Industry Links

From where we sit…..

Since our last edition in early September we have been witness to some of the most traumatic events that have rocked the world. None of us I’m sure, have remained unaffected by scenes from the bombing of the Twin Towers through to the disturbing pictures of refugees desperate to make their way to our shores in leaky boats. On top of this, has been the collapse of yet another corporate giant in Australia, this time Ansett, one of our major airlines. This seemed all too soon after the HIH and One-Tel disasters. No doubt, financial counsellors all around Australia will be dealing with the after affects of this now, and over the coming year.�

So saying, we are now headed towards Christmas and the usual big spend-up. With this in mind, our final edition this year brings you an extract from a paper by David Tennant on Unsolicited Credit Cards and Increases in Credit Limits which he presented to the Butterworths 11th Annual Credit Law conference in September this year. We also bring you Maree Crosbie’s account of being a financial counsellor in the world of HIV/AIDS. Richard Brading gives us the legal view of separating couples and Superannuation, and we say a fond farewell to Kevin Rolfe a financial counsellor in Alice Springs who has devoted himself to fighting for the rights of Aboriginals over the last ten years.

Included with this edition of your newsletter is a booklet produced by Telstra called “Your A to Z guide to affordable communication” which is the result of lengthy consultation with members from consumer groups around Australia who meet regularly with Telstra representatives. We hope you find it useful.

Finally, all of us at Credit Line would like to wish you our readers a very happy Christmas and New Year.�

Have a good break and—take care!

Jean Lewis

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Code of Banking Practice Review Final Report

By Michael Funston
Consumer Credit Legal Centre (CCLC) NSW

The Final Report of the Review of the Code of Banking Practice (CBP) released on 8 October 2001, has been warmly welcomed by both industry and consumer groups. The Report, which can be found at the Review web-site (www.bankingcode.com) completes a process that has been ongoing since May 2000 when the independent reviewer, Mr Dick Viney, was commissioned by the Australian Bankers Association (ABA) to undertake the first review of the CBP since it became fully operative in November 1996.

It will now be up to the ABA, in consultation with consumer and other stakeholders, to rewrite the Code to reflect the sixty-one Recommendations of the Final Report. The ABA has already indicated that it will implement the majority of the Recommendations; however, some significant differences do remain between the banker’s position and that taken by the reviewer.

The Report expressly acknowledges the considerable input of consumer representatives. Of particular value, in my view, was the information provided by financial counsellors and other caseworkers around the country during the course of CCLC’s Caseworker Consultation on Banking Issues undertaken last year.�

Among other things, the Consultation Report (available at the Review web-site) put a number of the key concerns for our clients very much on the Review agenda. These included: direct debits, credit assessment procedures, dealing with customers in financial difficulty, debt recovery and internal complaints handling processes, to name a few. The Final Report makes significant Recommendations in relation to these concerns.

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A Fond Farewell …..
to a Financial Counsellor In the Red Centre…..�

Kevin Rolfe has provided a financial counselling service at the Tangentyere Council in Alice Springs, NT, since July 1992 and it is with a great sense of sadness that his clients and all who have worked closely with Kevin, will say goodbye to him when he finally retires in April next year.�

During his ten years in Alice Springs he has been a tireless champion of Aboriginal people constantly demanding just and fair treatment on their behalf.�

The following is an extract from a presentation he gave at a SAFCA (South Australian Financial Counsellor Association) Conference in Adelaide in 1997 and goes a small way to acknowledge his excellence in the commitment and dedication he has shown to the Aboriginal people:

“Kevin has been working in the Territory for a number of years and has developed a deep understanding with and acceptance of, the indigenous people in his region. He says they are genuine, honest people who do not expect help from the white community.

They are a highly intelligent people with an ancient culture from the thousands of years of their past history in this country. However, because of their poor literacy skills they are often viewed as being less intelligent by the white community.

Many do not have access to the facilities one takes for granted in the towns and cities, such as schools, water for washing etc., and because of their poor understanding of forms and DSS processes, they depend on assistance from financial counsellors and other FACS (Family and Community Services) workers.�

However, it is very difficult working with Centrelink and also the Taxation Office because of the Privacy Act restrictions on access. This issue is being looked at by the Privacy Commission with a view to changing the protocol for Aboriginal people.�

There are always problems with underpayments and overpayments from Centrelink. But Kevin has always had great success in resolving problems in favour of the client. He has built up a good rapport with Centrelink through his work with Aboriginal clients and they are now very aware of the special problems they face.

Kevin is the only financial counsellor working solely with Aboriginal people. He works closely with the Commonwealth Ombudsman, and has been investigating problems under the title “One Size does not Fit All”. He says that a high percentage of Aboriginal people in the country and outback areas are still not receiving income of any description for part of the year.

