The regulator is running a month-long campaign to warn consumers about the risks associated with seeking credit repair and debt management services.
The Australian Securities and Investments Commission (ASIC) has announced that it will commence a month-long campaign — along with the commonwealth, state and territory governments — designed to inform consumers of the high level of fees charged by credit repair and debt management firms.
ASIC claimed that consumers may be left worse-off, with some firms failing to adequately address the credit and debt issues of their clients.
“Consumers experiencing money or debt problems don’t need to put themselves under further financial stress by paying high fees to firms providing credit repair and debt solution services,” ASIC deputy chair Peter Kell said.
“If people are having difficulty obtaining loans because of an incorrect default listing on their credit report, there are actions they can take that are free of charge to have it corrected.”
Mr Kell urged consumers who suspect that a credit default has been wrongfully listed against them to contact their creditor.
“If you aren’t satisfied with the response you receive, you can contact the relevant dispute resolution service for help,” the deputy chair added.
The campaign follows on from a 2016 ASIC report which found that debt management firms:
- were offering services where fees and costs were not well explained;
- often required payments be made before services were provided;
- sometimes used high-pressure sales techniques.
Mr Kell noted that consumers could consider alternative services like financial counselling before engaging a debt solutions firm.
Further, ASIC stated that consumers should be aware that lenders will review their credit report when they apply for credit or a loan and they should check that their credit history details are correct, adding that consumers are entitled to obtain one free copy of their credit report each year from a credit reporting agency.