Sharkwatch November 2004

Notes & Notices

ASIC has misleading credit calculators removed from over 100 financial institutions’ websites.

The Australian Securities and Investments Commission (ASIC), has had credit comparison calulators removed from over 100 financial institutions’ websites because they were misleading. This is part of ASIC’s broader work looking at debt reduction schemes and complaints about them.

ASIC has also been pleased to see the release of new Mortgage Industry Association of Australia (MIAA) advertising guidelines for their members (this story also features in ‘In the Media’ on page 16). The new guidelines are designed to assist MIAA members to avoid presenting advertisements which may mislead consumers. A recent ASIC press release about the guidelines quotes Greg Tanzer, who says that ‘the guidelines give a useful explanation of the key legal requirements for advertising and address a number of issues of concern to ASIC.’

Mr. Tanzer goes on to say that ‘in recent years, ASIC has taken action against the use of unjustified claims of “impartiality” and “independence” and the guidelines specifically address these issues. They also make clear the need to ensure that any comparisons used are on an equal footing and that any assumptions made are clear.

‘Advertising that informs consumers is an important part of a competitive market but there are dangers that advertising can mislead rather than inform, which can result in consumers making choices that are not in their best interests and that cause them significant detriment.

Mr Tanzer concludes that ‘while ASIC will continue to carefully monitor the marketplace and take action where necessary, the best outcome for consumers is if industry players avoid making misleading claims. The MIAA Guidelines should provide a useful tool in that process’.

Sharkwatch readers who are interested should visit the ASIC website at http://www.asic.gov.au/asic/asic.nsf. This is a great website for financial counsellors and provides links to the excellent FIDO pages which are devoted to consumer issues. These always have plenty of content that is of interest to our profession, especially the guides on dealing with different types of institutions.

Another scam to watch out for: Remote access to phone accounts.

Betty Weule, a well known financial counselling veteran from NSW, has sent in details of a new scam. One of Betty’s colleagues reported the following unusual contact:

“I had a call last night from an individual indentifying himself as an ATT & T Service Technician who was conducting a test on the telephone line. He stated that to complete the test I should touch Nine, Zero, Hash then hang up.

I contacted the telephone company and was informed that by pushing 90# you give the requesting individual full access to your telephone line, which allows them to place long distance calls billed to your home phone number. I was further advised that this scam has been originating from many of the local prisons.”

Further inquiry reveals that this is not an isolated incident, and that this scam is currently under investigation. Also, a warning has been issued by the Victorian police. The contact person is:

Stephen Cooper, Detective Senior Constable 29748: Victoria Police — State Crime Squads; Level 12, 412 St. Kilda Road, Melbourne; Phone: (03) 9865 2663; Email: stephen.cooper@police.vic.gov.au

If you have any clients who have unexplained items on their phone accounts, it may be valuable to check that they haven’t been a victim of this scam. If they have, we would advise you to contact the Victorian Police, and also the phone provider, for advice on how to rectify the problem.

ACCC Alleges Unconscionable Conduct Affecting NT Indigenous Communities

Wayne Warburton

In the light of a seemingly never-ending stream of scams aimed at defrauding members of indigenous communities — who could forget the $4,000 vacuum cleaners sold to communities with no electricity — it is pleasing to see the ACCC taking appropriate action when dealing with those whose conduct in trading with indigenous communities appears to be unconscionable. Here is an ACCC press release about just such a case:

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court, Darwin, against Mr Ramon Keshow for alleged unconscionable conduct and misleading and deceptive conduct in the promotion and supply of educational materials to indigenous communities in the Northern Territory.

The ACCC has alleged that since September 1998:

Mr Keshow visited a number of indigenous communities in the NT trading under the business names of National Math Academy, Drysdale Correspondence Schools and Easy Buying Services

when visiting these communities, Mr Keshow solicited customers for the supply by him of educational learning materials

Mr Keshow secured payment for these goods by having customers sign a periodic payment form, which authorised deductions to be made indefinitely from the customers’ bank accounts to the nominated account held in the name of one of Mr Keshow’s businesses.

The ACCC alleges that Mr Keshow has engaged in unconscionable conduct in breach of the Trade Practices Act 1974 by, among other things:

exploiting the customers lack of commercial experience when requesting that customers sign periodic payment forms with no termination date

failing to explain to consumers the significance and effect of the periodic payment form the customers were asked to sign, including failing to advise customers about the duration of time payments were to be made and how and when the customers could stop payments

failing to supply customers with any goods or only supplying very few or inadequate goods, such that the amounts paid were in significant excess of the value of the goods received.

The ACCC also alleges that Mr Keshow had engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Act by, among other things, failing to disclose to prospective customers the total cost of the educational materials and representing to customers without reasonable grounds that they would receive goods on a regular basis.

The ACCC is seeking orders including:

declarations that the conduct engaged in by Mr Keshow contravened the Act

injunctions having the effect of restraining Mr Keshow from engaging in the conduct again

attendance at a trade practices seminar

costs.

