it their way our safe lending laws will be gone by mid-2021.

Repeal of lending protections will hurt women facing domestic violence

Repealing safe lending will hit our community’s most vulnerable people including women experiencing economic abuse.

Current safe lending obligations prescribe important steps that enable lenders to identify red flags in domestic and family abuse. These critical protections require lenders to inquire as to the loan’s purpose, suitability and affordability. Lenders are also required to undertake an assessment that often puts them on notice when loans should not be approved. This plays an important role in identifying and preventing the financial abuse of vulnerable women.

Removing safe lending laws will reduce the ability of advocates like financial counsellors and community lawyers to assist vulnerable women with debts they accrued during abusive relationships.

It comes at a time when women are more at risk of family violence and economic abuse because of COVID-19 pandemic. Removing these critical protections could have devastating results.

2. Funeral insurance a risky business for the Indigenous community

Sorry business can be difficult, not only emotionally and spiritually, but financially as well. Sometimes funeral insurance is taken out to handle the financial costs. But funeral insurance could leave you more out of pocket than its worth.

Funeral insurance has limited value. Payout amounts are often small and there are high cancellation rates. The Aboriginal and Torres Strait Islander community has been significantly impacted by the unscrupulous marketing of poor value funeral insurance products.

Australian Financial Complaints Authority decision against Youpla

The Financial Rights Legal Centre’s Mob Strong Debt Help welcomed a series of determinations by the Australian Financial Complaints Authority between August and September 2020 that funeral insurance provider Aboriginal Community Benefit Fund (now rebranded as ‘Youpla’) misled policyholders through their subsidiary funds.

AFCA found, in three separate determinations, that Youpla misrepresented itself through their marketing materials and representations by salespersons as an Aboriginal owned and controlled, not-for-profit, community organisation serving the Aboriginal and Torres Strait Islander community.  

AFCA also found that Youpla did not take adequate enough measures to inform the complainants that the insurance premiums would increase with age or that the premiums paid would likely exceed the benefit payable. Some of the complainants subject to the AFCA determinations signed up in the 1990s.

Anyone who has been misled about their funeral insurance, including with Youpla can read the materials on our website or contact us at Mob Strong Debt Help on 1800 808 488.

We are already developing Community Education resources on funeral insurance and you can contact Annabelle on 1800 808 488.

Action against ACBF Funeral Plans by ASIC

Separate to the AFCA decisions the Australian Securities and Investments Commission began Federal Court proceedings on 29 October 2020 against ACBF Funeral Plans Pty Ltd (ACBF Funeral Plans) and Youpla Group Pty Ltd (Youpla Group) for alleged contraventions of the ASIC Act.

ASIC alleges that between 1 January 2015 and 30 November 2018, ACBF Funeral Plans engaged in misleading and deceptive conduct and made false and misleading representations, in offering, promoting and selling the ACF Plan and that Youpla Group was knowingly concerned in, or party to, the contravening conduct.

ASIC argues that ACBF made false representations in marketing material and point of sale documentation, including that ACBF Funeral Plans was owned or managed by an Aboriginal person or persons, the ACF Plan had Aboriginal community approval and the ACF Plan was more beneficial to Aboriginal consumers than other funeral insurance products generally available at the time. ASIC also claims that ACBF misrepresented that plan holders would receive a lump sum payment of their chosen benefit amount, when in reality they would only be reimbursed for funeral related expenses up to the benefit amount upon production of proof that those expenses had been incurred.

3. COVID-19: Motor Vehicle Insurance Claims Delays

So you’ve had a car accident and made a claim on your insurance policy. Your insurer has accepted your claim and agreed to repair your car – great! But the weeks drag on and you’re still waiting for the repairs to be completed.

Since the start of the COVID-19 pandemic, many callers to the Insurance Law Service have reported longer delays than usual in having their cars repaired by their insurance company.

Lockdowns, reduced staff at insurance companies and smash repairers, increased wait times on the phone and disruptions in international supply chains have all contributed to these delays. Here are some options you may have where there are delays in your car insurance claim.

My insurer has accepted my claim but repairs are taking forever … what can I do?

You can start by trying to resolve the issue directly with your insurance company. When talking to your insurance company, you should try to agree on a reasonable time frame for the repairs to be completed.

Keep in mind that most insurance policies allow an insurer to choose between completing the repairs (including appointing a preferred repairer) or cash settling the claim.

