Welcome to the Financial Rights Legal Centre E-flyer.
In this edition:
- What we do at the Financial Rights Legal Centre: The credit repair company crunch and how to deal with a notice to vacate
- Introducing our new Aboriginal Advice Service
- Debt dating – do you know someone on the lookout for that special someone…
- NSW Strata law reform
- A Code for Life?
- Write Offs: Insurance and the Written Off Vehicles Register
- Financial Rights’ viewpoint
- Financial Rights in the media
1. What we do at the Financial Rights Legal Centre
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 debt collection.
David and his deceased dad’s debt
A Financial Rights financial counsellor took a call on the National Debt Helpline from David. David is a single parent, was in rehab, dependent on Centrelink income and lived in public housing. He also had a large number of debts. However one debt stood out from all the rest – on the list was a DEBT COLLECTOR debt that belonged to David’s dad who passed away in 2010. They had however been pursuing David to pay.
David had been paying the debt since 2008 but had stopped paying in January 2016. Financial Rights wrote to internal dispute resolution on David’s behalf to dispute the debt, as well as request documents and a statement of payments. More importantly we wanted to advise them that the debtor had passed away in 2010. Financial Rights received an extensive email stating that David wasn’t liable for the debt, that legal action had not commenced (despite DEBT COLLECTOR having issued a default notice against David), and that David’s credit report hadn’t been affected.
David was relieved but wanted to know whether he could get a refund on monies he had been misled to have paid. Our financial counsellor once again contacted internal dispute resolution asking for a refund however this time they refused as they believed David was liable since he had provided a statement that he was liable and would pay. Our financial counsellor consulted with the Financial Rights legal section and after receiving further instructions from David, lodged a dispute in the Credit and Investment Ombudsman Service, as well as a complaint to ASIC about misleading conduct. Before the matter was determined by the CIO, the DEBT COLLECTOR refunded the full amount.
Ella and her energy debts
Ella called Financial Rights crying from her hill-top home where she lives in a caravan with a donated port-a-loo. Ella is unwell and has so many illnesses she has to carry around a two page list to take with her to hospital. Her sole source of income is Centrelink Newstart sickness benefits. Ella recently applied for the Disability Support Pension but was refused.
Ella called Financial Rights because a DEBT COLLECTOR#1 was calling her insisting she pay $60 a week towards a disconnected electricity debt. The DEBT COLLECTOR was not accepting any information about her situation and just kept insisting Ella pay, borrow money or whatever she had to do to pay them. Ella decided she needed help. In speaking with her, Financial Rights found out she had a debt to a BANK of $11,000 for an old credit card, another $1800 to DEBT COLLECTOR #2 (which was another disconnected electricity debt) and yet another old energy debt that had gone to DEBT COLLECTOR #3. Ella had repayment arrangements on the other debts but could not really afford any of the payments – not even $10 a month.
Financial Rights started by writing to DEBT COLLECTOR #1 to note that we were now acting on Ella’s behalf and asked for a waiver. We also copied the original ENERGY COMPANY to the email. The ENERGY COMPANY responded to say that Ella was not entitled to financial hardship as it was a disconnected energy debt. We wrote back pointing out that the ACCC/ASIC Debt Collection Guideline applied and Ella was entitled to hardship arrangements. This caused the ENERGY COMPANY some issues because they did not seem to know that the Debt Collection Guideline applied.
DEBT COLLECTOR’s #2 #3 and the BANK waived the debts quickly. Eventually the ELECTRICY COMPANY decided to waive the debts.
Ella was very relieved and grateful for the assistance in waiving her debts.
2. Introducing our new Aboriginal Advice Service
Financial Rights has launched a new Aboriginal Advice Service (AAS) on 1800 808 488. Its role is to provide legal advice and assistance to Aboriginal and Torres Strait Islander people across Australia on credit, debt and insurance matters. The AAS is available to provide specialist legal advice and financial counselling in credit and debt, insurance such as funeral insurance matters and other issues relating to responsible lending practices. There has long been a gap in providing specific legal and financial counselling advice and services to Aboriginal and Torres Strait Islander people and Financial Rights is determined to work closely with the community through outreach and referrals.
The AAS commenced operation in June 2016 and has already assisted a number of people via Aboriginal Legal Services and Knowmore, who provide free legal advice to Royal Commission into Institutional Responses to Child Sexual Abuse. The AAS has also established a working relationship with the Indigenous Outreach Service at the Australian Securities and Investment Commission.