If the ACCC is successful in its action, it proposes to make an application for compensation on behalf of the indigenous people alleged in the Statement of Claim to have suffered loss or damage because of the conduct.

The matter has been listed for a directions hearing in the Federal Court, Darwin on at 9.15 a.m. on 19 October 2004 before Justice Mansfield.

(ACCC Media Release 206/04; 22 September 2004)

As you can see from the release, the first hearing — the Directions Hearing — was held on October the 19th. Sharkwatch understands that Mr. Keshow did not attend the hearing but has been given additional time to put together a case for his defence. The ACCC are expecting that a hearing date will be set for early 2005, possibly in February.

The presiding Judge, Justice Mansfield, has made a number of high profile determinations in recent years. A well known Alice Springs car rental business owner found to be involved in price fixing was ordered to pay $150,000 in 1998; a Melbourne franchisor found to have made false representations in advertisements and cash flow projections was ordered to pay $245,000 in 2000, and an 1100 sq. km. native title claim near Tennant Creek was upheld by Justice Mansfield in 2004.

Given that it is often financial counsellors who end up providing practical assistance to those who have been defrauded by unscrupulous traders, we can only applaud any efforts to bring into the legal system any operators suspected of unconscionable conduct, especially those trading with marginalised or disadvantaged groups. Sharkwatch will notify readers of the final outcome.

Third Party Authorities: A Template

Jan Pentland

As you may be aware, I have been working on a draft Third Party Authority which may be acceptable across the financial services industry including debt collection agencies. Attached for your comments is the latest draft after feedback from the major banks at a Forum in Victoria in September.

The amendments add a date of birth for the client which assists creditors with large customer data bases to be sure they have the right person and I have no problem with this. However, requests to provide address and telephone number were refused for obvious reasons.

Your comments on the draft are very welcome, and should be sent (preferably by email) to: jpentland@each.com.au. I am hopeful that by the end of 2004 we can get some general acceptance from the major players in the financial services industry of an agreed Third Party Authority. This will then provide a basis for financial counselling agencies for your own Third Party Authority.

View the draft Third Party Authority.

* Note that the sections that are in bold font would carry the information specific to each service and counsellor

Round Up

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

Australia Wide

Debt Agreement Research

Financial counsellors and consumer advocates across Australia have been concerned for several years about Debt Agreements introduced by amendment of the Bankruptcy Act in 1996 and administered under Part IX of the Act. In particular, the unconscionable behaviour of some fee charging Debt Agreement Administrators (DAAs) has become increasingly concerning for our sector. Complaints by financial counsellors and debtors have led to the ACCC issuing proceedings against Fox Symes, the largest of the DAAs.

Consumer Credit Legal Service Victoria (CCLS) and Eastern Access Community Health (EACH) recently received funding from the Victorian Consumer Credit Fund to produce a report on the experience of debtors and financial counsellors with Debt Agreements. Work on this project has commenced and while the focus will be on the experience of Victorians, the project team is interested to receive feedback from across Australia.

Credit Helpline in Victoria has been collecting case studies nationally for some time and has significant data which will be compiled as part of the report. If you would like to add your case study, please email Penelope Hill at Penelope.Hill@iinet.net.au, or to discuss your experience or the project, contact Jan Pentland at 0407 042 483 or at jpentland@each.com.au.

Jan Pentland

2005 National Consumer Congress

The National Consumer Congress (NCC) will be held on March 15–16 next year. The theme for the congress will be “Prevention is better than cure: A vision for consumer empowerment in Australia”. The 2005 NCC will bring together prominent consumer advocates both nationally and internationally from government, community and private sectors to ‘explore issues facing consumers today and in the future’. According to the brochure, the NCC will be ‘interactive and outcome focused, providing delegates with the scope to explore move from the largely reactive methods currently adopted by the consumer protection regime to a more pro-active behavioural approach’.

Sharkwatch understands that there will be at least some financial counselling representatives going to the NCC, but would encourage as many financial counsellors as possible to attend. It would be desirable for a strong financial counselling perspective to be put forward at the NCC. In addition, financial counselling as a profession could benefit from being exposed to new ideas about pro-active approaches to consumer advocacy.

Presenters include ABC journalist Maxine McKew, Deputy ACCC Chair Louise Sylvan, Futurist Ron Honeywill, Peter Kell, the Director of the ACA, Gary Moore, the Director of NCOSS, and our very own David Tennant from CARE Financial Counselling and Consumer Credit Legal Service in Canberra.

The NCC will be held at the InterContinental Hotel in Sydney. Fortunately for financial counsellors, the pricing structure for conference attendance is tiered, so that the Corporate sector pay $1,750.00 per person, Government and Industry Associations $950.00, and Community Organisations and Academics $350.00. An early bird discount (who coined that phrase anyway!!!) of 10% applies for registrations received before January the 16th, 2005. The best value option is for Community Organisations and Academics, who can register for just $250.00 if they are willing to forgo the Congress Dinner (but no early bird discount applies).

Further information can be obtained via the internet or contact: Kyle Emslie from the Office of Fair Trading on (02) 9619 8704.

