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Released every month our debt collection blog contains news, stories and tips to keep you informed.

ASIC Regulatory Guide 165 Internal and External Dispute Resolution [Reminder]

Thursday, September 27, 2018 - Posted by Michael McCulloch

In our June 2018 edition of Debt Collection News we published our article ASIC Regulatory Guide 165 Internal and External Dispute Resolution.

Regulatory Guide 139 (RG139) now appears to be out of amended draft form and can be download here with ASIC reminding Creditors that RG139 is only in place until all current disputes with the Financial Ombudsman Service and the Credit and Investments Ombudsman have closed -

Note (20 June 2018): In the transition to the commencement of the new, single EDR scheme—the Australian Financial Complaints Authority (AFCA)—on 1 November 2018, complaints made to the FOS and CIO schemes will continue to be dealt with under the relevant scheme’s terms of reference and rules that applied when the complaint was made. 
This guide provides the framework for those versions of the terms of reference and rules. It will remain in force until all those complaints are closed. At that time, we will withdraw RG 139. Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) sets out how we will perform our oversight role in relation to the AFCA scheme.

As a reminder the Australian Financial Complaints Authority (AFCA) will start accepting complaints from 01/11/2018 with Creditors required to ensure that all final response letters and "delay" letters include reference to both relevant predecessor EDR schemes from 21/09/2018.

If you require clarification of the new requirements please contact Collection Law Partners on (02) 8923-1613.


Timeshare Lender Fined for Responsible Lending Failure

Thursday, September 27, 2018 - Posted by Michael McCulloch

A timeshare lender, Future Holiday Finance Pty Ltd (FHF) has recently been pursued by the Australian Securities and Investments Commission (ASIC) for breaches of responsible lending practices.

FHF provides finance for the purchase of membership in ULTIQA Lifestyle which is described as a points-based timeshare arrangement with many consumers being approached by employees of FHF providing scratch cards that tells them that they've won a free holiday. After attending a seminar, which is charged at between $20 to $40, consumers were being given the chance to sign-up to a timeshare scheme to enjoy cut-rate prices at major hotels. To be eligble consumers had to agree to enter into a Contract, with what appears to be a cooling-off period of 14 days, and paying between $12,000 to over $25,000 to secure their points and pay an ongoing yearly subscription.

In the action commenced by ASIC it was found that FHF signed consumers up to loans without assessing affordability and a review of the documentation attached to the loan identified potential unfair contract terms.

FHF has been fined and paid a penalty of $135,000 in response to 3 infringement notices and has been ordered to pay up to $3 million in compensation. FHF will also review loans provided to consumers between 01/07/2012 and 30/08/2018 and will provide refunds to customers where the loan was unsuitable. The refund scheme will be overlooked by an indepdent expert who will also assess FHF's compliance with future responsible lending obligations.

In a statement released to the media, ASIC Deputy Chair, Peter Kell, said, "Timeshare finance operators must ensure that they comply with their responsible lending obligations. 'Consumers should always take the time to consider upfront and ongoing costs of timeshare, including finance, given they are a long-term commitment and can be difficult to sell."

Consumers can get more information about the refund scheme by visiting the MoneySmart website.

Source: ASIC Media Centre - August 2018


Limitation Period for Body Corporate Debt Recovery

Thursday, September 27, 2018 - Posted by Michael McCulloch

There has been some anxious times recently for body corporates who have been eagerly awaiting the decision in the Queensland Court of Appeal in Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 v Superior Stairs & Joinery Pty Ltd [2018] QCA 173.

In the District Court the Defendant, Superior Stairs & Joinery Pty Ltd (STJ) argued that the action by the Plaintiff, Body Corporate for Mount Saint John Industrial Park Community Title Scheme 18632 (Body Corporate), should be struck out after action was taken for the recovery of unpaid levies, recovery costs and penalty sums on the basis that the proceedings were commenced outside of the limitation period. STJ arguies that the limitation period for bringing body corporate debt recovery action was contained in Section 145 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (QLD) -

Part 4 Payment and Enforcement of Body Corporate Debts
s145 Payment and Recoery of Body Corporate Debts

(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt -
(a):  the amount of the contribution or instalment;
(b) any penalty for not paying the contribution or instalment;
(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.
(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.

