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Debt Collection News


At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.

ASIC Recommends Buy Now Pay Later Reform {Update}

Friday, December 28, 2018 - Posted by Michael McCulloch

In our August 2018 edition of Debt Collection News we reported that ASIC were recommending reform to the "buy now, pay later" providers such as AfterPay and zipPay.

Following a report from the Australian Securities and Investments Commission (ASIC) it is being reported by Financial Review that the National Credit Code would not extend to the buy now, pay later sector however ASIC are indicating that there will still be close monitoring of those involved in providing the service to consumers.

The report from ASIC identified 3 key areas of focus:

- ASIC states that it will take regulatory action to address misconduct and monitor industry and risks to consumers;
- ASIC is "considering their legal position" of scenarios where a merchant inflates the cost of the underlying goods if a consumer uses a buy now pay later arrangement.
- ASIC is also 'monitoring' the issue of consumers becoming increasingly indebted due to the ability to access an alternate providers where they have missed payments. According to ASIC, each provider reviewed takes some steps to refuse some credit applications eg if a consumer misses a scheduled repayment, five of the six providers suspend that consumer’s ability to make additional purchases until they have remedied the missed payment.  However, only one out of six providers in the review examined the income and existing debts held by consumers before providing their services.  ASIC also received reports of instances where consumers were allowed to the service despite having limited or no income and substantial existing debt; and
- ASIC states that it expects providers to ensure that:
(a) consumers adequately understand the terms of their arrangement;
(b) a complaints process is visible and accessible for consumers;
(c) consumers understand that they can request financial hardship assistance from their provider; and
(d) merchants act consistently with guidelines supplied by the provider which limit how these arrangements may be promoted and provided to consumers.  ASIC writes that 'while we identified instances where providers could have done more, each provider demonstrated a readiness to work with ASIC by improving their practices in response to our recommendations' and that some have already implemented 'several improvements'.

A copy of the report released by ASIC can be read online at Report 600: Review of Buy Now Pay Later Arrangements November 2018.


Queensland Bushfire Emergency Relief November 2018

Wednesday, November 28, 2018 - Posted by Michael McCulloch

With severe bushfires impacting those in the communities surrounding the Gladstone, QLD region we are granting moratoriums to those in impacted areas.

Our staff have been made aware of the impact on these regions however owing to the overall size of the regions being impacted you may still be contacted. Please ensure that you communicate your situation to us if it is safe to do so. Where possible we will attempt to negotiate payment extensions or make alternate arrangements.

We urge you to follow the directions of emergency services and contact 000 from a landline or 112 from a mobile when a situation is threatening life or property.

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.


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


Attorney General Reviews Consumer Credit Reporting and Hardship

Thursday, June 28, 2018 - Posted by Michael McCulloch

The Attorney Generals Department has recently released a discussion paper regarding the relationship between consumer credit reporting and hardship.

The purpose of the paper is to examine whether hardship is currently treated adequately under the credit reporting provisions in Part IIIA of the Privacy Act, whether there are opportunities for reform and if so what reforms are appropriate.

The Attorney Generals Department did stress that the paper is not a general review of repayment history information in the consumer credit reporting system.

Source: Attorney General's Department - April 2018


ANZ Breaches Responsible Lending Laws

Thursday, March 29, 2018 - Posted by Michael McCulloch

The Federal Court has recently published their reasons and finding for ordering Australian and New Zealand Banking Group Ltd ("ANZ") to pay $5 million for breaches of responsible lending provisions.

ANZ has agreed to pay the fine as part of settlement of the case which also saw them admitting to 24 breaches of responsible lending provisions of the National Consumer Credit Protection Act 2009 (Cth) for car loans approved by Esanda from 3 finance brokers. We covered the successful prosecution of 1 broker in our May 2017 editionASIC alleged that between July 2013 and May 2015 that ANZ failed to meet their obligations when it relied on payslips only included in 12 car loan applications to verify the consumer's income. ANZ claimed to have detected and reported the suspected fraudulent conduct by the brokers and that it disaccredited the individuals involved and no longer accepts applications from them.

In relation to the civil penalty proceedings the Federal Court found ANZ:

  • knew that payslips were a type of document that was easily falsified;
  • received the document from a broker who sent the loan application to Esanda; and
  • had reason to doubt the reliability of information received from that broker;
  • income is one of the most important parts of information about the consumer’s financial situation in the assessment of unsuitability, as it will govern the consumer’s ability to repay the loan;
  • while ANZ did not completely fail to take steps to verify the consumers’ financial situation, it inappropriately relied entirely on payslips received from these brokers; and
  • ANZ management did not ensure that relevant policies were complied with and, in the case of the contraventions involving one broker, no action was taken despite management personnel having become aware of the issues about the broker.

ASIC Deputy Chiarman, Peter Kell, said, "A consumer's income is an essential component in determining their ability to repay a loan. Lenders must take reasonable steps to verify a consumer's financial situation, and this includes checking the reliability of documentation that is provided to them. Lenders must be alert to the potential for documents to be falsified and ensure that their controls are sufficiently robust."

The Court has ordered ANZ remidiate approximately 320 car loan customers for loans taken out through the 3 broker businesses from 2013 to 2015 with ANZ:

  • offering eligible customers the option of entering into a new loan on mare favourable terms than the existing loan;
  • providing refunds to some customers who have paid out their loan or had cars repossessed; and
  • removing any default listings result from the loan.