Victoria

Energy Comparator now available

The Essential Services Commission yesterday launched its online Energy Comparator, which consumers can use to compare your current energy contract against other offers. It can be accessed on the ESC website at www.esc.vic.gov.au and the ESC will also provide support on 1300 134 575 (toll free).

The Comparator helps you compare any offer made by an energy retailer to ensure that you are in fact going to be better off — if the offer isn’t as good as your current arrangement, then you should stay with what you’ve got. The Comparator works by building a picture of your annual energy use, then, using the prices and features from your new offer, it compares the new offer against what you currently pay for energy.

To use the Comparator you need to have your current energy bill and the new offer from a competing retailer. Take your time with it, to ensure everything has been entered correctly. And be aware that all costs and prices in the Comparator are GST included, but GST is often written as a separate item on your gas or electricity bill. The Comparator has been developed with differing types of internet set-ups in mind, so on a dial up connection it can take a few minutes to download; however it requires the Macromedia Flash plug-in v.6 or later.

Craig Garrett
Policy/Publications Officer
Consumer Utilities Advocacy Centre

New South Wales

Reminder to JPs

Just a reminder to the many financial counsellors in NSW who were JPs prior to the 8th of December, 2003, that they need to reapply for their appointment before Dec 8, 2006, if they wish to continue to function as a Justice of the Peace after this date.

Copies of the relevant application forms can be downloaded from the lawlink website. Just go to Information for JPs appointed before 8 December 2003 and select the appropriate link.

Once your application has been accepted, you will have four months to go to the local court and swear the oath, otherwise the application lapses. I was nearly caught by this, because I left it to the last minute and discovered that my local court, like many courts in NSW, is setting specific days and times aside for the swearing in of JPs in the face of the large amount of reappointments they are now dealing with. If you are a JP who is seeking reappointment, we would advise you not to leave it to the last minute to apply, and to find out in advance when your local court deals with the swearing of the oaths.

Telstra Insert

You should have received Telstra’s latest version of it’s A-Z guide with this issue of Sharkwatch. The new look guide contains information about a range of products and services that may be particularly helpful for those who have low incomes or are having difficulty paying their Telstra accounts. The brochure is part of Telstra’s ‘Access for Everyone’ Programme (see Sharkwatch Vol. 4 Issue 1 and Vol. 5 issues 1 & 2 for more details), and has been a very helpful resource for financial counsellors in the past.

Set out by alphabetical keywords, the guide gives details of the concessions available for pensioners and those who are unemployed or have a disability. It also details the services available for those from a non-English speaking background, for those in remote communities and for those who move frequently from place to place. Of particular value to financial counsellors are the sections that provide options for those on low incomes or who are having trouble paying their bills. The guide also provides contact numbers for every service listed. If you would like more copies for your service, call Telstra Consumer Affairs on 1800 804 591.

The Law Matters

by Linda Black
Solicitor, Wesley Community Legal Service

Criminal Prosecution for Centrelink Fraud

Debt and Fraud

Centrelink has the power to recover all payments made to people who are not entitled to them. These overpayments are recoverable as debts even where the person in receipt of the benefit was not aware that they were being overpaid.

Where the person continues to receive Centrelink benefits, the debt will be recovered by making deductions from the person’s payment. Where that deduction will cause excessive hardship, a financial counsellor may be able to negotiate with Centrelink to reduce the amount of the deduction. If the person is no longer receiving Centrelink benefits, Centrelink may recover the debt by standard legal means provided that Centrelink has first attempted to enter into an arrangement for payment by installments.

Where a person has received an overpayment because of fraud, or intentional misrepresentation, that person will be liable for the debt as well as possible criminal prosecution.

Criminal Prosecution for Intentional Misrepresentation

If a person has made a false or misleading statement to Centrelink they may be prosecuted for “intentional misrepresentation”. Centrelink may establish that someone is guilty of intentional misrepresentation if they have evidence that the person:

made a statement or presented a document to Centrelink which was false or inaccurate; and
intended to deceive Centrelink.

It may be difficult to prove this. In order to prove that the person intended to deceive Centrelink, the prosecution must show that the person knew the statement or document was false or that the person ignored or was reckless as to whether the statement or document was false. A person who signed a form without reading or understanding it may have been reckless as to the accuracy of what they were signing. However, in R v Brewer [2004] ACTCA 10, it was noted that people with problems of literacy and numeracy may be confused by their obligations towards the social security authorities.

Centrelink conducts ‘misrepresentation interviews’ to investigate suspected fraud. A person is not obliged to answer questions in a misrepresentation interview or required to provide information that would lead to self incrimination. However, under social security legislation, a person is required to advise Centrelink of certain information and to provide information that is not false or misleading. Therefore, voluntary disclosure is often advisable. Further, voluntary disclosure may influence whether Centrelink decides to prosecute an incident and it may be a mitigating factor in sentencing. Wherever possible, it is advisable to get legal advice about obligations and possible outcomes before attending a Centrelink interview or making a disclosure.