STJ successfully argued in the District Court that the time limit for recovery of a debt by the body corporate was 2 years and 2 months pursuant to s145(2) however the Body Corporate submitted at the time that the time limit was 6 years from the date the levy became due and payable pursuant to Section 10 of the Limitations of Actions Act 1974 (QLD).

 The District Court agreed with STJ at the time however on appeal, the Court of Appeal, overturned the District Courts decision. In the decision Justice McMurdo, Justice Mullins and Justice Bond stated that the issue raised on appeal was not that of conflicting limitation periods but whether or not s145 prescribes a limitation period. The Justices concluded that s145 is to compel a body corporate to commence proceedings but cannot be interpreted as a limitation period and therefore s10 of the Limitiation of Actions Act is the governing legislation (ie 6 years from the date the contribution becomes outstanding).


ASIC Recommends Buy Now Pay Later Reform

Thursday, August 30, 2018 - Posted by Michael McCulloch

In our January 2018 edition of debt collection news we posted an article AfterPay and zipPay Post-Christmas Warning which indicated that Westpac was warning their brokers that these payment schemes must be assessed as a liability when assessing a persons capacity to service a mortgage.

This month the Australian Securties & Investments Commission (ASIC) has come out and released a report "Design and Distribution Obligations and Product Intervention Power"which recommends broadening their powers to cover the buy now, pay later sector which is not currently regulated by the National Credit Code. In the report ASIC noted:

  • providers may carry out limited inquiries of the consumers' financial situation prior to providing credit (noting the responsibile lending obligations do not apply);
  • some providers are funding high cost purchases (up to $30,000) over long repayment period;
  • consumers may lack understanding of what fees and charges are payable and when; and
  • vulnerable consumers may be using these products.

ASIC went on to say in the report that as those in the buy now, pay later sector do not charge fees or interest so therefore do not meet the definition of "credit" under the Code:

  • do not meet the definition of credit within the National Credit Code. Some providers extend funds without charging fees or interest and as such do not meet the definition of 'credit' under the Code;
  • meet the definition of credit but are exempt under s6(5) of the National Credit Code. Some providers rely on the continuing credit contract exemption under s6(5) of the Code as the only fee they charge is an establishment and/or account fee that does not vary according to the amount of credit provided and is set at a maximum of $200 in the first year and $125 every year thereafter; or
  • meet the definition of credit but are exempt under s6(1) of the National Credit Code: Some providers rely on the short term credit exemption under s6(1) of the Code which requires that the term not exceed 62 days and fees and charges not exceed 5% of the amount of credit.

A review however of the AfterPay website shows that late fees may be payable where an instalment was not paid by the due date:



With AfterPay reporting that late fee income increased 365% ($28.4 million) in their Annual Report, Consumer Action Centre's Senior Policy Officer, Katherine Temple, said in a statement, "Our financial counsellors report that we are receiving increasing numbers of calls from people with buy-now-pay-later debts, including Afterpay. Most people calling us for help who have Afterpay debts are juggling numerous other debts, such as credit cards, payday loans and utility bills."

We will continue to monitor for updates regarding the outcome of the report by ASIC and will post these as and when they become available.


ASIC Approves ABA Code of Practice

Thursday, August 30, 2018 - Posted by Michael McCulloch

In our April 2018 edition of Debt Collection News we reported that the ABA announced a new Banking Code of Practice which was subject to approval by ASIC.

ASIC has now signed off on the new Banking Code of Practice following an independent review and extensive consultation with the ABA.

