Order of Payments

"Financial Counsellors evidence first-hand "the worst financial scams and unscrupulous market conduct in the country" (Predatory Advertising) on a daily basis within some web and newspaper advertisements for Credit Card Products that have patently proven very costly for Credit Cardholders with poor Financial Literacy Skills.

Extracts that evidence that Financial Counsellors are familiar with Unconscionable advertisements and Predatory Lending that tempt many Revolvers with Low Financial Literacy Capacity into horrendous Credit Card Debt Accruing Interest

1st extract:

Financial Counselling Australia website notes:

"Total funding from governments in Australia for financial counselling service delivery is $43 million per annum." of which 50% of assistance is to financially stricken Australians that earn less than $20,000 pa.

2nd extract:

Credit card debt is a leading reason why people seek financial counselling services, according to principal solicitor with the Financial Rights Legal Centre, Alexandra Kelly.

"Typically, they may start with one card and when they reach the limit on that card, they get a second card and a third card and so on," she said. "They end up just shuffling the debts around while the interest compounds, leaving them in unmanageable debt."

3rd extract:

The biggest debt Alexandra Kelly has seen on a single card is $90,000, while clients with multiple cards can end up owing hundreds of thousands of dollars.

"We have had cases of people who have accrued debts of $100,000 or $200,000 on multiple cards - that is the worst case scenario," she said.

"Around half the people that contact us actually have credit card debt of over $10,000," said the Victoria's Consumer Action Law centre's Chief Executive, Gerard Brody. "Many have many thousands more than that in credit card debt and, in fact, we've worked out that at least one person a week that contacts our centre has credit card debt of more than $100,000."

4th extract:

Ms Katherine Temple, a policy officer with the Consumer Action Law Centre in Melbourne, provided the Senate Economics References Committee with some insight into its work with people struggling with Credit Card Debt Accruing Interest, and by extension the scale and severity of the problem in the community:

"Consumer Action's free telephone financial counselling service, MoneyHelp, receives at least 15 calls per day from people struggling with credit card debt. Over 50 per cent of our callers have credit card debt exceeding $10,000, over 28 per cent have debts exceeding $20,000 and nearly every week we get a call from someone with credit card debt exceeding $100,000. However, the number of people contacting MoneyHelp for assistance is likely to be only a small proportion of those who are struggling with credit card debt.85 "

"..can lead to and exacerbate the marginalisation of struggling consumers. It can result in significant financial hardship and, in some cases, bankruptcy and the loss of the family home. At an acute level, credit card debt can lead to family violence, breakdown and a deterioration in health, including mental health. It can also have a long-term impact on the capacity to provide for health, retirement and education. These are serious and profound impacts. Taking appropriate steps, including regulation, should be an absolute priority for policymakers."[86]

5th extract:

Katherine Lane, principal solicitor at the Financial Rights Legal Centre, said she sees many people mired in credit card debt. She argues credit card terms can last decades and should be limited to three years, and borrowers should be required to pay off larger minimum amounts, including the minimum of the principle. But she said after 26 years of working in the financial services sector, she still couldn't understand why credit card interest rates stay so high.

"Personal loans are for five years, credit cards are for 30. Let's change that. Banks have made a fortune at amounts they shouldn't have got – a reasonable period is three years," she said

6th extract:

Below are two extracts from a speech in March 2006 by David Tennant, Chairperson, Australian Financial Counselling and Credit Reform Association at their Annual Conference in Qld:

"Queensland is the host state and custodian of the national consumer credit regulatory regime. It is also the home base of some of the worst financial scams and unscrupulous market conduct in the country. Many of these scams spread south and west much faster than the cane toad has so far been able."

"A key responsibility the financial counselling community shoulders in responding to its client base is to ensure the experiences those people report are recorded and appropriately considered in service design and policy, social action and law reform activities. Sadly, the otherwise rich data pool that the 450 odd financial counsellors working around Australia have access to, is also fragmented. Representatives from the Commonwealth Financial Counselling Program are here today. I congratulate them on evolving efforts to collect and produce more useful data. The conversation around data collection and usage does require greater engagement with and of the financial counselling community and all of the various funding sources around the country."

7th extract:

SMH article "Middle class hit by debt" notes that Tony Devlin, a senior Financial Counsellor at Salvation Army's "Moneycare" service, has interviewed hundreds of level 1 and level 2 Australians who have incurred huge debts on multiple credit cards. "There are far more middle-income earners seeking a way out of the desperate cycle of huge mortgage repayments and mounting credit card debt.........And people try to keep the ship afloat by using more credit cards."