The AAS has also been engaged in providing legal advice to a number of Aboriginal people in both regional and remote areas. This has consisted of providing information sessions on the Mid-North Coast of NSW with the local community legal centres and Legal Aid NSW. The service will also be attending the MWANT Conference in Darwin as well as a visit to the Tiwi Islands in early November 2016.
If you have a client that you feel could be assisted by the AAS contact us on 1800 808 488.
3. Debt dating – do you know someone on the lookout for that special someone…
“If you’re in debt, who is best to help you?”
This is the central question posed in a new “debt dating” video launched in August at www.yourfinancialrights.org The video follows the pitfalls many Australians face when looking for help with their financial problems.
The video and accompanying website are part of a new financial literacy campaign aimed at steering consumers away from “Debt Management Firms,” otherwise known as Debt Vultures, towards free and independent financial counselling services.
Anyone who has watched late night TV, listened to commercial radio or typed “debt help” into google have seen the flood of ads for these financial predators. The companies may look like simple, helpful options for people experiencing financial stress, but often they make things worse through high fees, ill-suited advice or questionable business practices. Their cheap tricks end up being quite expensive. What’s worse is that they prey on those who can least afford it.”
Debt management firms include:
- credit repair companies – who claim to fix your credit ratings
- money managers – who charge you to manage your income, bills and debts
- debt negotiators – who present debt negotiating as something they do as a “professional’ and
- debt agreement brokers – who direct people into debt agreements – a form of insolvency.
A report by the Australian Securities and Investments Commission (ASIC) released earlier this year found that there is “no uniform regulatory framework for debt management firms”. It confirmed that these predatory businesses use high pressure sales techniques and sell unsuitable products. This is leading to a huge number of complaints about these businesses.
The Your Financial Rights video can be seen at www.yourfinancialrights.org and you can follow the campaign on twitter at https://twitter.com/Fin_Rights_CLC, Instagram at www.instagram.com/yourfinancialrights and Facebook at www.facebook.com/yourfinancialrights
4. NSW Strata law reform
NSW has introduced new rules for strata schemes starting from 30 November this year. And the good news is that there will now be an opportunity for property owners who have fallen behind in their contributions to apply for payment plans: s 85(5)-(7) Strata Scheme Management Act (NSW) 2015.
Under the Act, an owners corporation may if they wish, by resolution at a general meeting, agree to enter into payment plans for the payment of overdue contributions for up to 12 months. A further plan may be agreed to by the owners corporation by resolution.
It is a modest but significant improvement for owners in financial hardship. However Financial Rights remain concerned that the right to establish a payment plan is not mandatory, and is vague and unclear.
If a payment plan is established, it must be in writing. However, if a payment plan is declined, the owners corporation is not obliged to respond or give reasons why it was declined. This is disappointing. If a client applies for financial hardship and does not get a response or it is declined, they should give Financial Rights a call and seek legal advice as owners corporation may take swift action to recover the outstanding debt.
Even if there is a written payment plan established, it is not clear that if the payment plan is adhered to that there won’t be legal action. If a payment plan is established in writing it must contain a statement that the existence of a payment plan does not limit any right of the owners corporation to take action to recover the amount of unpaid contributions.
If there is a dispute in relation to payment plans which is unresolved with the owners corporation, it is important, again to seek legal advice. One option would be to lodge a complaint to the NSW Fair Trading, who may attempt to mediate to resolve the dispute. Clients should seek legal advice on whether they have a right to apply to the NSW Civil & Administrative Tribunal (NCAT) or a court if they are in hardship.
An owners corporation may choose to commence proceedings in NCAT or in another court to recover outstanding levies and they can seek enforcement expenses under both options.
In the end the new strata reforms throw up a few more questions than answers and if you or a client of yours need assistance – call Financial Rights on 1800 007 007.
5. A Code for Life?
Over the last few years the life insurance sector has been the subject of seemingly never ending controversies regarding advice, claims processes and surveillance and investigations. With horror stories reported on Four Corners in Fairfax newspapers and on 7.30, the life insurance sector’s reputation in the eyes of consumers has gone from very bad to even worse.
One light on the horizon for consumers could be the development of a new Life Insurance Code of Practice. While self-regulatory codes of practice have long existed in other sectors including general insurance and banking, the life insurance sector has had for many years been without a code to establish best practice.
The Financial Services Council – the body representing life insurers – began the process of writing a code at the end of 2015 following a recommendation by the Trowbridge Report. This report has led to a number of reforms including the amendment of remuneration arrangements between insurers and advisers to minimise conflicts of interest.