The new Code provides for increased protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms. Expanded protections for consumers included:

  • provisions for inclusive and accessible banking;
  • protections relating to the sale of Consumer Credit Insurance (CCI) included a deferred sales period of 4 days for CCI for credit cards and personal loans sold in branches and over the phone;
  • protections for Guarantors giving them generally 3 days to consider information about any guarantee they provide and requiring banks to only enforce a guarantee once action has been taken against the borrower;
  • rules regarding credit card customers to receive reminders about balance transfer promotional periods ending as well as more consistent treatment about how repayments are applied; and
  • enhanced processes for assisting customers in financial difficulty and processes for resolving complaints.

All ABA member banks will be required to subscribe to the Code as a condition of their ABA membership and the relevant protections in the Code will form of the banks' contractual relationship with their banking customers.

The Code will commence operation from July 2019.

Source: Money | Management - July 2018


AFSA Regional Quarterly Insolvency Statistics June 2018

Thursday, August 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) has recently released their regional personal insolvency statistics for the June quarter 2018.

Debtor increases were seen across all regional areas, except Greater Hobart and the Australian Capital Territory, between the March quarter 2018 and June quarter 2018. Wanneroo in Western Australia recorded the most personal bankruptcies being filed with 117 followed by Wyndham in Victoria (93) and Wyong in New South Wales (89).

The regional statistics report on all debtors who became bankrupt or entered into a debt agreement or personal insolvency agreement during the quarter. The number of debtors is measured as follows:

  • The number of debtors who become bankrupt under a Debtor's Petition, Sequestration Order or Part XI Deceased Estate bankruptcy administration in the quarter.
  • The number of debtors whose debt agreement proposal were accepted by Creditors in the quarter (Part IX Debt Agreements).
  • The number of debtors whose personal insolvency agreement proposed were accepted by Creditors in the quarter (Part X Debt Agreements).
Where a debtor does not disclose their main cause of insolvency it is taken as being non-business related.

The quarterly regional personal insolvency statistics can be downloaded for each State and Territory using the links below:


The full reports can be downloaded from the Quarterly Regional Personal Insolvency Statistic Reports.



Federal Court Finds Against Debt Collection Agency

Thursday, August 30, 2018 - Posted by Michael McCulloch

A debt collection agency who act for Telstra has lost their case in the Federal Court following proceedings being commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).

The proceedings, which commenced in June 2016, highlighted the pressure some agencies apply to collect payment including engaging in misleading, deceptive and unconscionable conduct in it's dealings with 2 particular customers.

The first customer, CT*, who was living in a care facility on a disability support pension, after having suffered 3 strokes, received in excess of 60 demands for payment for a debt of $5,770. The Court found that the agency knew of CT's condition, which left him with the inability to care for himself or readily speak, however called the care facility approximately 40 times and sent approximately 20 demand letters seeking payment. Several times CT was threatended with legal action despite the agency not having any plans to follow through with the threat.

In the other matter a single Victorian mother of three, who worked part time and received a Centrelink payment, was demanded to pay $3,150. It was alleged that the woman was told that legal proceedings would be commenced against her and that a payment default would be recorded. The woman in question promised a payment of 50% of the debt in an attempt to avoid legal proceedings, despite this payment leaving her unable to pay rent and meet her other day-to-day expenses.

The Judgment, which you can read online, also criticises the capitalised use of words in demand letters and the use of “the words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings .....".

In a statement to the media the ACCC said that they will be seeking Orders preventing agencies engaging in misleading, deceptive and unconscionable conduct and will be seeking for large fines to be imposed.

Source: itnews - July 2018

* Name noted as per the original Judgment


Consultation of AFCAs Proposed Funding Model

Monday, July 30, 2018 - Posted by Michael McCulloch

The Australian Financial Complaints Authority (AFCA) has recently released a consultation paper which sets out how the new external dispute resolution scheme proposes to recover the cost of it operations.

