Vulnerable Australians may soon have better protection against so-called ‘debt vultures’ after other big four banks hinted they may follow NAB’s lead and abandon working with them.
NAB last week announced a crackdown on unlicensed fee-charging debt management providers (DMPs), which coincided with a rise in the number of customers accessing hardship measures, including loan deferrals.
According to NAB, 98,189 home loan customers and 39,528 businesses had deferred loans through the pandemic – with up to 20 per cent now resuming payments.
“As more Australians seek help it is important that we no longer deal with unlicensed, fee-charging debt management providers,” NAB group executive Rachel Slade said in a statement last week.
Unlicensed DMPs charge upfront fees to customers in financial strife on the understanding they can help negotiate payment plans, restructure debts and repair their credit rating.
Many do not hold a financial services licence or credit licence issued by corporate regulator ASIC, despite appearing to provide such services.
However, similar services can be accessed through free, licensed financial counselling services, including the National Debt Helpline.
A NAB spokesperson on Friday confirmed to The New Daily that any new arrangements from August 17 would be subject to the crackdown.
But those who have already signed a contract with an unlicensed DMP could still seek an exit.
They may soon be joined by Commonwealth Bank, after a spokesperson confirmed to The New Daily it is reassessing how it engages with unlicensed DMPs.
“CBA is reviewing its relationship with credit repair and debt management firms,” he said on Friday.
“We are taking steps to terminate arrangements with firms we reasonably believe do not act in the best interests of our customers.”
‘Debt vultures’ prey on vulnerable Australians in debt
Melbourne woman Anger Ageur knows all too well about the predatory nature of unlicensed DMPs.
After being stood down from her job because of a work-related injury, she built up $5000 in mortgage arrears, before receiving a letter from a firm called J Daniels & Associates telling her she would soon be taken to court by her lender, ANZ.
However, she had not been contacted regarding any legal proceedings.
“I really didn’t give the letter any attention,” Ms Ageur told The New Daily.
“But less than five days later, a man came to my house and served the same letter to me directly – he told me he had been waiting there for two hours, wanted to help me through my problems, and being vulnerable at the time, it sounded too good to be true.”
Ms Ageur said after getting confirmation they would stall the legal pursuit, she signed online paperwork (with difficulty) – and that’s when the problems started.
“I went to Good Shepherd and the financial adviser told me to see a lawyer, and when I mentioned J Daniels’ name, he told me to get a copy of the contract, as they’re not a law firm,” Ms Ageur said.
“On the phone they said the first monthly payments would be $240, which was affordable to me, but the contract said they would be $1004.”
After receiving support through community lawyers, she sold her property – and a month out from settlement, her conveyancer told her there was a $7000 caveat.
“When we looked to find the source, we found it actually came from J Daniels, and they wouldn’t take it off – and the sale wouldn’t go ahead – unless we paid them that money,” Ms Ageur said.
Stronger regulation urged amid pandemic crisis
NAB’s move comes two years after a parliamentary economics enquiry found unlicensed DMPs rarely benefit a customer’s financial standing, urging the federal government to introduce a licensing system.
An ANZ spokesperson declined to comment directly on whether the bank would alter its stance on engaging with unlicensed DMPs.
However, it is understood the bank operates with such providers on a case-by-case basis, and any firms that ring significant alarm bells are escalated up to senior management for potential exclusion.
Consumer Action Law Centre senior policy officer Cat Newton told The New Daily that banks and governments must work together to introduce industry-wide regulation that diminishes the influence of ‘debt vultures’.
“With very high and hidden fees, poor-quality advice, and no requirement to meet even basic professional standards, too often these unregulated, fee-driven companies can’t be trusted to help,” Ms Newton said.
“With growing financial difficulty due to COVID-19, business will be booming for debt vultures unless the other banks, and the federal government, act quickly.”
Ms Ageur said she hoped banks would follow NAB to quash “sneaky” unlicensed DMPs.
“This is stuff you would expect to happen where I’ve come from in Africa, the Middle East, but not in Australia, and that’s what p***ed me off more,” she said.