Penalties

Prosecution for intentional misrepresentation may be commenced under the Criminal Code Act 1995 (Cth) or the Social Security (Administration) Act 1999. The prosecution will choose under which Act a particular case of fraud will be prosecuted under. The maximum penalty under the Criminal Code Act 1995 (Cth) is imprisonment for 10 years. The maximum penalty under the Social Security (Administration) Act 1999 is 12 months imprisonment.

Where do the courts stand on social security fraud?

The courts are very strict in cases of social security fraud because judges believe that harsh penalties deter people from abusing the social security system. This general deterrence is important because social security benefits are for those in need. If detailed investigation was required to ascertain the truth of every claim, then money which should be paid to the needy would be diverted into investigation and administrative costs. Often the need for social security benefits is urgent and there is no time to fully investigate a claim before payment. Centrelink must rely on the accuracy of information supplied, and so the law requires honest disclosure by applicants. Judges impose harsh penalties in cases of social security fraud because it is easy to commit but difficult to detect, because it happens frequently, and because it increases the burden placed on taxpayers.

A court must find “very special circumstances, extraordinary circumstances or exceptional circumstances” to justify a sentence of less than full time imprisonment in cases of social security fraud — Howe (Bernice Kaye) (AKA McGovern) [2000] NSWCCA 405.

What are “very special circumstances”?

Special circumstances are usually found as a combination of factors in a case rather than any one factor. In Howe (Bernice Kaye) (AKA McGovern) [2000] NSWCCA 405, the offender worked under one name and obtained social security benefits under another name, receiving approximately $120,000 over 12 years. The offender was sentenced to imprisonment for two years, but was permitted to serve the detention periodically (rather than full-time) because of a number of special circumstances, including her early guilty plea, the fact that she was in the process of repaying the money and the fact that full-time imprisonment would seriously affect her daughter’s HSC studies.

In Kovacevic v R [2000] SASC 106, the offender had fraudulently obtained $7,000 of Newstart allowance over a period of 19 months, by under-declaring his income. It was held that this case did not warrant a sentence of imprisonment because the amount involved was not as substantial as in many other cases; the offender had ceased the fraudulent activity 3 months before it was discovered; the offender was now employed and imprisonment would bring that employment to an end and reduce his chances of employment in the future; the offender was 30 years old and had previously been of good character; the offender had repaid all the money involved, was genuinely remorseful, pleaded guilty at the first opportunity and co-operated with the authorities. The offender was sentenced to a good behaviour bond of three years and a fine of $300.

Age may also be a special circumstance if an offender is very old or very young. However, in Molesworth (Morna) [1999] NSWCCA 43, age was held not to be a special circumstance because it was a factor that enabled the commission of the offence. In this case, the offender was 67 years old and had received the age pension under a false identity.

“Need vs Greed”

In R v Jennifer Rose Purdon (unreported, NSW CCA, 27 March 1997) the NSW Court of Appeal stated that “if the fraud is based upon a perceived need, a custodial sentence must be expected except in very special circumstances. If the fraud is based on greed, the custodial sentence will be longer”. However, in Kovacevic v R [2000] SASC 106, the South Australia Supreme Court indicated that there may be cases where the offender’s extremely difficult or distressing circumstances could be taken into account. They gave the examples of an offender who is virtually destitute with dependents to support and an offender who acted as a result of domestic pressures that few people could withstand. The court said that these circumstances, coupled with other circumstances, may warrant a more merciful approach in imposing sentence.

Voluntary cessation of the offence prior to discovery

Courts will take into account the fact that an offender voluntarily ceased a crime before it was discovered. In Regina v Lopez [1999] NSWCCA 245, the offender stopped receiving social security benefits under a false identity a year before the offence was discovered. The court said that voluntary cessation should lead to a reduced sentence because: it shows an acknowledgment of wrongdoing; it may indicate that the fraud was not committed for greed; and it is in the public interest to encourage offenders to cease their activities. The offender in this case had received about $24,000 in benefits and was sentenced to 2 years imprisonment to be served by way of periodic detention.

Voluntary repayment of money

Offenders will not be entitled to leniency by the court just because they have voluntarily repaid the money unless a substantial sacrifice has been made in doing so. The court’s reasoning for this is that leniency cannot be purchased. However, if the money has not been repaid and is irretrievable, this can be an aggravating factor: Phelan (1993) 66 A Crim R 446.

References

Potas, Ivan, Sentencing Manual: Law, Principles and Practice in NSW”, Judicial Commission of NSW, Lawbook Co, 2001.
Raper, Michael (ed), The Independent Social Security Handbook, Pluto Press Australia 2001.

Updates: AFFCRA

Jan Pentland
President of AFCCRA

AFCCRA Council

AFCCRA Council met by telephone link up on 25 October and discussed a range of issues including:

Bankruptcy and the defence services, an issue being pursued by Tricia Ross, AFCCRA’s Northern Territory representative;
Part IX issues
Third party authorities
The review of the Commonwealth’s Rural Financial Counselling Program
Prepaid utility meters
The ANZ bank’s financial literacy and community education materials

Reports were received from AFCCRA’s representatives on the Bankruptcy Reform Consultative Forum, the Telstra, Optus, ACCC consultative forums and the CTN Board. There was also discussion of events around the states and territories.

