The Australian Financial Security Authority has imposed conditions on the operations of debt agreement administrator A&M Group, following a court finding that it harassed debtors and engaged in misleading and deceptive conduct in its management of debt agreements.
AFSA has imposed a requirement that A&M, which trades as Debt Negotiators, engage an external consultant to audit the company’s culture, systems and controls, and report the findings to the Inspector-General in Bankruptcy.
It has also imposed a two-year supervisory period to ensure debtors are treated “appropriately and fairly”. It will review a sample of debt agreements administered by Debt Negotiators.
“Any failure to adhere to the conditions will result in further regulatory action,” AFSA said.
Last December, the Federal Court fined the company A$650,000 for its poor practices.
Debt Negotiators administers registered debt agreements entered into between debtors and their creditors under Part IX of the Bankruptcy Act. It is one of the bigger companies operating in the sector. Many of these agreements involve consumers with multiple creditors and few assets.
ASIC commenced proceedings against the company in November 2021, in relation to its dealings with six debtors. Its contravening conduct was directed at debtors who were failing to comply with the debt agreements they had entered into.
Staff contacted debtors and told them their creditors were considering terminating their debt agreements and taking legal action, or that creditors had placed their debt agreements under review for termination.
“Customer support officers” told debtors that creditors had demanded payments by certain dates and would terminate their debt agreements if the deadlines were not met.
They told debtors they could be charged with fraud and sent to prison if they did not make payments and that creditors were planning to contact family and friends to recover debts.
The court found that “for the most part” these representations were based on templates that were used over and over again.
Debt Negotiators staff also threatened to contact family members, friends, work colleagues and landlords and, in some cases, did make contact with those people. They pressured debtors to seek assistance of family and friends to help make repayments.
In his judgment, Justice Robert Bromwich said: “There was a very significant failure by Debt Negotiators to train and oversee the customer support officers and thereby prevent, mitigate or detect the contravening conduct. Senior management’s culpability is apparent from the lack of adequate safeguards in place. Debt Negotiators incentivised the contravening conduct through its bonus structure.”