In this edition:
- What we do at the Financial Rights Legal Centre: assist with energy payment plans
- The 2019 Federal election / update on Financial Services Royal Commission implementation
- What changes to the National Debt Helpline in NSW mean
- Financial Rights’ experience with post-judgment jurisdiction
- Progress update on Financial Rights’ RAP
1- What we do at the Financial Rights Legal Centre: assist with energy payment plans
In our E-flyers 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 outlined how we advocate for debt waivers and explained common pitfalls in travel insurance. This month we take a look at a recent case were we helped a mum whose power had been cut off by her provider.
WHEN A PLAN GOES WRONG
Lily had a debt of $2000 and was paying $30 a fortnight. A Financial Rights financial counsellor called the provider with Lily on the line in a conference call.
Lily, is on a Centrelink benefit and is a single mother raising three children, called us when her payment plan to a major energy provider was cancelled by the provider and her power disconnected.
One of the provider’s service officers confirmed the plan was cancelled but wasn’t sure why. On investigation of Lily’s energy consumption it was obvious that the amount in the payment plan wasn’t enough to cover her use. That meant her debt was increasing regardless of the fact she was meeting the plan payments.
The service officer agreed to re-instate the previous payment plan on the condition that Lily accepted an assessment of her usage from an energy inspector. She agreed and also committed to seeing a financial counsellor to look at her spending.
Lily’s electricity was cut off but our financial counsellor assisted in getting agreement from the energy provider to reconnect it without a reconnection fee.
The name of our client and the company involved have been changed to protect her identity.
- Important note: Most of the time Financial Rights financial counsellors will refer people to face-to-face financial counselling services to get help, especially if you have not yet been disconnected. We are unlikely to contact the energy provider for you. You may have to wait a few weeks to see the face-to-face counsellor, but if you have an appointment and let the energy provider know about it, they should not disconnect you in the meantime.
Calls about energy bills are among our most common enquiries. Of those, people being referred to financial counsellors for help with payment plans to meet unpaid bills would be the most common issue. The cause of the build up of arrears can be varied.
Many people are referred to us by their energy provider because:
- the payment plan they are on does not meet their usage costs;
- they have missed a payment on an agreed arrangement (sometimes several);
- the energy provider thinks the arrangement is not reflective of their circumstances;
- they are at risk of disconnection.
So what does our experience of these calls – and negotiations on behalf of callers – tell us? What is the most useful advice we have for anyone in this situation?
A common mistake people make is to switch energy providers when they have incurred a large debt that they cannot manage and are at risk of being disconnected by not talking to their energy provider about the situation. The original debt is just sold to a debt collector, which is likely to start pestering the person for payment and may list the debt on his or her credit file .
Energy providers have obligations to provide hardship assistance but debt collectors tend to be more difficult to deal with.
When your debt is with the energy provider you may eligible for:
- an Energy Accounts Payment Assistance (EAPA) in NSW which can be applied to reduce the debt, or
- the provider may allow matched payments if you stick to a plan, or
- other benefits such as access to staying connected programs, energy audits or replacement appliance programs.
If you switch, you cannot access EAPA for the debt and debt collectors won’t provide matched payments and often require lump sums.
If you are struggling with energy affordability generally, you may then struggle with your new provider and you can find yourself facing another growing debt.
Probably the most important points are DO NOT:
- hastily switch;
- ignore your provider; or
- promise an unaffordable arrangement you may not be able to meet.
Payment plans work if they are arranged at a manageable rate in your circumstances and cover your usage as well as possible.
To work out a payment plan, a good first step is to work out how to cover your usage going forward. For example, if your bill is $900 per quarter and you are behind $500, you would want an arrangement to be paying $70 for your ongoing usage plus $40 to cover the arrears so a total of $110 per week.
If you are not able to meet usage, you should let the energy provider know and ask for:
- an energy audit
- if you are on the best deal
- to be put in their hardship program
Once a payment plan is agreed to, people should try to:
- make the payments on the agreed dates for agreed amounts, and if something goes wrong contact the hardship team ASAP
- identify unnecessary energy consumption (the energy provider may help with an audit or information)
2- The 2019 Federal election / UPDATE: Royal Commission implementation
After the final report from the year-long Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was tabled in Parliament on February 4, Financial Rights’ hopes for better consumer protections were high, though our expectations were measured.
The blanket media coverage has slowly trailed off, but what has happened to the 76 recommendations outlined by Commissioner Kenneth Hayne in his 1776-page report?
The major parties remained split on implementing the recommendations; and on the eve of the 2019 Federal Election the Royal Commission remained an election issue.
Pre-election, the Government stated it would act on all 76 recommendations, although it had not committed to implement exactly what Hayne has specified in a number of cases. For example, the unfair contract terms provisions in the ASIC Act must be amended to provide a definition of the “main subject matter” of an insurance contract and not a narrow definition, but there has been no public commitment to this. On mortgage broker commissions, the Government decided to not prohibit trail commissions on new loans as recommended, but rather review their operation in three years’ time.
