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.