February FCA Update 2019 - 11 February 2019
STOP PRESS – the final report of the banking Royal Commission was released on
Monday last week. We sent out a short FCA Update the next day - we were
delighted that Commissioner Hayne had recognised the important work that financial
counsellors and consumer credit lawyers do in giving people access to justice.
Things since then have only got better. On Wednesday, the Treasurer announced
that one of the Government’s responses to the Royal Commission would be a review
of ’the coordination and funding of financial counselling services … to consider …
the adequacy of appropriate delivery models for future funding.’’ You can read more
about what this means below …
And here is our usual introduction to FCA Update
Welcome to the first FCA Update of 2019! In this update we explain what is
happening with the Senate inquiry into credit and financial services and what will be
happening at the FCA conference.
You will want to check out a number of new resources relevant to your work
including guidance notes on repayment history information, and VET FEE-HELP, an
online module on debt collection and a webinar on supporting clients participating in
the National Redress Scheme. Equifax has also introduced a new process that
means financial counsellors can get access to a credit report for a client within 24
hours.
You'll also find an update on some of the work that FCA have been doing and we'll
draw your attention to some changes that you should be aware of in out new 'things
to look out for' section.
And just for fun - *NEW* everyone loves a quiz! Why not test your knowledge ? This
one's on credit law.
In this Newsletter:
• Industry News
• Tools and Resources
• FCA News
• Things to look out for
Industry News
Treasury response to Royal Commission report
The final report of the Royal Commission into misconduct in the financial services
industry continues to reverberate. While some people were disappointed that it didn’t
go far enough, there are a number of positive changes that will lead to a fairer
system. These include closing loopholes in the law and addressing conflicts of
interest.
But the big news for financial counselling was the response by the Government with
the Treasurer Josh Frydenberg, announcing an immediate review into ‘’the
coordination and funding of financial counselling services … to consider … the
adequacy of appropriate delivery models for future funding.’’
He also noted that the “Government recognises that [financial counselling] is a vital
service used by thousands of Australians every year”.
It would be very strange to have a review about the "coordination and funding of
financial counselling services" and then not recommend any changes to funding.
We don’t know much about the review other than it will be relatively fast. What we
would like to see come out of the review are:
• additional funding, including through an industry levy;
• work to begin on a National Partnership Agreement between state and federal
governments to guarantee funding levels;
• the inclusion of funding for consumer credit law services (as Commissioner
Hayne suggested)
• the extension of the National Debt Helpline to include small business.
Senate inquiry into credit and financial services targeted at people in financial hardship
This inquiry was announced on 17 October last year. The terms of reference focused
on three areas:
1. The impact of payday lenders, consumer lease providers, unlicensed financial
service providers (e.g. ‘buy now, pay later’), and debt management firms;
2. Whether the current regulation is adequate; and
3. The capacity and capability of financial counselling services for people in
financial hardship.
The financial counselling sector put in two submissions, which are available
here: https://www.financialcounsellingaustralia.org.au/Corporate/Publications/Submi
ssions.
Some of the changes requested are:
• Urgently enact the bill with changes to the National Credit Act to improve
protections for consumers who use payday loans or consumer leases
• Buy now, pay later services must be licensed and regulated under the
National Credit Act
• Debt Management Firms must be regulated
• Pawnbrokers must be regulated under the National Credit Act. In the interim
we called for at least compulsory membership of AFCA.
We made a call for case studies and many of you provided brilliant case studies.
Thank you!
The submissions also gave evidence on:
• How financial counsellors help
• That demand for financial counselling exceeds supply, and
• How an industry levy would be a better way to fund financial counselling.
Review of early release of superannuation benefits
The Government’s review of the early release of superannuation is progressing, with
the release by Treasury of proposals for change.
FCA’s joint submission with the State financial counselling associations, Choice and
the Consumer Action Law Centre, responded to the specific proposals but raised the
following additional issues:
• Early release of super should not be used as a substitute for an inadequate
social safety net.
