“If you’re in debt, who is best to help you?”
This is the central question posed in a new “debt dating” video launched today 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,” said Alexandra Kelly, Principal Solicitor of the Financial Rights Legal Centre. “These 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”.
“ASIC’s report confirmed that these predatory businesses use high pressure sales techniques and sell unsuitable products,” said Financial Rights’ Ms Kelly. “This is leading to a huge number of complaints about these businesses. Something needs to be done at a legislative level to ensure that these business are regulated appropriately.”
The Your Financial Rights video can be seen at www.yourfinancialrights.org and you can follow the campaign on:
The four key Debt Management Firms are:
Credit Repairers claim that they will be able to “fix” or “clean” a bad credit report and “improve” a poor credit score. However their ability to do any of this is limited and if your credit report is inaccurate you can get it fixed for free.
“Money Management,” “Personal Budgeting Services”, or “Debt Payment Services” offer to manage your income, bills and debts, while providing you with an allowance for daily expenses. Some also claim to provide other services, such as negotiating future repayment arrangements with your creditors. They then charge you periodic maintenance or management fees, usually in addition to an up-front establishment fee.
Debt Negotiation is a negotiation between you (the debtor) and your creditor(s) to settle a debt on terms beneficial to both parties. Debt Negotiators present debt negotiation as something they do as experienced “professionals”. But in many cases they are far from it.
Debt Agreements are an alternative to bankruptcy for people who are unable to pay their debts. Debt Agreement brokers usually offer to provide a “free consultation,” during which they may suggest that entering into a debt agreement is your best or only option. This is often not the case. A Debt Agreement is an insolvency option and has serious consequences.
For further information contact Drew MacRae, Policy and Advocacy Officer, Financial Rights Legal Centre on 02 8204 1386
About the Financial Rights Legal Centre
The Financial Rights Legal Centre is a community legal centre that specialises in helping consumer’s understand and enforce their financial rights, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals about a broad range of financial issues. We operate the Insurance Law Service which provides advice nationally to consumers about insurance claims and debts to insurance companies. Financial Rights also operates the Credit & Debt Hotline, which helps NSW consumers experiencing financial difficulties. Financial Rights took over 26,000 calls for advice or assistance during the 2014/2015 financial year.
- Insurance Law Service 1300 663 464
- Credit & Debt Hotline 1800 007 007
- Aboriginal Advice Service 1800 808 488