Expert says new legislation will be a good thing for consumers and the finance industry as a whole
Well, it’s finally happened! After years of talk, ASIC is now putting legislation in place that will require debt management companies to be licenced.
While I may not agree with everything ASIC does, in this case I feel they have it right and that this reform, while it’s been a long time coming can only be a good thing for consumers and the finance industry as a whole.
It has always struck me as odd that while almost every other business that interacts with consumers on a financial basis has been subject to legislation, the debt management industry has been able to operate unchecked, until now that is.
Some interactions with debt management companies haven’t ended well for the consumer as, like most industries, while there are professional practitioners, there are also predators who have made a living by praying on the vulnerable. To date the consumer has had little recourse if they have been misled or taken advantage of.
It’s unbelievable to think that a consumer could contact a debt management company to seek help for what may be a complex financial situation, and the person they end up talking with may have no relevant qualifications or experience in this field. This has led to some regrettable outcomes for consumers where they have paid debt management companies significant amounts of money for little result, or their situation has been made worse and the debt management company has been able to ride off into the sunset looking for their next victim. Is it any wonder ASIC has taken notice and brought about change?
The term debt management is quite broad, however ASIC tends to deem this as a company/anyone who charges a fee for services that relate to a consumer credit contract. Examples of this are credit repair, debt negotiation, hardship assistance and dispute management, all of which, to date, have been unregulated.
From July 01, 2021, all debt management companies will need to hold or have applied for a credit licence. This will involve ensuring the licensee is a fit and proper person to engage in credit activities via police and background checking, along with at least two years trouble-free relevant experience and a minimum qualification of a Certificate IV in credit management. Licence holders will also be required to carry appropriate professional indemnity insurance and be a member of the Australian Financial Complaints Authority (AFCA).
While it would be unrealistic to think this will stamp out all wrongdoing, this legislation will go a long way to legitimising the industry and perhaps see some of the less professional operators pull up stumps.
While some consider this impending legislation a burden, I see it as a positive step towards elevating the industry to a more professional standing. When conducted correctly by experienced and qualified operators, debt management can be an invaluable service for consumers and has the power to change lives for the better.
John Dickinson
www.debtx.com.au