The work being undertaken by AFCCRA on the Sugar Industry Reform Program was reported and discussed. AFCCRA’s Industry Funding Policy was adopted and will soon be posted on AFCCRA’s website.

The process for proposed changes to the Constitution is proceeding and will be finalised at the AFCCRA AGM on 15 December 2004.

All Council members were sorry to say farewell to Rosemary Warren who has represented South Australia in an exemplary manner for many years. Rosie has also been an exceedingly efficient secretary and editor of the AFCCRA News. We will miss her!! But we wish her well and look forward to catching up with Rosie and her husband Bob in Melbourne in June 2005. Thanks so much, Rosie.

AFCCRA website

The new AFCCRA website continues to develop. This will be a primary means of communication for AFCCRA’s work with the Department of Family and Community Services (FaCS) on the implementation of the financial counselling component of the Sugar Industry Reform Program (SIRP). We will also build the website information towards providing an excellent overview and resource for financial counselling nationally. Check out the website at www.afccra.org

Bankruptcy Reform

Financial counsellors would be aware of the changes to Part X of the Bankruptcy Act earlier this year although as a sector we have very little to do with the decreasing number of Part X arrangements that are made. ITSA is running information sessions across the country on the changes but these are mainly targeted at registered trustees. My assessment is that there is little for our sector in the changes to the Act or in the information sessions. Minimal changes to the Statement of Affairs are not significant for us.

The Bankruptcy and Family Law Legislation Amendment Bill 2004 which was before the Parliament and lapsed when the election was called will be re-introduced, and this may occur in the November sitting of Parliament. I understand that the Law Council has considerable reservations about this Bill and it may not have a totally smooth passage through the Parliament.

AFCCRA Conference

AFCCRA is planning a Conference in Melbourne in June 2005. Likely dates are June 17 and 18 to follow the planned Dispute Resolution Forum. Topics for the Conference include

the current landscape for financial counselling — what does our sector look like nationally?;
the changing landscape of financial counselling, a discussion/debate we need to have including the growth of fee charging services;
the national Diploma of Community Services (Financial Counselling) and how we can work together to implement this most effectively nationally;
state and territory accreditation for financial counsellors

Please put these dates in your diary for next year and watch this space for further information.

If you have any queries about any of the above, please contact me on 0407 042 483 or at jpentland@each.com.au .

Bankruptcy

Bankruptcy Reform: Proposed $200.00 fee!!

The last few years have seen constant reform proposals for bankruptcy law and administration. Financial counsellors across Australia will be aware of AFCCRA’s continuing involvement in these issues and strong advocacy for our clients, low income and vulnerable consumers.

A very concerning proposal has recently been communicated to me as AFCCRA’s representative on the Bankruptcy Reform Consultative Forum. The Commonwealth Government has embarked on a cost recovery policy which is being imposed on all Government Departments. Under this policy, ITSA has conducted an internal review of its fees and charges and proposes to change their current fee charging regime.

The significant issue for financial counsellors is ITSA’s proposal to introduce a $200 fee to lodge a debtor’s petition. As we are all aware, currently there is no fee and the notion of our clients who are facing bankruptcy having to pay $200 to lodge their bankruptcy papers seems farcical.

AFCCRA is taking strong action to protest against the proposed fee and I hope that state and territory financial counselling associations and organisations will also make strong representations on behalf of our clients. As AFCCRA Chair and AFCCRA’s representative on the Consultative Forum, I am in the process of writing to Attorney General, Phillip Ruddock and Shadow AG, Nicola Roxon, to protest in the strongest terms about this proposal. I shall be highlighting the large amount of work financial counsellors undertake with and for ITSA, most of which is not funded by the Commonwealth Government. AFCCRA will also issue a media release on this important issue.

I understand that ITSA offices in each state will be offering briefing sessions to our sector during November to ‘consult’ on the proposed reform. All states and territories should take up this opportunity of making it clear to ITSA and the Attorney General that this proposal is not on. In Victoria, financial counsellors will meet with our ITSA office on 22 November at 10.30am. I am looking to financial counsellors to attend in numbers to send a loud and clear message to Canberra that we strongly oppose the proposed $200 fee.

Please contact me on 0407 042 483 or at janpentland@hotmail.com or jpentland@each.com.au if you would like to discuss any of the above.

Telstra

Credit Management Reforms Move Ahead

One of the fairly new initiatives Telstra has put into place is to make a courtesy call to clients whose phone usage is unusually high — that is, if the account is double the amount of the average of the previous three accounts and over $900.00 for a fixed line account or over $700.00 for a mobile account, or if the account is $200.00 above the planned usage for a broadband account. This is, of course, a valuable initiative as far as financial counsellors are concerned, because many of our clients have run up huge bills in the past without being aware of it, either through underestimating their own use, or through another person using their account outside their awareness. This programme has been quite successful, with 30,000 Telstra customers being contacted so far, courtesy calls being made at the rate of 300 per day, and 88% of contactees reporting that they were pleased that Telstra had rung. It is pleasing that Telstra are considering the possibility of further reducing the thresholds, and are particularly looking at thresholds for the 18–23 youth market.

