Debt consolidation services, credit repair companies and debt agreement administrators sometimes fall through the cracks when it comes to regulation by ASIC of financial service providers. This came to the forefront yesterday with the banning by ASIC of a director of a Sydney company, from engaging in any credit activities for three years.
ASIC had found that the director of Debt Genie, Peter Doherty, was engaging in credit activities while unlicensed.
Majority of debt agreement administrators in Australia are registered with Insolvency Trustee Service Australia and are therefore regulated through the insolvency law.
There are exceptions to this - one being administrators who handle less than five cases at any one time do not have to register with ITSA.
Unfortunately Debt Consolidation companies that fall outside ITSA’s control are not necessarily covered by the National Consumer Credit Protection Act, depending on the type of debt agreements they negotiate.
Gven that NCCP does not provide ASIC set jurisdiction over the activities of debt agreement administrators, the regulator would need to review cases on a case by case basis to determine whether there is a credit activity that comes under the consumer protection provisions.
The coordinator of the New South Wales Consumer Credit Legal Centre, Karen Cox, said there were a range of issues with debt consolidation businesses that need to be addressed.
Credit repair companies charge consumers a significant up-front fee to investigate a consumer’s credit file and "clear" the file. In some circumstances consumers are asked to pay hundreds or thousands of dollars to remove credit file errors which they are able to have removed themselves for free.
There is little regulation in this area of consumer finance.
ASIC had found that the director of Debt Genie, Peter Doherty, was engaging in credit activities while unlicensed.
Majority of debt agreement administrators in Australia are registered with Insolvency Trustee Service Australia and are therefore regulated through the insolvency law.
There are exceptions to this - one being administrators who handle less than five cases at any one time do not have to register with ITSA.
Unfortunately Debt Consolidation companies that fall outside ITSA’s control are not necessarily covered by the National Consumer Credit Protection Act, depending on the type of debt agreements they negotiate.
Gven that NCCP does not provide ASIC set jurisdiction over the activities of debt agreement administrators, the regulator would need to review cases on a case by case basis to determine whether there is a credit activity that comes under the consumer protection provisions.
The coordinator of the New South Wales Consumer Credit Legal Centre, Karen Cox, said there were a range of issues with debt consolidation businesses that need to be addressed.
Credit repair companies charge consumers a significant up-front fee to investigate a consumer’s credit file and "clear" the file. In some circumstances consumers are asked to pay hundreds or thousands of dollars to remove credit file errors which they are able to have removed themselves for free.
There is little regulation in this area of consumer finance.