It was due to these tireless campaigns by Kevin in the 90’s that a special Centrelink office was set up in Alice Springs to ensure Aboriginal people received their proper entitlements.�

Kevin also assists with taxation returns and Aboriginal people use Kevin’s office to store their personal documents and letters, as they have no private place to keep them.”

In 1994 the Governor of South Australia presented Kevin with the Order of Australia for his work in Consumer Rights.

Our best wishes to you for your retirement Kevin!

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FINANCIAL COUNSELLING AND HIV/AIDS

By Maree Crosbie

In November 1997 The Bobby Goldsmith Foundation (BGF) started a Financial Counselling Service to specifically provide financial counselling to people living with HIV/AIDS who live in NSW.

For several years the welfare area at BGF were experiencing more clients presenting with financial issues eg. difficulties managing debt, poor money management skills and a wide range of financial problems.

In response to this need BGF successfully sought funding from the Department of Health to employ a Financial Counsellor on a full-time basis. The service has expanded to two full time Financial Counsellors.

Some PLWHA ( people living with HIV/AIDS) did not feel comfortable accessing mainstream financial counselling services at predominantly religious organisations. This was due to a variety of reasons such as lack of understanding of HIV/AIDS, fear of disclosing their HIV status to the agency and their sexuality.

There was a huge response to the Financial Counselling Service - some clients whose health had improved wished to deal with old debts, people newly diagnosed with HIV were considering the financial implications if their health deteriorated and they were no longer able to continue to work and earn an income.

BGFs Financial Counselling Service provides face to face financial counselling in the city office and also regular outreach to Westmead Hospital and a drop in centre at Blacktown, to the Illawarra area, Central Coast and Newcastle and the Blue Mountains. Yearly trips are made to take the service to Tamworth and the Northern Rivers areas.

Outreach is provided to PLWHA in hospital as required. For some clients it is very important to put their financial affairs in order if their prognosis is poor. Sometimes the partner or family will access the financial counselling service after a person's death to obtain assistance in sorting out the financial situation and advising creditors that the person is deceased.

Education is a large component of the service and regular participation in workshops organized by both hospital and community based social workers in the HIV sector.
The feedback from clients via an annual telephone survey has been positive and particularly mentions the freedom to discuss HIV issues and the associated costs of medications and dental work.

It is necessary to work within the constraints of the health of the individual client and also to take into account the episodic nature of HIV.

In the HIV sector we are tending to see more clients with complex needs, often with multiple diagnosis. The financial counsellor works closely with other services (both internal and external) that may be involved with the client, and also attends case conferences on a regular basis.

Financial Counselling fits well with BGF's other projects which include direct financial assistance based on a benevolent model, a pre-employment service and two housing projects.�

I found that in mainstream Financial Counselling Services once a client has finished attending financial counselling sessions you usually don't see them again. Working with a closed group of clients I often see them again in the BGF office or at an outreach location. Clients will often self refer quickly if any problems arise.

The BGF Money Plan needs to be prepared with a very liberal mind as some of the client group spend on illegal drugs, sex on premises venues and all sorts of interesting items. I have designed a money plan form that has a Personal Pleasures item to cover anything the client wishes. If they do not want to they do not need to disclose what the money is being used for.�

I regularly write articles and answer questions in an Agony Aunt format for Talkabout which is an HIV magazine.

I have been employed as a Financial Counsellor at BGF for the last four years. During that time I have learnt a great deal and gained a lot of experience from initially setting up the service, education and outreach programs through to working with a diverse range of clients.�

If anyone has any HIV positive clients and would like to know more about HIV services please feel free to contact me on 02 9283 8666.

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News, views and information on what’s happening in financial counselling around Australia.

QUEENSLAND

Kate Keating from the Financial Counselling Services (Qld) Inc also attended the SAFCA conference as a speaker and gave a fascinating talk on her recent visit to the USA and Canada. She and her colleague Lola Mashado went to find out how financial counselling (called Credit Counselling) is conducted in those two countries and came back with an interesting picture. Basically, Credit Counselling is funded largely by creditors. These agencies are multi-million dollar businesses, some returning up to $20 million in debt repayment to creditors per year. Agencies who are members of the National Federation of Credit Counseling must adhere to their strict accreditation criteria. There is a full audit every four years of all aspects of each agency's policy, processes and structure. Agencies that don't come up to scratch can go out of business. As you might expect, this puts considerable pressure on agencies and counsellors. Agencies must be very well managed, with major attention to detail. Credit counsellors must get payment arrangements in place and ensure their clients' keep up those payments.