Telstra’s draft hardship policy is well under way, and it looks at this stage as if they will be putting together a dedicated unit to deal with hardship cases, although the size and makeup of the team have not yet been decided. This is certainly good news. Telstra are planning to run a pilot hardship programme from February to June 2005, for which they will be training both specialist staff and Front of House (FOH) operators. The eligibility criteria in the draft policy — illness, unemployment or other reasonable cause — offer operators some flexibility, but will also need some fine tuning to effectively identify hardship cases from the several thousand calls Telstra gets each day from clients requesting extensions of time to pay their accounts. It is hoped that the hardship system will run very simply, with FOH operators screening calls and then passing appropriate referrals directly to the hardship team.

Other positive moves include the commissioning of an internal debt-collection team under the banner of Credi-Tech (against the general trend of creditors outsourcing debt collection), and a deliberate ‘moving away’ from the disconnection option, by putting more steps in the process between non-payment and disconnection. It is important for financial counsellors to know that Credi-Tech is actually a part of Telstra, despite its name, and that when you are dealing with Credi-Tech you are still dealing with the actual creditor, not an agent.

Wayne Warburton

Calculating BITA Contributions; Bankruptcy and the Baby Bonus

BITA Contribution Rates Calculator as at September 20, 2004

How to use the BITA calculator to work out likely income contributions.

Step 1. Obtain gross income.

Work out the client’s gross income.

Example: Let’s say the client has a gross income of $67,955.00 and has 1 dependent child.

Step 2. Calculate net income.

Calculate the Tax Payable and the Medicare Levy using the guidelines in the tables at the bottom of the page, and work out how much child support or maintenance the client is paying if applicable. Subtract those amounts from the gross income.

Example: Tax on $67,955.00 = $13,572.00 for the first $58,000 and 42c in the dollar for the next $9,955.00 ($4,181.10), totalling $17,753.10. The Medicare levy (1.5%)= $1,019.33. The net income, then, is $49,182.57.

Step 3. Calculate assessable income.

Add any assessable income items that would increase the net income, such as a fringe benefit. This will give you an estimate of the client’s assessed income for BITA purposes.

Example. This client has no fringe benefits and has an assessable income of $49,182.57.

Step 4. Calculate income in excess of AITA threshold.

Looking at the column with amount of dependents, find out the AITA (assessable income threshold amount) and subtract it from the clients assessable income.

Example. The AITA for 1 dependent is $42,200.34. Subtracting this from the assessable income amount of $49,182.57, we find that the client has an excess of $6,982.23.

Step 5. Calculate likely contribution towards bankruptcy.

ITSA will take 50c in the dollar of any excess above the AITA threshold. Divide the excess income over BITA amount by two. This will give the amount of the contribution towards the bankruptcy the ITSA is likely to ask for.

Example. The excess of $6,982.23, when divided by 2 (or multiplied by .5 to get the same result), gives a likely contribution amount of $3,4911.12. This is the amount you would tell your client that they would be likely to pay ITSA as a contribution towards their bankruptcy, if the figures they have given turn out to be complete and correct.

Baby bonus included as income for income contribution assessment purposes

The “baby bonus” is paid under the Income Tax Assessment Act 1997. As the baby bonus is not paid under the Social Security Act 1991 nor the New Tax System (Family Assistance)(Administration) Act 1999, referred to in Reg.6.12C of the Bankruptcy Regulations, which excludes those payments from “assessable income”, the baby bonus payment is treated in the same manner as an income tax refund in a bankruptcy context (viz, income).

It appears that the great majority of bankrupt mothers who will receive the $3,000 payment will not become contributors because in the majority of cases, the additional $3,000 income would not take their income over the threshold amount for contribution purposes as their income if any, is generally well below the income threshold amount (currently $35,763 after tax).

However, the receipt of the $3,000 baby bonus by a bankrupt’s wife will preclude her bankrupt husband from claiming his wife as a dependant for income threshold purposes even though she may not be working, because that amount exceeds the $2,500 income limit for dependants imposed by Reg.6.15A .of the Bankruptcy Regulations.

The legislators have commented that this was an “unintended consequence” of the interaction between the two Acts.

Possibly, thought may be given by the legislators to increase the $2,500 limit in Reg.6.15A to say $3,500 to avoid such a consequence.

Robert J. Cruickshanks
Deputy Official Receiver
ITSA Sydney
14 October 2004

Teleconference

Issues Surrounding the Sugar Industry Reform Package

On October the 5th, a teleconference was held to discuss issues surrounding the Federal Government’s Sugar Industry Reform Package (SIRP).

This package has been put into place as part of a federal government restructuring of the sugar industry in Australia — a restructure that is expected to have a significant and adverse economic impact on some of the sugar growing areas in Australia. As part of the package, the Federal Government has released a large amount of money to be distributed to Commonwealth funded financial counsellors in sugar growing areas. The rationale for this is that financial counsellors are one of the groups most able to meet people’s needs at the coalface where economic hardship becomes a reality, and to do so in a practical way.