• Referral to a financial counsellor should be a part of the process when
accessing super early
• All super funds should offer early access
• Further consultation is required with Aboriginal and Torres Strait Islander
people in relation to funeral benefits
• Reducing tax on early access of super to nil
The main proposals for change are:
• There should be a ground of release for family and domestic violence –
we supported this but suggested changes to evidence requirements (to make
it easier), to increase the amount accessed and for the term to be
lengthened.
• A written statement that the home loan would be serviceable if the
arrears were paid– this was supported.
• Access for housing arrears will be once every two years instead of the
current 12 months– we suggested access three times every 10 years to
build in more flexibility.
• A proposal to remove the Regulator’s discretion (which would mean no
release for council rates)– we strongly opposed this.
• A proposal to change the eligibility for early release on severe financial
hardship to 26 weeks over 40 weeks– we supported this.
The submission will be available on the FCA website
Tools and Resources
Some great resources have been added to the FCA Toolkit
Comprehensive credit reporting/Repayment History Information
Clients may be starting to ask you how their credit report will be affected if they ask
for hardship on any of their loans. FCA has released a detailed guidance note on
comprehensive credit reporting and Repayment History Information.
Accessing credit files
Equifax has now made it easier for you to access your client’s credit reports. The
process should now only take one business day.
VET FEE-HELP student debts
New remedies are available for any of your clients who have a student debt because
of inappropriate behaviour by some VET FEE-HELP providers.
Top tips to help break down the barriers
Use these tips to help overcome the stigma people may feel about getting help from
a financial counsellor. Researchers used behavioural economics to devise strategies
to tackle the unconscious biases that also stop people from taking action.
New content on National Debt Helpline website
A large amount of content has been added to ndh.org.au. The content includes
information on: Court judgments; Old debts; Financial hardship – borrowers’ rights;
and Creditors’ rights. Two sample letters have also been added at on the page
relating to debt collection. These are: A letter to request a delay in debt enforcement
action; and a letter to offer to pay a full and final settlement.
Webinar on the National Redress Scheme
Following the Royal Commission into Institutional Responses to Child Sexual Abuse,
a National Redress Scheme was established for survivors. Up to 60,000 people are
eligible for a redress payment, so you may be asked to provide support to survivors.
One component of the scheme provides for a monetary payment up to a maximum
of $150,000, with the median payment expected to be about $76,000.
In conjunction with knowmore Legal Service, FCA has put together a webinar that
sets out ways you can support survivors. The webinar provides some background to
the royal commission, considers the financial implications of the redress payments
and identifies referral pathways.
Two webinars are coming up: Tuesday February 26th at 2pm and Tuesday April 9that
2pm. REGISTER HERE. If you can’t make either of these dates, you'll video
recording of the webinar on the Toolkit.
It’s easy to say “don’t sign anything”: debt problems among recent migrants from a non-English-speaking background
Much has been written lately about the difficulties that consumers face in accessing
appropriate assistance from creditors under Australia’s hardship protections.
However, to what extent are these protections serving the needs of recent migrants
and refugees from a non-English-speaking background?
Researchers at Melbourne Law School have published an article in which financial
counsellors and other consumer advocates discuss their experiences in assisting
recent migrants and refugees with utility bills, consumer leases and other types of
debt. This research involved focus groups with advocates employed by three
community organisations: Lentara UnitingCare, South East Community Links and
Diversitat.
This research demonstrates the importance of providing recent migrants with
adequate assistance with the financial aspects of resettlement in Australia. The
researchers recommend a number of policy measures that could reduce the
vulnerability of recent migrants in consumer transactions and assist them to resolve
debt problems before they escalate. These measures include:
• Funding for refugees, asylum seekers and other vulnerable new arrivals to
receive face-to-face training in community languages covering topics such as:
utilities, insurance, consumer leases and other complex products and
services; exercising consumer rights; and resolving debt problems.
• Funding for settlement workers, family violence workers and other community
workers to receive training in assisting clients to resolve debt problems.