NEW SOUTH WALES

On-going supervision by an accredited financial counsellor is part of the annual re-accreditation process by their state association for all financial counsellors in NSW. The Financial Counsellors Association of NSW (FCAN) have recently implemented a two day training program solely for supervisors themselves which has been held twice this year. So far, fourteen financial counsellors who supervise others, have done the course and feedback received has been excellent. Of particular note was the appreciation by the trainees of the identification and coverage of how best to meet the needs of financial counsellors at four different levels of experience. Any financial counsellors in NSW wanting to find out about the next course can contact either a member of the FCAN executive or Lynette Westbury, who runs the course, on 0411 820 944.�

SOUTH AUSTRALIA

The South Australian Financial Counsellors Association (SAFCA) Annual Conference was held at the Hotel Adelaide International this year on the 8th and 9th November. Among the keynote speakers were Betty Weule, who gave an inspiring talk on her 25 years as a Financial Counsellor, and Sue Vardon, Chief Executive Officer of Centrelink, who spoke about Centrepay and answered questions on various issues including breaching and Centrelink payments. The Hotel Adelaide is situated on a hill overlooking the city and the conference rooms are on the top floor with spectacular views all round which made for a very pleasant two days. The AGM for SAFCA was held on the first day and Sue Heathcote was voted in as President for a second term. Long–standing members such as Carolyn Deane and Rosemary Warren were warmly thanked for their contribution to the executive over the years. They have decided to stand down this year taking a well-deserved break and making way for new members.�

VICTORIA

Dianne Dixon and Kate Cahill from Anglicare Yarra Ranges in Lilydale, a leafy suburb just on the edge of Melbourne, have launched their Christmas campaign this year with the slogan “How long will it take you to pay for Christmas this year?” - a timely reminder of the ongoing costs that overwhelm some and seem to dominate our consumer orientated world.�

WESTERN AUSTRALIA

Ian Macdonald who is a solicitor working closely with the Financial Counsellors Resource Project of WA will close his office on December 19th and open at his new office in Mt Lawley (PO Box 784, Mt Lawley 6929) on 7th January 2002. Phone and fax to be advised later.

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News from AFCCRA

Australian Financial Counselling and Credit Reform Association

by Jan Pentland, AFCCRA Chairperson�

The next meeting of AFCCRA Council will be held by teleconference on Monday 3 December. State representatives are: Tania Buck (WA); Peter Carratt (NT); Lola Mashado (QLD); Rosemary Warren (SA); Phillip Powell (TAS); Jennifer Gracie (NSW); David Tennant (ACT); Jan Pentland (VIC). Please contact your state representative to the AFCCRA Council for input or feedback.�

It is planned that the next edition of the AFCCRA News will be available through state representatives and state networks by the end of the year or early in 2001.�

National Competency Standards for Financial Counselling�

As reported in the last edition of Sharkwatch, Community Services Health Training Australia (CSHTA) are currently undertaking work for the Australian National Training Authority (ANTA) in relation to the Community Services Training Package. This includes development of draft national competency standards for financial counselling.�

The expression of interest submitted by FCRC in partnership with Delaney Associates to develop the draft competencies was not pursued as the funding available was less than half what was deemed necessary. I am informed by Stephen Auburn, the Project Director at CSHTA that the financial counselling competencies will now be developed as part of the larger counselling competency project contract. The contractor is currently seeking information on financial counselling such as job descriptions. Any input should be forwarded to CSHTA by email - admin@cshta.com.au or by fax - 02 92633599. For updates on the Community Services Training Package review and work on the development of competency standards, access the CHSTA website: www.cshta.com.au� or contact Stephen Auburn on (02) 9263 3582.�

Bankruptcy Amendment Legislation Update

You may be aware that the Bankruptcy Legislation Amendment Bill which was introduced into Federal Parliament in June and amended in the Senate in September was overtaken by the calling of the Federal election and the Bill has now lapsed.�
The amendments passed by the Senate included: (1) retain early discharge but make it available after 2 years rather than 6 months; (2) repeal Section 271 (the gambling offence provision).�

In Melbourne, on October 25, Marilyn Webster from the Interchurch Gambling Taskforce, Gary Sullivan from West Heidelberg Community Legal Service and I, met with Terry Gallagher to discuss the Bill and what happens next. The Bill could be re-introduced into Parliament as is, if the Government is looking for already drafted legislation which they hope would have quick passage. This may happen quickly if Parliament has a short sitting period before Christmas which seems unlikely but not out of the question. It would presumably be passed in the House of Representatives given the return of the Coalition Government which introduced the original Bill and would then go to the Senate and hopefully non-Government Senators would again raise concerns about it and possibly pass amendments.