Financial Rights has provided a significant amount of input into the development of the Code over the previous year to ensure that consumers got a look in to the writing of the code and that their best interests were taken into account.
The end result is a modest first step with much more work needed to really deliver solid consumer protection outcomes.
First, the good news. the Code will provide protections for people who are subjected to investigations and surveillance while their claims are being assessed. This has been a significant bone of contention for consumers and a real black hole – as reported in our Guilty until proven innocent report earlier this year. The Code places two hour limits on interviews, allows for interviewers of the same sex, if requested, and encourages policyholders to have support people attend the interview. Surveillance measures will also be curtailed and won’t be conducted in courts, medical facilities, bathrooms or inside your house.
The Code also now imposes timeframes on insurers in claims processing. The length of time it has taken to get a decision from an insurer has been one of, if not the most common complaint we have heard from callers. The length of time an insurer has to make a decision will be now be curtailed to 12 months. This is obviously still a long time but will provide significant relief to many policyholders. The code also commits life insurers to updating medical definitions, a significant area of consumer concern.
On the other hand, there remains much missing from the Code. For example, most Australians have their life insurance through their super funds – the Code does not apply to superannuation funds and gives those people no guarantee that their insurance claims will be decided within a set time. The life insurers and superannuation industries are currently discussing how to resolve this issue.
The Code is also insufficient with respect to very problematic products and sales practices, for example, funeral insurance and ‘add-on’ sales practices. This is disappointing but it is expected that the FSC will be moving on these issues in the next 18 months. This is needed as too often these products tend to be about gouging the most vulnerable.
Financial Rights expects the FSC to continue to work to improve the Code and expects the Code to be registered with ASIC at its first review in 18 months time.
6. Write Offs: Insurance and the Written Off Vehicles Register
Nikki she was driving home one day when she was involved in a car accident. Amy ran into the back of her. They exchanged details. Both Nikki and Amy are insured.
Nikki takes her old car to the smash repairers. He tells her that the damage is mostly aesthetic and could repair the damage for a few thousand dollars. Nikki’s car is worth about $4,500.
Nikki calls Amy’s insurer who tells her to take it to their repairer. Nikki’s insurer however tells her to take it their repairer.
Nikki loves her car, it is of great sentimental importance and it is perfect for driving her dog to the shops, and taking her mum to Church on Sundays. She doesn’t really care if it is a bit dinged up.
After an accident, there are a number of different options available Nikki (the not at-fault party) can take. Nikki could:
- allow Amy’s insurer to view her car for the purposes of assessing or repairing it;
- claim on her insurance, and her insurer will repair her car; or
- pay for her repairs herself and recover from Amy (her insurer).
Each option presents pros and cons, and but the first two options could lead to Nikki’s car being written off and included on the Written Off Vehicle Register (WOVR).
TIP: If you want to be sure your car is not written off for minor damage get legal advice before you claim on your, or let the other party’s insurer assess your car.
The WOVR is a legislative requirement for insurers, auctioneers and dismantlers. Vehicles that are severely damaged may be written off either for being too unsafe or uneconomical to repair – that is, if the repair cost plus salvage cost exceeds the market value or agreed value. The WOVR is a requirement of laws that are designed to ensure vehicle safety, protect road users, and reduce vehicle-related crime.
All insurers, be it yours or the other party’s, have mandatory obligations to notify the WOVR if they believe that a vehicle is unsafe or uneconomical to repair, leading to the vehicle being recorded on the WOVR, and vehicle’s registration cancelled. Owners have the right to request that the insurer provide a written record of assessment, but the law only requires that this record specify whether or not the vehicle has suffered damage that is too unsafe to repair.
While there is no dispute resolution available for vehicles assessed as too unsafe to repair, broadly speaking, the rules of each state and territory may offer an avenue of redress if a vehicle is assessed as uneconomical to repair. In some States owners may be able to apply to their motor vehicle authority for authorisation to repair the vehicle provided certain conditions are met. If the authorisation to repair the vehicle is granted, the owner will be able to repair the car by a licensed repairer in order to have the vehicle re-registered. But note that the car will remain on the WOVR as a repaired write off and may affect its future value.
So what happens in Nikki case?