Before the election, the Government had either implemented or announced it would implement at least 13 of the recommendations with action taken on additional four measures. Legislation has either been passed or Treasury has begun consultations before the caretaker period began. These include the below. We have included links to our submissions on these to find out more:
- universal terms for insurance within MySuper
- ending grandfathered conflicted remuneration for financial advisers
- superannuation binding death benefit nominations and kinship structures
- enforceability of financial services industry codes
- APRA capability review
- Insurance claims handling
Among its election policies, the ALP committed to fully implementing 75 of the 76 recommendations and announced an overhaul of compensation caps and a “Banking Fairness Fund”, which would help fund financial counselling. The ALP also has a promising policy on unfair contract terms in insurance. After initially declaring support for reforms on mortgage broking, the ALP backtracked on this recommendation. Among its election policies, the ALP committed to fully implementing 75 of the 76 recommendations and announced an overhaul of compensation caps and a “Banking Fairness Fund”, which would help fund financial counselling. The ALP also has a promising policy on unfair contract terms in insurance. After initially declaring support for reforms on mortgage broking, the ALP backtracked on this recommendation.
While we remain hopeful Treasury will recommend full implementation on these as the then-Government indicated in February, we have plenty of concerns about other areas, including the exemption from the National Consumer Credit Protection Act where retail store sales staff offer point-of-sale credit applications to complete purchases.
We are also concerned at the lobbying efforts of general and life insurers to undermine full implementation with respect to unfair contract terms, codes of practice and anti-hawking recommendations.
It is now widely known that part of the financial advice industry is trying to raise a $1.5 million war chest from its membership to challenge the recommendation to scrap trailing commissions in the High Court.
Outside of the remit of the Royal Commission – and its recommendations – Financial Rights strongly believes the new Government can ease the burden on struggling Australians by regulating the debt management sector including budgeting services and debt agreement negotiators.
One of the most urgent things the new Government must do is bring the Small Amount Credit Contract and consumer lease legislation before the House of Representatives and the Senate. This would ultimately improve protections for vulnerable people from being targeted by predatory lenders such as payday lenders.
It’s also time to better regulate ‘buy now pay later’ services and introduce a new code of practice, as recommended by the Federal Senate Inquiry in January this year.
Finally Financial Rights wants to see a review of the Privacy Act and the Australian privacy principles to beef up consumer protections for privacy and security protections in line with European Union’s General Data Protection Regulation.
3- UPDATE: National Debt Helpline changes in NSW
From 1 April 2019 two different services were funded to answer calls to the National Debt Helpline (1800 007 007) in NSW.
Financial Rights Legal Centre (Financial Rights) continues to take 75 per cent of the calls, and Uniting, based in Dubbo, handles the remaining 25 per cent. Calls are diverted randomly between the services according to this ratio.
Both services are putting in place policies and procedures aimed at ensuring callers receive the same level of service regardless of who they ring. Referrals between the services are also a priority to ensure continuity of service when people are already receiving advice and assistance from one of the two available services.
Uniting will provide financial counselling only, not legal advice. Financial counselling includes lots of para-legal information and assistance.
Financial Rights Legal Centre continues to be funded provide legal advice and assistance to people from all over NSW for credit and debt matters. If you, or your client, need legal advice you can now call our dedicated Credit and Debt Legal Advice line on 1800 844 949.
Callers to the National Debt Helpline who need legal advice will also be referred back to Financial Rights by Uniting where necessary.
Financial Rights will continue running our two national services: Mob Strong Debt Help for Aboriginal and Torres Strait Islanders on 1800 808 488, and our Insurance Law Service advice line on 1300 663 464.
Financial counsellors from across NSW can still contact Financial Rights on our priority access line for financial counsellors. This number is not available to the public.
4- Financial Rights’ experiences with post-judgment jurisdiction
Financial Rights regularly hears from clients who have received a judgment and are looking for options when a notice to vacate is handed to them. To assist those of you who also hear from clients in similar situations – we provide the story of Dennis – and explain his options and the steps we go through to help someone in this situation*
Dennis is 50 and living in outer Sydney. He called us before a public holiday, just 7 days before a Notice to Vacate was due to be executed. He had a mortgage of $200,000 and arrears of about $20,000. Dennis’ hardship started a few years prior, with the death of his wife and an injury at work. His life got more complicated, when, in attempt to keep the mortgage up to date, he rented the property out – only for the tenant to cause substantial damage and not pay any rent. Dennis needed to repair the house, but had little money to do so. In early 2019, Dennis thought his life was getting back on track as he started a new job and had regular income. Before contacting us, he had tried to negotiate with his lender to capitalise the arrears, but they refused and sent out the Notice to Vacate.