Alternatively, the new Attorney General may decide to rethink the Bill given what happened in the Senate in September. Terry Gallagher said that his advice to the Attorney General will be that issues which could be revisited given feedback he has received as well as the Senate amendments are: (1) the 30 day cooling off period – it seems that trustees and the Law Council as well as the Financial Counselling sector have raised concerns with this proposal; (2) Section 271- various groups have expressed concerns about this Section of the Bankruptcy Act over several years and it is good to at least have it on the agenda with the Senate repeal amendment; (3) early discharge – however, ITSA believes that early discharge is discriminatory as well as feeding into the perception of bankruptcy as ‘too easy’.

AFCCRA will be writing to Terry Gallagher to re-iterate the concerns that were again raised with him on October 25. We shall also maintain contact with other groups throughout Australia who have been raising these issues with ITSA, the Attorney General and non-Government Senators.�

Further information will be reported as it comes to hand. Please contact me at CAMCARE on Mondays or Wednesdays on (03) 9882 2216 or anytime on 0407 042 483 if you would like to discuss any of the above.

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The Law Matters

Property Purchased with Personal Injury Compensation Moneys

R.J. Cruickshanks, Deputy Official Receiver Insolvency & Trustee Services Australia

There have been a number of enquiries recently from debtors contemplating bankruptcy and from financial counsellors assisting such debtors, concerning the protection afforded by the Bankruptcy Act to property purchased with personal injury compensation moneys.

It is imperative that when answering questions on this issue, that the enquirer is informed that the protection afforded by s.116(2)(g), s116(2)(n) and s.116(2D), (3) and (4) of the Act to such property is confined to only property purchased by a debtor who subsequently becomes bankrupt, with the proceeds from a personal injury compensation claim made by that debtor.

There have been several instances recently where an insolvent married woman was contemplating bankruptcy, who was the joint owner with her husband of a house property which had been purchased with a personal injury compensation payment in respect of a claim made by the husband.

In such cases, prima facie, if the wife becomes bankrupt, her half interest is not protected by the provisions of s116 of the Act referred to above as she was not the person who was the claimant of personal injury compensation.

If both the husband and the wife became bankrupt, in that scenario, prima facie according to the presumption of advancement, only the husband’s half interest in the jointly owned property would be protected, notwithstanding that the total purchase price came from his compensation payment i.e. it is presumed that the husband “advanced” or “gifted” to his wife, her share of the property’s purchase price from his compensation moneys.�

The same principle would apply if the matrimonial home had been purchased in the wife’s name only with the purchase moneys coming from the husband’s compensation moneys. Furthermore, it will not be presumed that the wife holds her half interest in the property by way of a “resulting trust” for her husband. See Calverley v Green (1984) 59ALJR111 at 116; Pearson v Pearson (1961) VR693; Hepworth v Hepworth (1959) 11CLR309 at 317; Muschinski v Dodds (1985) 60 ALJR52 at 54; Allan v Snyder (1977) 2NSW LR685.

However, the presumption of advancement in such instances is a rebuttable assumption, and it would be open to the husband to produce evidence as to the true ownership or equity in the property, so as to rebut the presumption of advancement. The trustee considers the merits of such claims on a “case by case” basis, and accordingly comments cannot be made to enquirers as to what the trustee would or would not accept as evidence to uphold the husband’s claim.

Therefore, when answering questions on this issue, care must be taken to explain the protective provisions of s.116(2) of the Act, and emphasise the fact that the protection afforded to property purchased with personal injury compensation moneys relates only to property purchased by the bankrupt with moneys received by the bankrupt from the proceeds of the bankrupt’s personal injury claim.

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The Law Matters

SPLITTING UP AND SUPERANNUATION

By Richard Brading, Principal Solicitor, WCLS

Changes to the Family Law Act mean that superannuation is now an “asset” which will be divided on relationship breakdown, rather than merely a “resource”. The Family Law Act applies to property settlements where there was a legal marriage. However, it does not apply to De Facto and same sex relationship property settlements which are governed by State law.

The new law is found in the Family Law Legislation Amendment (Superannuation) Act 2001 which can be found on www.austlii.edu.au��

Splitting & flagging superannuation

The new law means that in working out who gets what, each spouse’s superannuation entitlement is added to the total pool of family assets, along with the house, car and bank accounts. In agreeing on a property settlement, or obtaining a court order, the pool is simply split as a percentage, in accordance with the principles in the Family Law Act and case law. The Family Court will be able to order a superannuation trustee to split superannuation or to “flag” (i.e. freeze) superannuation pending a later order. Flagging orders will be useful where the current value of a superannuation interest is not currently known. The superannuation is held by the trustee until the usual time for payment and then each party is paid an amount in accordance with the court order.