If Nikki lets Amy’s insurer view her car and the insurer forms the view that it is uneconomical to repair, they will notify the WOVR and the car’s registration will be cancelled. Nikki would be entitled to recover her common law damages, being her market value of the vehicle (less salvage) and any other losses arising from the accident (e.g. hire car). If she wants to keep the car Nikki could seek an authorisation to repair from the State authority. If granted, she could use the insurance money to repair the car but it will remain on the WOVR as a repaired vehicle.
If Nikki claims on her insurance her insurer has the right (as outlined in the Product Disclosure Statement (PDS)) to elect how they deal with a claim. Most PDS’s will have wording that will give the insurer the right to repair the car themselves or with an authorised repairer, declare the car a total loss; or pay Nikki the sum it would cost them to repair her car. In the event they write off the car and notify the WOVR and Nikki disagrees with their decision, it can be very difficult to dispute the decision or remove it from the WOVR. The insurer would need to agree they made a mistake in the assessment. She could access internal dispute resolution (IDR) and in the event they find against Nikki, lodge in the Financial Ombudsman Service. However, FOS cannot compel the insurer to remove a listing from the WOVR.
If Nikki actually feels the car should be written off but the insurer elects to repair the vehicle, like above she could access IDR and FOS. But she would need substantial evidence that it is unsafe to repair. This can be very difficult and is a lengthy process.
If Nikki doesn’t let Amy’s insurer view her car, Nikki could ask her smash repairer to quote to repair the car to a registrable standard. Nikki can then send a letter of demand to Amy seeking the amount in full and final settlement of the damages in the accident. However Nikki needs to be mindful that if she is not happy with the repairs, this is the risk that she needs to accept and any dispute would be between her and the smash repairer. Nikki will also need to let her insurer know at renewal that the car has been in an accident.
7. Financial Rights’ viewpoint
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.
Banking Code of Practice
The Australian Banker’s Association agreed to resource a joint consumer submission to the current review with the Financial Rights Legal Centre engaged by the Consumer Federation of Australia to consult with consumer representatives to prepare this submission. Eighteen consumer organisations have endorsed the submission.
Trust and confidence in the financial services sector, particularly the banking sector remains low. While Consumer Representatives do acknowledge that the banking sector has been working in many areas to improve the way they engage with consumers, there remains a number of areas where banks can work harder to improve their relationship with consumers, particularly with those in financial hardship and other vulnerable Australians.
Download our submission here
EDR scheme review
In May 2016 the Federal Government announced the establishment of an independent expert panel to lead the review into the financial system’s external dispute resolution and complaints framework. Financial Rights worked with Consumer Action and other consumer representatives on a joint consumer submission strongly supporting mandatory external dispute resolution. We believe the final dispute resolution framework in the financial system should empower a single industry-funded external dispute resolution scheme.
Financial Rights is opposed to the establishment of a new banking tribunal. The consumer experience of tribunals has not been positive and are very concerned that a new tribunal may in fact deliver worse outcomes for consumers. While there is room for improvement, the existing EDR schemes are world class and an extremely important alternative to the court system. A robust, well-resourced single ombudsman scheme with appropriate scope and design, together with a well-funded regulator and a statutory scheme of last resort, will provide a free, fair, accessible and effective dispute resolution framework in the banking and financial sector.
Download our media release here
8. Financial Rights in the media
Financial Rights acting coordinator Kat Lane 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:
Shake up in the world of dispute resolution
The Federal Government recently announced a review into the external dispute resolution schemes – with an eye on merger of the Financial Ombudsman Service, Credit and Investment Ombudsman and the Superannuation Tribunal. One idea that has traction with the Government is a banking tribunal. Financial Rights and the consumer movement don’t think that is such a good idea. We wrote a joint letter to the Prime Minister on the issue questioning the value of a tribunal. Kat Lane spoke to the Australian Financial Review saying that “a tribunal is not the answer.”
A new lease on Life
As mentioned above Financial Rights has been working hard to ensure that the new Life Insurance Code of Practice developed by the Financial Services Council meets best practice standards. While there are some good aspects to it, the Code has yet to reach the best practice benchmark. Kat Lane spoke about our concerns to the Sydney Morning Herald and the Australian Financial Review.
The financial advice sector is currently undergoing a number of significant changes with the Federal Government’s Life Insurance Framework introducing a raft of changes. One area in sore need of reform is commissions. Principal solicitor Alexandra Kelly put forward Financial Right’s view in the Financial Observer.
The Federal Government is currently considering changes to the regulation of pay day lending and consumer leasing. Both of these areas are causing incredible harm to consumers and the industry needs to be reigned in. Kat Lane spoke about consumer lease rip-offs to The Guardian.
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