In trying to reach a resolution with the insurer, you may ask your insurer to:

  1. Look outside its usual network of suppliers if there are delays or difficulties sourcing a part.
  2. If using its preferred repairer, ensure that the repairer is ready and able to complete the repair in a reasonable time period.
  3. Consider using other repairers that can do the work faster than the preferred repairer.
  4. If parts are unavailable, consider doing temporary repairs using a second hand or recycled part (subject to safety) and agreeing to complete the repair once the parts become available.
  5. Provide you with a courtesy car if the delay is unavoidable.
  6. Pay you a cash settlement instead. Any cash settlement must be fair and you must be able to complete the repairs with the settlement amount offered by your insurer.

Whether any of these options are reasonable depends on the circumstances of your claim. There is no standard formula to assess what is a reasonable timeframe for your insurer to complete repairs to your car.

What if I’m in financial hardship?

If you are in urgent need of the financial benefits under your policy, you can ask your insurer to fast-track the assessment of your claim. You can make this request under section 64  of the General Insurance Code of Practice 2020. You should tell your insurer in writing that you are in financial hardship and provide evidence such as a Centrelink statement or evidence of unemployment. You can try asking your insurer to cash settle your claim instead if waiting for repairs will cause further financial hardship for you.

I’m not happy with how my insurer is handling my claim … where can I go from here?

If you think there has been an unreasonable delay in completing the repairs and you are not satisfied with your insurer’s reason for the delay, you can call or email your insurer’s Internal Dispute Resolution (IDR) department to raise a dispute. You can raise the obligations under the General Insurance Code of practice or the insurer’s obligation of utmost good faith in respect of claims handling.

If you are not happy with the response from the IDR department, you can lodge in the Australian Financial Complaints Authority (AFCA).

If you are successful in AFCA you can also ask that the insurer pay you interest from the date it reasonably should have paid your claim. You can also ask for compensation of up to $5,000 for non-financial loss, for example if you have suffered an excessive amount of inconvenience, stress or anxiety caused to you by your insurer, however AFCA tends to be conservative with this type of loss.

You might also want to complain to the Australian Securities and Investment Commission (ASIC) and the General Insurance Code Governance Committee (GCGC) about your insurer’s conduct. ASIC is able to investigate the claims handling practices of insurers, while the GCGC monitors and enforces insurers’ compliance with the General Insurance Code of Practice. While complaining to these organisations will not result in a direct outcome for you, it may help shed light on bad practices by insurers and result in better outcomes for consumers in the future.

You can make these complaints on the ASIC and GCGC websites:

4. Radical overhaul of privacy laws required

The personal information held on us by financial services companies is increasingly voluminous and valuable to a sector that is constantly refining its business models to make money off of our data. We are also at risk from more frequent security breaches, identity theft, scams and other abuses. That is why a review of Australia’s privacy laws currently being run by the Federal Attorney General’s Department is much needed and well overdue.

Financial Rights – supported by Consumer Action and Financial Counselling Australia – has called for a radical overhaul of the Privacy Act to provide greater protections for consumers to counterbalance the increased use and exploitation of big data by business and industry.

It is clear that Australians want a safe and secure data environment that puts their privacy ahead of the increasingly rapacious data desires of industry. Recent research from the Consumer Policy Research Centre found that 94% of Australian consumers are uncomfortable with how their personal information is collected and shared online.

Privacy agreements, privacy preferences, and terms and conditions are often complex and unclear so consumers don’t know what they are consenting to. Consumers should be free to decide how much or how little of their information they wish to share in exchange for the use of services. Yet, declining to participate in data driven technologies is increasingly not an option for many consumers. Services are offered on a like it or lump it basis, meaning people have the choice to either fully participate in the modern economy or retain reasonavble control of their personal data. You can’t do both.

To date Australians have had very little power to stop the trade, misuse and abuse of their personal information. The time to strengthen our right to privacy is now.

For full details on the privacy reforms proposed by Financial Rights see our submission

5. The risks and opportunities of Open Insurance

The Federal Government is driving an innovation agenda and is looking to apply the new Consumer Data Right to general insurance. This has the potential to provide consumers with benefits including the ability to access specified data held about them by insurers, and to authorise the secure disclosure of that data to third parties. Financial Rights has taken a close look at this topic – the risks involved and the opportunities for consumers in a recently released report titled Open Insurance.

