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ASIC recently announced a review into the credit repair and debt management sector following reports of dishonest practices.
The exploitation of vulnerable customers is being weeded out by the regulator after it claimed some organisations were not meeting debt management terms, charging high fees, or not communicating adequately with customers.
The Australian Retail Credit Association (Arca) welcomed the ASIC review and said tougher laws are needed to protect vulnerable consumers.
The credit reporting and consumer data association urged brokers to be wary of these shady credit repair and debt management providers, as they play a key role in supporting informed financial decisions.
Brokers who are informed and can distinguish between the legitimate and dodgy credit repair providers can help ensure clients remain financially secure.
Arca CEO Elsa Markula said many credit repair providers claim they can wipe defaults or quickly boost credit scores, which can often be misleading.
Other providers charge customers to fix information that’s either accurate or could have been corrected for free.
While the ASIC review will help identify those who are engaging in dishonest practices, Markula said tighter regulation is necessary.
“This review is an encouraging first step, and Arca fully supports ASIC enforcing the existing law,” she said.
“However, what is ultimately needed is stricter, more specific laws on credit repair services. Arca and our members will continue to advocate for reforms that protect consumers using these services and benefit others in the credit reporting system.”
Markula said that the laws requiring licensing for credit repair and debt management firms introduced in 2021 were a positive step to reducing exploitation, but the legislation is too broad to adequately protect consumers.
“ASIC’s review should not delay action. We need a dedicated legal framework with strict rules to deal with the egregious conduct we continue to see in the credit repair sector,” she added.
There are around 100 credit repair and debt management operators in the Australian market that will come under the watchful eye of ASIC.
One Broker Daily commenter disagreed that further reform was necessary and said the examples provided by the regulator were “straight up acts of negligence or fraud” that should already be addressed in existing laws.
“Don’t pile more obligations on those doing the right thing to try to prevent outcomes caused by those intent on doing the wrong thing. They’ll break those new laws too,” said the commenter.
[Related: Regulator to investigate credit repair and debt management sector]