Regulatory Change Ahead for Early Release of Superannuation

Thursday, March 29, 2018 - Posted by Michael McCulloch

In February 2018 the Australian Government released for consultation the draft regulations on the transfer of the early release of superannuation on compassionate grounds to the Australian Taxation Office ("ATO").

These regulations will provide the necessary administrative grounds to transfer the authority for the early release of superannuation on compassionate grounds from the Department of Human Services to the ATO with the draft regulations set to improve the integrity of the current process and to expidite the release of those funds to successful applicants. The Minister for Revenue and Financial Services, Kelly O'Dwyer, said in a statement, “The regulations require the ATO to directly notify a member’s superannuation trustee when it has authorised the early release of funds, removing the need for that trustee to independently confirm the amount authorised for release."
At what are often times of great stress and concern for the individuals involved, these changes will cut the administrative burden for superannuation trustees and will help successful applicants receive their authorised funds sooner.

The authority for the early release of superannuation is not the only potential upcoming change with new rules also set to be introduced regarding what early access of superannuation can be used for.

Under the current rules superannuation may be released on compassionate grounds for:

  • Medical transport;
  • Medical treatment;
  • Palliative care;
  • Modifications necessary for he family home or vehicle due to severe disability;
  • Forclosure of mortgage where the address is the mortgagor's principal place of residence; or
  • Pay for the costs associated with a dependant's death including funeral or burial costs.

Under the proposed changes superannuation may also be accessed for medical aids, rental expenses and dental expenses where other financial support avenues have been exhausted.


Radio Rentals Fined $2 Million

Tuesday, January 30, 2018 - Posted by Michael McCulloch

A total of 278,683 Radio Rental leases that led to poor outcomes for consumers has resulted in ASIC pressuring parent company, Thorn Australia, to issue $19.9 million in refunds.

The action comes after ASIC filed proceedings in the Federal Court where ASIC proposed a $2 million penalty in addition to the $11.8 million the company has already refunded to affected consumers for not upholding responsible lending practices. A further $6.1 million will also need to be paid to cover refunds and defaults for 60,000 leases and potentially a further $200,000 more in costs to ASIC.

This is seperate to thet $50 million class action that was filed by law firm Maurice Blackburn in March 2017.

2 of the examples provided to the Federal Court of irresponsible lending include:

  • A 65 year old pensioner, Norma Wannell, purchasing 2 Dyson vacuums, with a combined retail price of $991, entering into an Agreement with Radio Rentals that would have cost her $3,900 over the term of the Lease; and

  • A mother of 5 in Wagga Wagga, NSW, purchasing a used mattress and bed for $430 but entering into an Agreement with Radio Rentals to pay back almost $3,300.

Acting Chairman of ASIC, Peter Kell, said in a statement, "If customers are paying more than what is required, lease providers need to promptly fix this or face regulatory action. The changes we have made to the consumer leasing division put it on a sound footing to meet the needs of its customers and satisfy its responsible lending obligations".

The Consumer Action Law Centre ("CALC") encourages consumers to seek additional compensation from Radio Rentals and reminded consumers that they may contact the Credit and Investments Ombudsman ("CIO"), of which Thorn Australia, is a member of, to make a complaint.

A spokesperson for Maurice Blackburn said that the recent Federal Court action has no impact on its upcoming class action.


AfterPay and zipPay Post-Christmas Warning

Tuesday, January 30, 2018 - Posted by Michael McCulloch

2 of the larger players in the 100% interest-free lines of credit, AfterPay and zipPay, have attracted the attention of Westpac with the bank warning their mortgage brokers that these payment schemes must be assessed as a liability when assessing a person's financial affairs.

AfterPay has more than 1.3 million customers in Australia and it's anticipated that annual sales will exceed $1.7 billion however a spokesperson for RateCity, Sally Tindall, said in a statement, “It’s easy credit for people who might not otherwise get a credit card and if you rack up a significant amount on these payments schemes it will have long-term repercussions if you can’t pay down the debt. The good thing is there are limits on AfterPay up to $1500 per transaction so there are sensible perimeters to help people pay it back, but if they put these payments on a credit card they can be hit by nasty interest rates.”

AfterPay Chief Executive, Nick Molner, said that a majority of their customers meet their repayments and pay-off their purchases without incurring any fees. He went on to say that 85% of AfterPay payments are made using a debit card and not a credit card.

Both AfterPay and zipPay offer customers the opportunity to order online or make a purchase in -store without providing any information regarding their financial position with charges only being incurred if the amount owing is not paid by the due date.

Source: The Daily Telegraph - December 2017


Consultation Paper Released On New EDR Scheme

Tuesday, May 30, 2017 - Posted by Michael McCulloch

Recently the Australian Government has released a consultation paper for Financial Service Providers ("FSPs") to submit responses to the proposed External Dispute Resolution ("EDR") framework.

As part of the proposed new scheme a single dispute resolution body will be established called the Australian Financial Complaints Authority ("AFCA") which will replace the Financial Ombudsman Service ("FOS"), Credit and Investments Ombudsman ("CIO") and the Superannuation Complains Tribunal ("SCT"). It is believed that AFCA will be operational from 1 July 2018 with all FSP's required to be members.

The new EDR sceme will give ASIC additional powers for oversight and monitoring while FSP's will need to adhere to enhanced transparency and accountability of Internal Dispute Resolution ("IDR") processes.

2 new bills will be introduced to parliament as a result of the proposed change. The Treasury laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017.

The closing date for submissions on the scheme is 14 June 2017.

Source: Independent Financial Adviser - Government Introduces New EDR Scheme



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