There are also powers to deal with superannuation where a person has a sequence of marriages and divorces.�

Superannuation agreements

Couples can now make their own binding written agreements regarding superannuation and other property, before, during or after a marriage. A certificate of independent legal advice must be obtained from a lawyer by each spouse for the agreement to be binding. These agreements only take effect after the spouses have been separated for over 12 months.�

Bankruptcy

However, it appears that an interest in a spouse’s superannuation fund created by such a binding agreement may need to be disclosed at Question 27 of the Statement of Affairs. By contrast, the mere fact that a person is married, and entitled to make an application for property settlement under the Family Law Act, does not create any legal interest until a consent or court order is made.

Law is not retrospective

The new law has not yet commenced, and is not retrospective. That means that where an application for property settlement has been commenced but not finalised, it may be necessary to postpone a final court decision until the actual commencement date, which is expected to be mid-2002.

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Notes and Notices

ANSETT EMPLOYEES AND TELSTRA

Robert Morsillo, Manager Consumer Relations, Telstra says that Telstra appreciates the difficult circumstances that (former) Ansett employees and other (sub)-contracting staff may be facing at this time while their entitlements and future employment prospects are being determined.

Telstra has in place he says, flexible credit management processes that enable reasonable extensions of time to pay, network control features to minimise (future) liability, and Incontact as a last resort while seeking to resolve an outstanding debt. Requests in regard to individual circumstances can be escalated to a Team Leader or to the Customer Relations Manager if required.

Financial Counsellors or Telstra customers, can call the Credit Management Centres direct on 1800 816 025 or through the general 13 2200 number and say “accounts & payments” and then “payment extension”. If you have any difficulties please contact Robert Morsillo on (03)9634 5573

AGL LAUNCHES CENTREPAY

AGL has advised all customers that Centrepay will be accepted nationally as a bill payment option from all Centrelink customers, as of 28th September 2001. Centrepay allows customers to have a pre-arranged amount direct debited from their fortnightly pension or benefit, prior to the pension being paid to them.�

Customers will continue to receive quarterly AGL statements and will be required to pay the balance owing by the due date. AGL sees this as a practical way of assisting customers who may be experiencing financial difficulties.

MOBILE PHONES BECOME CREDIT CARDS�

A new kind of drink vending machine is being placed in public areas throughout Australia. The machine allows customers to charge the cost of the drinks they wish to buy to their mobile phone account. The drink is then dispensed just as if the customer had put coins into the slot. Telstra is offering this service with Coca-Cola and there are seventeen machines already in use at Central Station in Sydney, on one month’s trial.

HECS DEBTS

In our last edition we briefly mentioned that certain HECS debts were provable in bankruptcy. Bob Cruickshanks, Deputy Official Receiver of the Insolvency & Trustee Services of Australia, would like to clarify the position further and writes:

“On 7th June 2001 the Higher Education Funding Amendment Bill 2001 amended s.82 and s.153 of the Bankruptcy Act, which relate to the provability of HEC debts in bankruptcy and the release/non-release from such debts on dischage from bankruptcy.

The changes can be summarised as follows:

In respect of persons who became bankrupt on or after 7th June 2001, any HEC debt they had at the date of bankruptcy is provable in bankruptcy including:

A semester debt (ie. tuition etc. fees payable by the student for each semester)
An accumulated debt (ie. the unpaid semester debts accumulated at the end of each financial year);
An assessment debt (the debt as per the assessment raised by the ATO when the student or ex-student’s income exceeds the prescribed threshold amount)

Upon discharge, the former bankrupt will be released from only the assessment debt they had at the date of bankruptcy.

Upon discharge the former bankrupt will not be released from:

Semester debts incurred before, and/or during bankruptcy
The accumulated debt owing at the date of bankruptcy less any dividend paid from the bankrupt’s estate, and any accumulated debt arising after the date of bankruptcy.

The net effect of the amendments is that the Department of Education, Training and Youth Affairs (DETYA) can now lodge a Proof of Debt in the student or former student’s bankrupt estate for all HEC debts owing at the date of bankruptcy and share in any dividend paid from the bankrupt’s estate to ordinary unsecured creditors.

For the student or ex-student the position is much the same in that bankruptcy will only release them from the assessment debt owing at the date of bankruptcy.”

