NAB stops dealing with unlicensed debt management providers

The major bank said this was an important step as more Australians seek financial assistance as they deal with the economic impacts of the coronavirus pandemic.

Many for-profit providers do not hold a current Australian Financial Services Licence (AFSL) or an Australian Credit Licence (ACL) from ASIC, despite often appearing to offer services that require a licence.

In 2019, almost 20,000 NAB customers sought financial hardship assistance, the bank revealed. Additionally, around 9 per cent engaged debt management providers that charged fees and often operated without any professional credentials.

In 2020, the over 150,000 customers sought financial assistance in the wake of the COVID-19 crisis.

However, the financial services regulator has previously warned consumers about paying high fees for debt management companies, warning that some unlicensed companies claim they can fix poor credit ratings but often fail to do so, leaving the consumer in a worse financial situation.

NAB group executive, personal banking, Rachel Slade said the lender wanted to ensure that financially vulnerable customers were professionally supported, either directly by NAB or by an accredited representative.

“Now more than ever, customers are facing situations that can leave them in a vulnerable financial position,” Ms Slade said.

“We continue to check in with our customers who have requested payment deferrals due to the impact of COVID-19, and know many still need our support through this crisis.

“However, we also understand that some customers won’t be able to bounce straight back. As more Australians seek help, it is important that we no longer deal with unlicensed, fee-charging debt management providers.”

Ms Slade said NAB will continue to work with customers who are unable to make repayments to find the appropriate solution, or refer them to free and independent services that can assist them.

She added that this move would help protect customers from potentially being placed in a worse financial position.

“We’ll then work with the customers’ appropriately accredited debt advocate to give them time to get things back on track,” she said, adding that NAB Assist can help customers with grants, low interest loan and support for finding employment.

NAB added that consumers experiencing financial stress or hardship, or those facing credit or debt problems, could also:

• talk to their lender or bank;
• engage a “free and independent financial counsellor or community legal service (such as Way Forward or The National Debt Helpline);
• seek assistance from the Consumer Action Law Centre or Financial Counselling Australia; or
• visit ASIC’s MoneySmart website for more guidance around debt and credit repair.

Background to debt management provider warnings

In 2018, a Senate economics references committee recommended tighter regulation of all credit and debt management, repair and negotiation activities.

The move was initiated by NAB’s independent customer advocate Catherine Wolthuizen and has received ASIC’s support.

At that time, ASIC issued a warning to consumers about paying high fees for credit repair and debt advice services to companies that claim they can fix a poor credit rating.

ASIC was running a month-long campaign with other government agencies to help consumers understand that they may end up paying high fees by using these services.

Instead, the corporate regulator advised consumers facing debt problems to seek free help and guidance from financial counsellors and the National Debt Helpline.

ASIC deputy chair Peter Kell said consumers who believe they have had a credit default wrongly listed against them can contact the creditor and ask for it to be removed. If they are not satisfied with the outcome, they can contact the relevant dispute resolution service for help.

“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,” Mr Kell said.

NAB’s announcement in relation to debt management providers comes as the bank also revealed that it would partially close 114 smaller regional branches – only opening them in the mornings – from next month.

The change, which will come in effect on 17 August, will see bankers splitting their time between over-the-counter service (during the hours of 9.30am-12.30pm) and digital or phone banking support.

[Related: ASIC to review responsible lending guidance]