The Australian Securities & Investments Commission (ASIC) is cracking down on the debt management and credit repair industry, and its underperforming operators. The regulatory body launched a review on 22 July amid growing concerns that licensees are falling short of their obligations and letting customers down in the process.
Some industry players see the move as a positive step forward, for both the sector and brokers.
"It's a fantastic thing," Victoria Coster, founder, chief executive officer and credit repair specialist at Sydney-based Credit Fix Solutions, told Australian Broker. "I welcome it with absolute open arms. [The industry] is a world of dodgy pirates."
A licensing regime for debt management and credit repair firms was established in 2021 to shield consumers from misconduct. Today, around 100 firms hold a credit licence in Australia. These licensees must comply with the National Consumer Credit Protection Act 2009 and maintain membership with the Australian Financial Complaints Authority (AFCA).
Regarding the need for the review, ASIC commissioner Alan Kirkland said: “We are concerned some licensees may be failing to engage in credit activities efficiently, honestly and fairly, leaving financially vulnerable consumers worse-off as a result. We have heard numerous accounts of debt management firms making promises to vulnerable consumers that may not have been kept.”
As part of the review, ASIC will examine whether some credit licensees are falling short on key standards, such as charging excessive fees, offering limited services, or failing to communicate effectively with clients.
Coster, who founded Credit Fix Solutions in 2014, said the review will help "weed out the ones who aren't doing the right thing."
"What I've seen – and this is systemic, across my industry – is at least once a week, a consumer will call us and say, 'Hey, can you help me? I've been paying this credit repair now for six months and nothing's happened,'" Coster said. "Or the phone call is, 'The credit repair specialist removed one default, and I paid them for it, but they didn't remove the other.' But it's not always a [situation] where, yeah, we can fix [someone's credit].
"And brokers will know which places are safe to send their clients, or which credit repair firms can they trust," added Coster, who has also previously worked as a mortgage broker. "Because at the moment, they don't know who they can trust. It will be a good thing for brokers, because it will make our space compliant, and it will make it a sort of safe place for brokers and their clients to land."
Melbourne-based broker, director and founder of Brava Finance Cara Julian added a reliable credit repair specialist strengthens trust with borrowers, while poor service and back-and-forth issues can quickly erode that relationship.
"The benefit of anything that becomes regulated is it puts those extra steps and processes in place," she said. "And my guess would be that it would be a benefit to the consumer."