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Teleconference on Gambling Issues

By Jenny Fitzgerald

A number of financial counsellors took part in a recent teleconference on dealing with problem gamblers as clients. The first part of the discussion centered around the difficulties of identifying a problem gambler.�

It is quite natural for most people to conceal certain facts when first interviewed by a financial counsellor but problem gamblers are experts at concealing and disguising their behaviour. They are also usual highly intelligent and skilled in deception.�

Financial counsellors need to be on the lookout for clues that may alert them to a problem gambler. Here are some of the suggestions that were put forward:

• A budget can be revealing as it may bring certain patterns to light and with careful questioning it may become apparent where that money goes. Some gamblers admit to their habit when asked outright but may deny it is a problem for them.�
• The history of Credit card statements can be quite revealing giving indications of cash withdrawals and their locations
• Frequency of personal loans�
• A history of bounced cheques
• Loans from pawnbrokers or Pay Day Lenders
• Store accounts are often used to buy goods which can readily be converted to cash
• A mysterious friend or family demanding immediate repayment of a loan

Some ideas on dealing with a gambler:

Discussion centred at first on the destructive behaviour of gamblers and the consequences of their actions on both themselves and their family – loss of assets, the family home, even employment was mentioned. The financial counsellor might ask a gambler to think and verbalise what those consequences might be as a way of encouraging them to confront the reality of their actions.�

Negotiating with creditors can be problematic for a financial counsellor as not only are facts being hidden, but there is the real possibility that the gambling may continue as before, despite reassurances.�

Because of this, a financial counsellor needs to act cautiously and not commit to a great deal of work until the client is prepared to share the commitment by attending ongoing gambling or personal counselling.�

Family members/friends:

Dealing with a family member who is not the gambler and needs help in protecting the family assets is a common senario for financial counsellors. One participant told the teleconference that 40% of all clients who present for gambling counselling are family members or friends who are all made vulnerable by the actions of a gambler.

The legal protection of assets can be made by seeing a lawyer who deals in family law and getting orders for a property settlement through the courts. This may also jolt the gambler into realising what their behaviour is doing to family relationships but it could also create negative consequences in the area of domestic violence.

What are the confidentiality issues with gambling?

Should a financial counselor disclose the status of a gambler to a creditor? This should only be done in conjunction with your client (as with all clients) by asking their permission. Disclosing their gambling status may be a negative in negotiation, although some creditors already have a strong suspicion that there is gambling by observing their money trail.

Fraud and how to deal with it:

It was suggested that most gamblers commit a certain amount of fraud even if it is only by defrauding their family and friends. Many go further and embezzle money from their employers. In such cases, a gambler should be referred to a lawyer as it may become a police matter.

In conclusion:

• Use clues from budgeting plans etc. to identify a gambler.
• Set up some kind of contract with a gambling client which includes a commitment to outside help.
• In the end, it is up to the gambler to decide what they want to do if anything, about their situation and up to them to act responsibly.
• Financial counsellors need to be aware that relapses for a problem gambler are common and should be prepared for this.
• Financial counsellors should also be aware that file notes could be subpoenaed by a court if a gambler is prosecuted.

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Unsolicited Credit Cards and Increases in Credit Limits...a time for change

The following is an extract from a paper by David Tennant, presented to the Butterworths 11th Annual Credit Law conference on 22nd September 2001. With the pressure to reform the Credit Code to take account of unsolicited credit card and overcommitment issues, it makes interesting reading. Sadly, legislative change is likely to be too late for the annual marketing binge that Christmas brings.

In July 2001, VISA International and the Australian Bankers’ Association jointly released a paper entitled “Credit Cards in Australia – A Research Report”.�

There were a number of propositions put forward as fact, including:

• Credit card debt is a small component of overall household debt in Australia,
• Only 1% of Australian credit card holders may face financial hardship, and
• Default rates are low and decreasing.

From these propositions, certain conclusions were drawn, including:

• Automatic evaluation and scoring techniques are good for consumers and business,
• Banks are well equipped to deal with problems when they arise, and
• Regulatory action is not needed because the vast majority of consumers use credit cards well.�

There was considerable reference to financial data from Reserve Bank figures. Those figures alone are not sufficient to draw many conclusions about credit card use, or potential problem areas.�

It is clear that more detailed information was provided by the commercial entities involved in the project. Readers are not told how that information was compiled, or whether it was or could be independently verified.

Some of the findings were surprising. For example, the numbers of cardholders in default seemed a surprisingly low figure.�

The very first point noted in bold type in the Executive Summary is:

“A low 1% of Australian credit card holders may face potential financial hardship”

Let us assume the 1% assessment is correct (although I strongly suspect it is not). The report notes elsewhere that at March 2001 there were 9,578,701 bank issued credit card accounts in Australia. Applying the logic in the report, 95,787 accounts were held by people facing financial hardship. That is a significant number of accounts. What we do not know is how many account holders this represents. Nor do we know whether those account holders have more than one account.