• Funding to allow community organisations to provide interpreters at meetings
with clients from a NESB, particularly while taking instructions in relation to
legal or financial problems.
• Stronger regulation of – or a ban on – unsolicited door-to-door sales.
• Explicit requirements for providers of consumer credit, utility and
telecommunications services to offer the services of an interpreter when
signing or varying a contract with customers who are not fluent in English.
• Increasing the level of payment for recipients of Newstart and the Centrelink
Special Benefit and allowing asylum seekers on bridging visas to access the
full rate of payment of Newstart.
This research was undertaken as part of the Financial Hardship Project, which was
funded by an Australian Research Council Discovery grant.
The article was published in the Alternative Law Journal in 2019.
Jan Pentland Scholarship
Do you know someone who would make a fantastic financial counsellor? Or do you
want to become a financial counsellor? Applications for Jan Pentland Scholarships
are now open.
Each year the Jan Pentland Foundation awards several scholarships to people who
FCA thinks will make a great contribution but require financial help to complete the
Diploma of Financial Counselling.
The scholarships cover costs associated with the diploma up to $5000. People from
all backgrounds are invited to apply, but applications from people who identify as
Aboriginal and Torres Strait Islander and people from a refugee background are
particularly welcome.
Applications close on March 29. You can find more information and the application
form here. If you have any questions, please call us on (03) 85546980 or email us
Reminder: Check out the New Debt Collection Module
Have you completed the online debt collection module yet? You’ll find it on the LMS
section of the FCA Toolkit.
The module takes you through the basics of debt collection and includes information
on financial hardship, how to negotiate repayment arrangements, how to dispute
debts and how to determine whether a debt is owed.
FCA News
FCA conference: registrations opening soon
We’re busy preparing for the national conference, to be held in Melbourne at the
Pullman Albert Park on May 22 and 23. Registrations will be opening very soon.
We’ll have all the usual highlights, including a jam-packed program and a variety of
fantastic concurrents. We’ll be trying some new things, too, so be prepared. This
year’s theme is ‘‘curiosity’’, so we’re thinking outside the square.
Keep an eye on your inbox for more information.
Day in The Life
The Day in the Life project continues to grow. It has now been running for just over
six months and already 50 politicians and key decision makers have spent time with
a financial counselling agency talking to workers and meeting with clients.
We are really proud of the results. The project is increasing awareness of financial
counselling and an understanding of the hardship that so many people experience.
The project is also increasing respect among decision-makers for what financial
counsellors do, the complexity of the issues they have to tackle, and how they help
clients get back on track.
We have produced an update for agencies containing some of the key statistics and
achievements since July last year.
Things to look out for
Changes to debt agreements
The way Debt Agreements (Part IX of the Bankruptcy Act) work is changing. The
Government has introduced the changes with the Bankruptcy Amendment (Debt
Agreement Reform) Act 2018. The main changes start on 27 June 2019.
The main changes are:
• There is a new payment to income ratio requirement which the total proposed
repayments cannot be more than a prescribed percentage of the debtor’s
yearly after-tax income. The new ratio is to protect people on low incomes
from entering a Debt Agreement they cannot afford.
• The Debt Agreement Administrator (DAA) must make reasonable enquiries
about the debtor’s financial situation and take reasonable steps to verify it.
Then the DAA must certify that the debtor is likely to be able to repay the Debt
Agreement.
• The maximum term of a Debt Agreement is three years unless the debtor
owns a home, in which case the maximum term is five years and the payment
to income ratio does not apply.
A Law Update containing further details is available on the FCA Toolkit website.
Changes with Credit Cards and responsible lending
On 1 January 2019, ASIC changed the laws relating to credit cards and responsible
lending. Credit providers must now assess the affordability of credit cards over three
years based on a fully drawn credit limit. This means the debtor must be able to
afford the repayments to repay the debt in three years. Approved credit limits should
now be lower.
A Law Update is available on the FCA Toolkit website.