Debt management companies, long the bane of consumer groups and financial counsellors, face a new world of regulation as the new financial year starts.
Providers of debt management services must now hold an Australian credit licence and meet ongoing compliance obligations. As ACLs, they will have to become members of the Australian Financial Complaints Authority.
Under regulations made in April, debt management services include businesses offering “credit repair” and “debt negotiation” carried out in relation to a consumer credit contract and where a consumer is required to pay for the service.
Regulated debt management assistance activities include helping a consumer apply for a change to a credit contract, apply for postponement of enforcement proceedings and helping make a complaint or claim against a credit provider.
Helping a consumer apply for a change to information collected by a credit reporting body is also a regulated activity.
As regulated entities, debt management companies will have to engage in their services fairly, honestly and efficiently, they will have to deliver good outcomes for consumers and they will have to meet the needs of customers experiencing vulnerability.
Lawyers providing these types of services may be exempt from regulation.
Licensees will have to meet a fit and proper person test and be able to demonstrate organisational competence.