UPDATE, 24 January 2013:
On 25 July 2012, the Australian Securities and Investments Commission banned Peter Doherty from providing credit services for a period of three years (see the original article below). On 20 December 2012, and with the agreement of Doherty and ASIC, the Administrative Appeals Tribunal set aside ASIC's banning decision as if it were never made.
The effect of the AAT's decision, ASIC said, is that Peter Doherty is not considered banned
from providing credit services for any period.
However, on 21 September 2012 the AAT upheld a decision
by the Inspector-General in Bankruptcy to decline to register Doherty as a debt agreement administrator.Article from 2 August 2012
The banning of a debt consolidation company this week has highlighted the uncertainty surrounding the regulation of debt consolidation services, credit repair companies and debt agreement administrators.
The Australian Securities and Investments Commission has banned the director of a Sydney company, The Debt Genie, from engaging in any credit activities for three years.
ASIC found that the director, Peter Doherty, had engaged in credit activities while unlicensed.
Most debt agreement administrators are registered with Insolvency Trustee Service Australia and are regulated under insolvency law.
However, administrators who handle fewer than five cases at any one time do not have to register with ITSA.
Businesses that fall outside ITSAís coverage may or may not be covered by the National Consumer Credit Protection Act, depending on the type of debt agreements they negotiate.
For example, an administrator who negotiated a debt discount for a debtor would not be engaging in credit activities. Under the law, a debt reduction means that there is no fee or charge involved in the agreement.
Because NCCP does not give ASIC specific jurisdiction over the activities of debt agreement administrators, the regulator has to look at each case to see whether there is a credit activity that comes under the consumer protection provisions.
This gap in the law was the subject of a panel discussion at this yearís ASIC Summer School.
The coordinator of the New South Wales Consumer Credit Legal Centre, Karen Cox, said there were a number of problems with companies operating in this area.
She said credit repair companies charged large up-front fees to investigate a consumerís credit file and "clear" the file. In some cases, consumers were being charged hundreds of dollars for having errors in credit files corrected Ė something they could do themselves for nothing.
In other cases, the credit repair companies have used aggressive tactics to try and persuade the lender or the credit reporting agency to remove legitimate listings.
And, in some cases that Coxís staff have dealt with, the credit repair company has persuaded the consumer to enter Part IX insolvency arrangements, which they then administer for a fee.
"It is a completely unregulated area," said Cox.