The report finds that increased access to, and use of, consumer’s own data could improve disclosure processes when buying and renewing insurance. There is also the potential that data can help consumers and insurers work together to produce improved personal and social outcomes in the face of increasing natural hazards borne of climate change.

However there is the very real possibility that the use of big data could produce serious consumer harms and disadvantages. More data could lead to granular risk segmentation, and inappropriate price optimisation practices. Large numbers of people may find themselves unable to access insurance claim on their insurance, or contest their premium increases. As with any reforms there can be unintended consequences associated with the process and design of regulation.

And importantly the privacy concerns of consumers must be front and centre of future reforms in the Consumer Data Right and the Privacy Act. As the insurance industry begins to use new data collection techniques, artificial intelligence systems and algorithms, consumers’ personal information must be kept safe, secure and not used against them.

For a deep dive into the future of insurance read our report Open Insurance – the Consumer Data Right and Insurance by Dr Richard Tooth.

6. Consumers warned to avoid Christmas debt

The Financial Rights Legal Centre and Mob Strong Debt Help are urging consumers to be careful if taking out loans or using buy now, pay later services (BNPL) to keep up with Christmas expenses.

While these options may seem like an easier way to cope with holiday season and back-to-school expenses, it could be the start of an ongoing debt trap.

Financial Rights often sees cases of people who find themselves in difficulty upon realising they cannot meet their loan obligations on top of their living expenses. Many people also end up in financial hardship because they take out loans to cover existing repayments.

It’s important to know that help is available, if you end up in these circumstances

The risks of debt hardship

The risks of debt hardship are particularly high for vulnerable people in the community including Aboriginal and Torres Strait Islander consumers.

People from our mob may turn to borrowing to travel to see their families or to do things to make Christmas a special time for their loved ones.

Buy now pay later arrangements allow consumers to buy and receive goods and services immediately from a merchant, and repay another company, a buy now pay later provider, over time.

Don’t just read the advertising, do your research

Mob Strong’s Aboriginal Coordinator Amanda Cameron is concerned about the number of in store and mobile app promotions she sees that urge users to use buy now pay later services instead of money.

Buy now pay later products are often advertised as ‘interest free’ but some do have charges that add up quickly including if you miss a payment. If you use a buy now pay later service, it is worth doing some research into the fees including possible late fees, payment processing fees, monthly account keeping fees and establishment fees as these fees can be high. If your BNPL account is linked by direct debit you may also get a double whammy of fees if you later struggle with payments.

It is important to take a moment and think about your spending habits: Can I afford this right now? Can I keep up with the fortnightly repayments? Is this something that you really need or want right now or could this be purchased later on?

Findings by the Australian Securities and Investments Commission

A recent report by the Australian Securities and Investments Commission highlighted some of the negative consequences of using BNPL including:

  • 21 per cent missing a payment in the last 12 months and paying late fees;
  • 20 per cent had to cut back on essential expenses, including food, to meet the repayments;
  • 15 per cent had to take out a loan to meet the payments, and;
  • Things get worse when multiple BNPL accounts are opened.

ASIC’s considered aggregated data from six buy now pay later providers: Afterpay Australia Pty Ltd (Afterpay), Brighte Capital Pty Limited (Brighte), Humm Certegy Ezi-Pay Pty Ltd (Certegy), Openpay Pty Ltd (Openpay), Payright Limited (Payright) and Zip Pay ZipMoney Payments Pty Ltd (ZipMoney Payments).

What people can do to avoid debt or manage debt better

There are important steps people could take to help avoid the pitfalls of debt.

It’s always best to try to stick to a budget to manage holiday period expenses. If you really need to borrow try to keep the amounts to a minimum to ensure it’s as easy to pay back as possible.

If you do use the option of a loan, always budget to make sure you can afford each instalment and ensure that each instalment won’t be deducted from your bank account before you receive your next pay.

Tips to reduce risks when using BNPL:

  • Write up a shopping list for the holidays and budget for it;
  • Manage your accounts – keep to one BNPL account you can keep track of;
  • Avoid taking out loans to keep up with payments;
  • Line up your payments with your payday;
  • If you can’t meet a payment then contact the BNPL provider for financial hardship assistance;
  • If you’re having troubles keeping up with payments, call Financial Rights for free financial counselling and legal advice.