There are many other questions that could be asked about the validity of how information contained in the report was interpreted, or the conclusions drawn. The most significant is the lack of any consumer input or scrutiny. Forget for a moment that the paper was released with much fanfare in the same week the Ministerial Council on Consumer Affairs met in Canberra to consider, amongst other things, the marketing of credit cards to consumers with limited payment capacity.�

It is claimed:

“Banks have reported that they are willing to work collaboratively with governments and consumer advocacy groups…..”

If that claim is to be taken seriously, there may need to be more thought given to how projects like the July 2001 report are undertaken and who is engaged in the process.

So what consumer information is around?�

A good example of broad consumer comment widely circulated to encourage debate, were the submissions coordinated by the Consumer Credit Legal Centre (NSW) as part of the review of the Banking Code of Practice. The submissions were supported and informed by an extensive consultation process with financial counsellors, again circulated widely to encourage comment and debate.

The consultation process with financial counsellors was an extensive undertaking. It involved a number of surveys, workshops, follow up communications and eventual collation of material gathered. The surveys, of which 67 were completed around the country, provided the quantitative data. The follow up communications, which allowed for more detailed comment, description of case study material and so on, provided the qualitative unpacking of the concerns outlined in the surveys.

In relation to the following question:

How do you rate the credit assessment procedures of (Banks)? This includes procedures for ensuring the borrower has the capacity to repay and use of Credit Reference checks to establish credit worthiness?

Respondents were given several response possibilities:

1. Not in a position to comment (little or no experience of relevant area)
2. Generally positive or favourable experience of industry/sector conduct
3. Concerned about some practices in this area
4. Concerned about industry sector practices/conduct generally.

37% of respondents gave “3” as their response, 40% wrote “4”. Only 13% of respondents reported positive or favourable experience.

More detailed comments contained later in the consultation report add to the survey responses. The case studies detailed by advocates in other parts of the country are very similar to the examples CARE has been collecting in its own client work. Here are just two examples:

“Customer is a 60 year old widow and has been unemployed and on a widow’s pension for many years. She has had a credit card with (regional bank) for at least 15 years and periodically has had trouble maintaining required payments. During at least one difficult period the bank offered to increase the limit and issued her with a Gold Card with a limit of over $10,000. Again the customer fell into default, at which point she sought assistance from a financial counsellor. Her financial counsellor asked the bank for a copy of the written notice of variation, which it was unable to produce. When the issue of the customer’s capacity was raised, the bank alleged that it was the customer’s responsibility to assess capacity, not the bank’s.”

“Customer with a gambling problem, received an unsolicited offer of a credit card from her bank. She contacted the bank and after ensuring her husband would not be informed (which included an arrangement that all statements be sent to her mother’s address) she applied for a card with a $500 limit. When she attended the bank to pick up the card she was told she had a $2000 limit. She was also told she could reduce the limit to the requested $500, but that if she left the limit as it was she could use it immediately. She decided to take the card as it was and soon used the card up to its limit.

Having fallen further into financial difficulty she received assistance from a financial counsellor, who requested a copy of the credit application form. This confirmed her request had been for a $500 limit, but also revealed her 1974 Toyota – which she had advised was worth $3,500 – was shown with a value of $35,000. The application also clearly showed her income was $1,500 per annum. The financial counsellor raised this issue with the bank, which agreed to waive all amounts outstanding.”

CARE undertook a small research test with our client group in the lead-up to Christmas 2000. It was not an extensive study but provided a snapshot, useful in understanding the nature of consumer complaints concerning credit card marketing. Over a period of two weeks, CARE’s financial counsellors asked new callers to our service whether they would take part in a survey in relation to credit card use and marketing.

From the respondents who agreed to be involved and allowed CARE to use the information provided, there were eight case studies selected and sent to the ACT Office of Fair Trading. All of these case studies involved consumers who reported the following:

• they were experiencing problems with maintaining credit card payments,�
• they had been offered a new card or an increased limit in the preceding six month period and�
• they had not been asked to provide any information about their financial circumstances that would have allowed an assessment of their capacity to repay the new or increased credit limit.

Even more alarming was the fact that six of the eight case studies involved consumers whose sole or predominant source of income was a pension entitlement.�

David Tennant is Director of CARE Inc Financial Counselling Services, Canberra, ACT.