A three-phase funding model has been developed by AFCA. Extracted from the AFCA Funding Model Overview:

Phase I - Transition Funding
  • Meeting the costs of AFCA's establishment so that it is adequately prepared to receive and handle complaints from commencement on 01/11/2018.
  • Transition funding covers both the governance-related costs and the costs of establishing and operationalising AFCA to be ready to receive up to 1,000 complaints in the first week of commencement. In the May 2018 the Federal Governement allocated $1.7 million as contribution to AFCA's 2018-19 establishment costs.

Phase II - Interim Funding Model

  • To apply for the first three years of AFCA operations (FY2018/2019 – FY2020/2021). During this period a hybrid funding model is proposed to be applied - based on aspects of the existing scheme funding arrangements for Firms that are FOS and CIO scheme members, and the APRA levy model for superannuation trustees who become AFCA members.
  • The first two months of funding in 2018-19 cover the operations of the FOS scheme (operated by AFCA), funded by FOS members who transitioned their membership to AFCA on 1 May 2018, with the next two months funded by both FOS and CIO members. The subsequent eight months will fund the newly formed AFCA from its commencement on 1 November 2018, and will be managed in accordance with the interim funding model, outlined in this funding model overview.
  • The interim funding arrangements will apply while AFCA establishes an evidence base of complaint volumes and complexity in an expanded jurisdiction, and settles complaint handling approaches and required skills/resources to manage the full range of complaints.

Phase III - A Long-Term Funding Model
  • A long-term funding model – to be adopted following a full funding review based on complaint forecasts, operational efficiency savings across the consolidated scheme, and resource requirements for the long-term future of AFCA.
  • The review will seek options for a revised funding model developed from consultation with stakeholders and settlement by the AFCA board following discussion with the Minister for Revenue and Financial Services and ASIC. The long-term funding model is proposed to be implemented from July 2021.

Feedback regarding the consultation paper can be directed to AFCA via email.


Victoria Plans Crackdown on Debt Collection Industry

Monday, July 30, 2018 - Posted by Michael McCulloch

The Labor party in Victoria has planned a crackdown on debt collection in Victoria if re-elected at the November State election.

news.com.au and radio 3AW 693 are reporting that organised crime groups will be the focus of a planned State Government crackdown on the debt collection industry with Police Minister, Lisa Neville, announcing earlier this month an overhaul of the regulations. In a statement to the media she said, "We'll clean up this industry, like we did with scrap metal - to tackle organised crime and crack down on rogue operators."

The Labor Government, if re-elected, would like to establish a dedicated commission and harsher penalties for those involved in unlicensed debt debt collection in Victoria and would work more closely with the police, Consumer Affairs Victoria and industry leaders to clean-up the industry.

Chief Executive of the Australian Collectors and Debt Buyers, Alan Harriers, said in response, "If they are that [sic] then it's up to Fair Trading to stop them as being illegal persons doing debt collection. I am unaware of any prosecutions against people in this regard. If they were actual proper debt buyers, they would hold an Australian credit licence that is issued by ASIC. It's a very highly regulated industry."

In Victoria there is not a legal requirement in which to hold a debt collection licence.


Release of New Bankruptcy Notice Warning

Monday, July 30, 2018 - Posted by Michael McCulloch

The Australian Financial Security Authority (AFSA) has recently published a fact sheet that they recommend be attached to all future Bankruptcy Notices.

The fact sheet, Warning - You May Be Declared Bankrupt, outlines to the Judgment Debtor the options available to them rather than ignoring the Bankruptcy Notice or unintentionally committing an act of bankruptcy.

AFSA claim that by providing this information it will potentially shorten the administrative burden on Creditors, Judgment Debtors and Trustees with the possibility of potential bankrupts making arrangements to repay their Creditors or contest a Bankruptcy Notice sooner rather than later.

Feedback can be provided to AFSA about the document via stakeholders@afsa.gov.au by 30 July 2018.

Source: AFSA Newsroom - July 2018

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