The Writer spoke to Tony Devlin on Wed 7 Dec '11. Tony told him "It is not uncommon to meet people in financial trouble who had significant debts on between 6 and 10 credit cards."

8th extract:

Debt Relief Australia spokesperson Deborah Southon says the typical family credit card debt is likely to be much higher than the $3321 average with many households juggling repayments on two or more cards.

"We had a client recently who owed $450,000 and was on a salary of $40,000. She had ten credit cards and was using one to pay off the other. By the time she came to us she was almost suicidal."

"It's not just the number of people who come to us for credit card debt resolution that’s alarming but the extreme level of debt they are in,” Ms Southon says.

"We had a client recently who owed $450,000 and was on a salary of $40,000. She had ten credit cards and was using one to pay off the other. By the time she came to us she was almost suicidal."

Ms Southon says it's not surprising that more Australians are sliding into the debt every month, with credit card companies constantly devising new ways to lure cardholder to make more purchases and conduct more transaction, such as rewards programs and special offers.

Blinded by the incentives, consumers lose sight that credit cards are one of the most expensive ways to borrow money, she says.

"Lives can be destroyed by credit card debt, more couples break up over financial stress than infidelity," Ms Southon says.

The risk increases tenfold when households and businesses are under both credit card and mortgage stress, she says.

This massive mountain of debt will continue to escalate indefinitely with many lenders charging interest rates on credit card accounts four times higher than the official RBA cash rate of 4.75 per cent (on 16 May '11).

Financial Counselling Australia produced a booklet in 2015 titled Standards for agencies employing financial counsellors to establish standards that -

A. assist agencies (charities/not-for-profits/community organisations) that offer financial counselling services to provide a high quality of service; and

B. set out the essential requirements an agency should meet if it wishes to offer financial counselling services.

Below are extracts from the above FCA booklet which relate to Financial Counsellors maintaining records whereby useful data/information can be provided back to their 'funders':

1. Financial counsellors also work to prevent financial difficulty through community education and by providing input to government and industry policy development processes.

2. The agency keeps complete and legible records in relation to each matter where it provides financial counselling services.

3. The agency submits reports to its funders in the required format and within the required time frames.

4. The agency collects and analyses data concerning:

(a) Demographic information about the clients who use the service.

(b) Systemic issues that are identified in the course of service delivery.

5. The agency participates in evaluation concerning the effectiveness of its financial counselling services.

Financial Counsellors have evidenced first-hand the "the worst financial scams and unscrupulous market conduct in the country" on a daily basis in web and newspaper advertisements for Credit Card Products.

A shocker of misrepresentation and deceit was that some Credit Card Issuers were offering a Zero Balance Transfer (for say one or two years) and then -

i) applying monthly repayments of Purchases to reduce the Zero Balance Transfer amount; and

ii) charging 20% circa on those Purchases from date of each Purchase and in some cases, withdrawing the Interest free Period for one or two months.

National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 Unconscionable Conduct Credit Card Issuers are -

A. no longer able to apply the 'Order of Payments' provision; and

B. required to apply all repayments to the Credit Card Debt with the highest percentage annual interest rate first.

The Federal Dept. of Social Services provides a division called "Commonwealth Financial Counselling services that funds financial counselling that are provided by community and local government organisations to help people in personal financial difficulty to address their financial problems, managing the debt and make informed choices about their money in the future".

In order to better understand the social and fiscal costs of the Credit Card Product, Commonwealth Financial Counselling services and the State governments (that collectively fund $43 million annual for Financial Counselling at Australia's major charities/agencies) should obtain from the 10 largest charities/agencies that provide Financial Counselling -

(A.) descriptions of misleading, deceptive or unconscionable web and newspaper Credit Card advertisements (Predatory Advertising) and pass those advertisements onto Australia' Three Financial Regulators that should ensure that offending Credit Card Issuers are prosecuted, with ASIC (or another) imposing hefty monetary fines and public exposing the practice; and

(B.) numeric data of the number and demography of Credit Cardholders seen by Financial Counsellors that carry Credit Card Debt Accruing Interest >$10,000 >$25,000 >$50,000 and >$100,000 and the number of different credit cards held by each distressed Credit Cardholder in those debt categories.

As a start, the Federal Treasurer should request the relevant Regulator to -

(i) examine the information in advertisements for Credit Cards (explained in the Nine Examples in Labyrinth of ‘Concealed Spiders - referred to in Chapter 3 above) with particular regard to any breaches of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 'et al'; and

(ii) for ASIC to impose monetary penalties where Unconscionable Conduct is found to exist (based in the ACCC's description of (Unconscionable Conduct).