A full copy of his paper can be obtained from CARE Inc Financial Counselling Service, PO Box 763, Civic Square, ACT 2608, or you can email David at cccls@austarmetro.com.au�

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In the Media

ONE.TEL hunts debt

One.Tel’s administrators have hired five debt-collection firms to track down and recover outstanding monies. Administrator Steve Sharman, of Ferrier Hodgson said yesterday the company’s debtors’ book had been outsourced to five mercantile agencies, although he wouldn’t reveal how much was being sought. The agencies—Austral Mercantile Collections, Brodie Collection Services, Bridgement Smith & Associates, Impact Financial Services and Action Mercantile—will work together to gather funds for creditors. “These debt-collection agencies have been charged with ensuring the collection of outstanding debts to One.Tel for services rendered,” Mr Sherman said.

The Weekend Australian, 13-14 October, 2001.

Speeding fines on the plastic

“Pull over driver, will that be on your Visa account?” Speeding motorists around the nation could soon be given the option of settling their fine on credit card thanks to the latest eftpos technology, according to the Commonwealth Bank of Australia.

In what would make on-the-spot fines literally that, some police forces are considering introducing light-weight eftpos devices that operate off mobile phones.
The issuing of true on-the-spot fines would save considerable money by eliminating the need to process infringement notices, said Nick Kennett, head of CBA cards and financing.

The Australian, November 20, 2001.

GE negotiating to buy AGC

GE Capital is moving to fulfil its much-vaunted promise to become a major player in the Australian financial services industry with its ambitious bid to buy most of the AGC finance business from Westpac.

The US-based consumer finance specialist is understood to be offering about $1.7billion for AGC, which is about 11 to 14 times the subsidiary’s net earnings to the end of September 2001.

A full sale of AGC would slice about 2,500 staff from the Westpac payroll and add more than one million customers to GE’s business in Australia.

The Australian Financial Review, 27 November 2001

Credit card splurges lift ANZ to profit record

A bumper profit from credit cards has helped push the ANZ Bank to a record full-year profit of $1.87 billion amid accusations the bank is profiting from financially distressed customers.

The bank, the second biggest card issuer behind the Commonwealth Bank, saw its card division’s net profit soar 48 percent to $120 million.

The increase was partly due to a 5 per cent rise in unpaid credit card amounts, as well as more customers incurring interest rather than paying off debt in the interest-free period.

The Australian, 26 October, 2001.

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Some food for thought

If we could shrink the earth’s population to a village of precisely 100 people, with all the existing human ratios remaining the same, this is what we would land up with:

57 Asians
21 Europeans
14 from the Western Hemisphere, both North and South
8 Africans
52 would be female
48 would be male
70 would be non-white
30 would be white
70 would be non-Christian
30 would be Christian

89 would be heterosexual
11 would be homosexual
6 people would possess 59% of the entire world’s wealth and all 6 would be from the USA
80 would live in sub-standard housing�
70 would be unable to read
50 would suffer from malnutrition
1 would be near death
1 (yes, only one) would have a university education
1 would own a computer

When we consider our world from such a compressed perspective, the need for acceptance, understanding and education becomes glaringly apparent.�

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The Ambulance down in the Valley

T’was a dangerous cliff, they freely confessed
Though to walk near its crest was so pleasant;
But over its terrible edge there had slipped
A duke, and full many a peasant.
The people said something would have to be done
But their projects did not all tally
Some said, Put a fence round the edge of the cliff
Some, An ambulance down in the valley -
The lament of the crowd was profound and was loud
As their tears overflowed with their pity;
But the cry for the ambulance carried the day�
As it spread through the neighbouring city.

A collection was made, to accumulate aid,
And the dwellers in highway and alley
Gave dollars and cents—to furnish, not a fence,
But an ambulance down in the valley.
For the cliff is alright if you’re careful, they said,
And if folks ever slip and are dropping
It isn’t the slipping that hurts them so much�
As the shock down below—when they’re stopping!
So for years (so we heard), as these mishaps occurred
Quick forth would the rescuers rally,
To pick up the victims who fell from the cliff
With the ambulance down in the valley
Said one, in a plea, Tis a marvel to me
That you’d give so much greater attention
To repairing results than to curing the cause
You had much better aim at prevention
For the mischief of course, should be stopped at its source;
Come neighbours and friends, let us rally
It is far better sense to rely on a fence�
Than an ambulance down in the valley
He’s wrong in the head, the majority said,
He would end all our earnest endeavour
He’s a man who would shirk this responsible work
But we will support it forever.

Aren’t we picking up all, just as fast as they fall
And giving them care liberally?
A superfluous fence is of no consequence
If the ambulance works in the valley!
The story looks queer as we’ve written it here
But things often occur that are stranger
More humane, we assert, than to succour the hurt
Is the plan of removing the danger
The best possible course is to safeguard the source
By attending to things rationally
Yes, build up the fence and let us dispense�
With the ambulance down in the valley.
Anon.�

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