For the financial counsellors, though, this funding has come at fairly short notice and with little warning. The budgets for some services will rise fivefold for the next year, and such sudden growth in both the size of a service and the demands put on it, creates a pretty unique kind of strain for those involved. Also, there has been an uncomfortable wait between the scramble to get a large funding application in, and the receipt of the money, creating a sense of anxiety for some counsellors because the work of getting things quickly up and running is still on hold.

The purpose of this teleconference was to give financial counsellors in areas affected by the Sugar Industry Reform Package a chance to talk about their concerns, about what their issues are, about their expectations for the next 9 months, and about ways to constructively deal with these issues.

The discussion centred on a number of areas.

Who can we service?

One issue that was raised was how to differentiate between SIRP clients and regular clients, and who to provide services for. After all, most services will be booking in both regular and SIRP clients, but most clients won’t be immediately identifying themselves as having financial difficulties due to the SIRP up front.

At a recent forum in Brisbane, one government body took a very strict view — that SIRP-funded clients should only be cane growers or harvesters. Others suggested that mill workers or others directly affected by the SIRP should also be included. The teleconference participants tended to want to take a fairly broad definition, and to be able to offer services also to those whose small businesses have been affected by a sugar town’s reduced economy, or to include others affected in other, peripheral ways by the SIRP.

What problems can financial counsellors expect to face?

The sale of farms in the face of debts and non-viability is an issue. In the Nambour region of the Sunshine Coast, the sugar mill closed last year. Some sugar farmers have had their land purchased by the government or other interests, but not all. In the cane growing areas of Mackay, Burdekin and Ingham, land values have dropped by half. In some areas, rezoning applications that will make farms attractive to developers are taking a long time to pass council, and so sales of affected farms are also being held up by this. Overall, many farmers who would like to sell up cannot do so without making a substantial loss.

It is not all bad news however. In the Burdekin area, the effects of a growing ethanol industry have lessened the adverse economic impact of the SIRP.

An experienced Rural Financial Counsellor from a sugar area detailed the sorts of issues he had seen over the previous year as being:

Problems with various types of debts including credit cards, personal loans, hp, leases, and mortgages
Difficulty filling out the appropriate Centrelink forms
Loss of property
Legal problems

It was also generally agreed that many of the problems in the sugar growing areas may take a long time, maybe even several years, to surface, and that dealing with these late problems will be an issue on its own. For this reason, a number of counsellors expressed concern that resources may be needed after the SIRP funding expires.

On a different note, many of the new SIRP positions are outreach positions to outlying sugar areas. This raises safety issues — how can the safety of counsellors be guaranteed? — and may also be a concern for auspicing bodies that have a no-outreach policy and/or are not insured for this type of programme.

How to sort out practical problems associated with fast tracking and implementing new programs in SIRP areas

The main problem discussed here was the restricted amount of time SIRP services will have to utilise their money. Most contracts will specify that the initial funding is only till June 30, 2005, and yet the teleconference was in October and most services had not yet received their money, and so could not even begin to recruit new staff, let alone begin to provide a service. This means that the SIRP-funded services will have to be provided over a very short period — around 8 or so months at best.

Such a short time line makes it difficult to advertise for staff with the appropriate skills — the positions that will become available are for less than 9 months duration and will be temporary. — and this means that fewer counsellors from the relatively small pool of those with the necessary skills or training, may be interested in relocating to take up one of the new SIRP jobs.

Jan Pentland from AFCCRA said that she would write to the funding body (FaCS) to ask that financial counsellors be given a full 12 months from the receipt of funding to implement their services and use the SIRP funding.

Dealing with sudden growth within a service

One factor discussed in this regard related to the lack of general resource services for financial counsellors in Queensland. Jan Pentland from AFCCRA has been quite busy in lobbying for funding for such a service and is currently looking at a proposal from a Queensland agency to approach FACS with. Jan believes that this need is an ongoing one, and hopes that any funding acquired now will become ongoing once the SIRP funding finishes. It was also noted however, that funding is already inadequate for financial counselling in Queensland, and it would be undesirable for such monies to come at the expense of any existing Queensland service.

Issues related to the wait for funding money

The wait for funding, apart from being a fairly anxious time, also makes it difficult to make practical arrangements. Many of the new jobs will be almost purely outreach positions, and accommodation and travel arrangements will be quite important. In a related vein, because new cars cannot be purchased with the funding and leases for 9 months or less are not obtainable, car rental would also need to be organised. Many of these things need to be established in advance but can’t be until the funding money is received.

Conclusion

All in all, many issues related to the SIRP funding were discussed. Clearly, a main issue will be the short-term nature of the funding and the long term nature of some of the problems associated with the SIRP. If AFCCRA are successful in helping Queensland financial counselling to have a resource service with recurrent funding, and if the terms of the SIRP contracts can be extended past June 2005, this will certainly help in this regard. In the meantime, don’t forget that Jennifer and I are available to everyone on the Commonwealth Financial Counselling Programme on 1800 647 409.