Dennis accepts he had a long bad patch and things had escalated to a judgment in the Supreme Court, NSW which limited his options. He had received the statement of claim, and agreed the amounts owing; he had no defence – just hardship.
Dennis was confident that he could finish the repairs, sell and have enough to start again. He just needed more time. A Financial Rights solicitor discussed his options, which were:
- continue to negotiate with the lender despite the possibility of eviction occurring if they did not agree
- move out – but Dennis would then be homeless and the lender may not sell his home for as much as he might get or
- apply for an urgent stay through the Supreme Court, which is expensive and will add to the mortgage debt
The solicitor also raised with him the possibility of lodging in the Australian Financial Complaints Authority. AFCA had just commenced in November 2018 and does have a limited post-judgment jurisdiction. However since it was new, we hadn’t lodged with AFCA and didn’t know if it would work. AFCA was receiving lots of complaints and this was very urgent.
The solicitor looked at the applicable AFCA Rules:
- One rule says that the lender mustn’t take any action to recover a debt including a default judgment without AFCA agreeing: Rule A1.7.1(c).
- Another says that AFCA can decide the lender take a particular course of action on a default judgement: Rule D.2.1(h).
- Yet another says that AFCA must exclude a dispute already dealt with by another court unless the person had requested a stay of execution for financial hardship reasons and the lender had refused the hardship request: Rule C.1.2(d).
In this case, Dennis had asked the lender and was refused.
Dennis instructed the solicitor to lodge in AFCA on his behalf. We had to have regard to AFCA’s Operational Guidelines on how they approach this situation (at page 43). These say that Dennis would need to either:
1- sell the property himself within a reasonable time … but Dennis would need to have taken sufficient steps to prepare to sell the property
2- imminently refinance the loan … here Dennis would need to show he had already taken steps to refinance
3- show that he was suffering from personal (as distinct from financial) hardship and needed a reasonable time to organise his affairs …Dennis would have to explain his personal hardship, with documents, and how it was likely to be temporary
4- apply to the court to have his default judgment set aside … Dennis would need to have an arguable basis and have taken steps to make the application, and demonstrate a prima facie case that the judgment was irregular or obtained in contravention of a legal requirement.
Dennis was not able to provide an agency agreement, and he wanted an unusually long time to sell. We followed up with AFCA, and just in case, drafted an application for a stay at the Supreme Court.
Fortunately for Dennis, the day before the scheduled eviction, the lender’s lawyers contacted us and advised that they had agreed to stop the eviction and allow AFCA to review the hardship matter. The matter proceeded in AFCA and the parties exchanged information. Dennis was able to enter into favourable terms along the lines of what he was seeking, which was time to repair the property and sell.
If the lender had refused, given the wording in the Operation Guide, AFCA may not have awarded Dennis the length of time he was seeking. Equally the Supreme Court may not have agreed to the time frame Dennis was after to repair his house for sale. Despite this AFCA does have limited jurisdiction where default judgment is entered, and this may provide an avenue for consumers to obtain resolutions for their situations.
5- Reconciliation Week 2019 / UPDATE: our Reconciliation Action Plan (RAP).
Financial Rights – with Tenants NSW and the Arts Law Centre – will be jointly hosting a Reconciliation Week event consistent with Reconciliation Australia’s ‘Grounded in Truth’ theme, during the CLC NSW quarterlies on 29 May in Sydney.
Meanwhile, Financial Rights continues to progress its ‘Reflect’ Reconciliation Action Plan in 2019. Two major achievements in implementing our RAP so far are:
- Implementing our RAP into our staff induction procedure and encouraged new staff to take part in the RAP committee and activities.
- Implementing CLCNSW’s cultural safety workbook into our staff meetings to discuss questions relating to cultural safety for Aboriginal and Torres Strait Islander staff, clients and callers.
Financial Rights is now finalising its Welcome to Country protocol and developing a MOU with the Metropolitan Local Aboriginal Land Council.
We have been getting great help and advice from Reconciliation Australia with implementing the RAP and recommend other small organisations like ours to engage with them on building reconciliation with a RAP as well.
The Financial Rights RAP is a one-year Reflect RAP, valid until October 2019. A Reflect RAP lays the groundwork for an organisation’s reconciliation journey and sets out steps the organisation must take to prepare for reconciliation initiatives in future RAPs.
The deliverables for us to complete under this RAP include:
- Preparation for relationship building with Aboriginal and Torres Strait Islander peoples, communities and organisations
- raising awareness of ourRAP; participating in National Reconciliation Week (May 27 to June 3, 2019) and NAIDOC Week (July 7 to 14, 2019)
- investigating opportunities to expand our use of a range of Aboriginal and Torres Strait Islander suppliers
- updating organisational policies and procedures to improve cultural safety, and
- providing professional development and support options for Aboriginal and Torres Strait Islander staff and advisory committee members.
Page last updated: May 2019.