Obtaining Credit Files

In 1968 the Credit Reference Association of Australia (CRAA) was formed and quickly became the major supplier of credit reporting information on Mainland Australia. Later, the CRAA changed its name to Credit Advantage Ltd., and, more recently, changed it again to become Baycorp Advantage Business Information Services Ltd. Currently Baycorp has in excess of 4000 subscribers such as lending institutions, retailers, telecommunication providers and many more.

What Baycorp sells is information from its database, which contains credit files on 11,000,000 consumers and over 1,000,000 businesses. These files include credit enquiries, default reports and available court judgments, writs and summonses, bankruptcy information, as well as information on the structures, directorships and proprietorships of companies and businesses. Because these files contain sensitive information that is not freely given by those who are the subject of the files, Baycorp’s activities are regulated by the Federal Privacy Act 1988.

Using the Baycorp website, it is easy for a consumer to purchase a copy of their credit report (http://www.mycreditfile.com.au). However it is important to know that under the Act, Baycorp have to provide a free copy of your credit file if requested. Simply send Baycorp a request which contains:

A brief note asking for ‘a copy of my credit report’

Your full name
Your date of birth
Your driver’s Licence No.
Your current residential address
Previous residential addresses within the last 5 years
Your daytime telephone number
Your signature at the bottom

Baycorp Advantage Public Enquiries: PO Box 964; NORTH SYDNEY, NSW, 2059; Ph. (02) 9464 6000; Fax (02) 9951 7880

In the Media

Less of the hyperbole, mortgage brokers told

Original story by Lisa Pryor

The Mortgage Industry Association of Australia (MIAA) has released new guidelines for mortgage brokers to follow. This comes after years of hyperbole in advertisements, including firms claiming to be ‘unbiased’, ‘cheapest’, ’best’, ’impartial’, ‘free’, ‘guaranteed’ or ‘independent’. The new guidelines put pressure on mortgage brokers to tone down their advertising to stem criticisms that their pitch is often based on exaggerated or inaccurate claims.

Brokers are already taming their advertisements, chastened by the experience of Mortgage Choice, which was forced to run corrective advertisements after claiming in May that it was ‘unbiased’, even though it only recommended loans from the lenders that had paid it commission.

The new guidelines prohibit brokers from describing their service as impartial, independent or unbiased if they only recommend lenders who pay a commission (which is how the system works for most brokers).

Carolyn Bond from the Consumer Credit Legal Service in Melbourne said the guidelines were welcome but that they clarified the law rather than raised the bar. There was a problem with the whole structure of the industry, she said. “They present in a way that makes consumers think they are acting on behalf of the consumer, they talk about ‘helping you find your way through the maze’ … whereas most of them get direct remuneration from the lenders whose products they sell”.

Greg Tanzer, the Australian Securities and Investment Commision’s executive director of consumer protection, said that he was pleased with the initiative but pointed out that misleading and deceptive advertising was already prohibited by the ASIC Act and the Trade Practices Act.

This move follows a clampdown on lenders and brokers who encourage borrowers to switch loans by producing misleading graphs on loan calculators.

Sydney Morning Herald, September 21, 2004

Slicker in the city? It ain’t necessarily so

Original story by Ross Gittins

Ross Gittins put to the test the notion that those in the cities are more affluent than those in rural areas. He quotes research from the University of Canberra’s Centre for Social and Economic Modelling, which looked at income trends by region, using census data from 1996 and 2001. This research divides Australia into five regional categories: capital cities (defined widely so that, for example, Sydney includes the Blue Mountains and Perth includes Fremantle); major urban areas such as Wollongong, Geelong and the Gold Coast; regional towns with populations between 1000 and 100,000; rural towns with populations of between 200 and 1000; and “rural areas” (everything else).

The average income in the cities was $57,000, compared with $46,000 in major urban areas, $46,000 in rural areas, $42,500 in regional towns and $39,000 in rural towns. Interestingly, those in rural areas are significantly better off than those in regional and rural towns.

In addition, incomes in the capital cities also grew faster — by 12 %, in real terms, compared with 11 % for rural areas, 10 % for major urban areas and rural towns, and a little over 7 % for regional towns. Again, rural areas fared better than some might have expected.

The average household income in Sydney was $63,000, compared to $57,000 in Melbourne, $52,500 in Brisbane and Perth, $47,000 in Adelaide and $45,000 in Hobart.

However, even though incomes differed between the regions, it was the cost of housing that was the great leveller between city and country, and between the capital cities. For example, households in the capital cities spent $13,500 a year on mortgage payments or rent, compared to $12,000 in major urban areas, a bit over $9000 in in regional towns and rural areas, and less than $8000 in rural towns. Also, over the five years to 2001, housing costs in the capital cities rose by almost 14 % in real terms, whereas such costs rose by 12% in rural areas, 3.5% in major urban areas and just 1% in regional and rural towns.

Sydney Morning Herald, November 10, 2004

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