Warning on Debt Agreements ruining lives as much Debt Collectors

New report has been released highlighting sales pushed debt agreements on consumers in debt/being chased by debt collectors. Instead of disputing and fighting the collectors, the debt is simply palmed off to a debt agreement company. Rendering consumers in debt for years…….

 

It was a very money-driven company, and the bonuses were very generous.

– Jenny, a former debt agreement company employee.

While the Banking Royal Commission has exposed a litany of unethical and fraudulent lending practices at financial institutions, the flipside of the coin is the debt help industry.

These are companies that are profiting by offering “debt solutions” or “debt relief” to money-stressed Australians. And that’s a huge market. Personal debt has reached nearly $2.4 trillion nationally, or nearly $100,000 per Australian.

One way they do this is through what’s known as a debt agreement. You might have seen the ads on TV or online – they promise an easy way out of debt for those struggling.

These legally-binding agreements have some great perks. They combine all a person’s debts into one lump sum that can be paid off over up to five years. Creditors are getting money, so they stop calling and sending letters. And if the debtor sticks to the agreement, they won’t have to worry about losing big assets like the family home.

But the fine print paints a more complex picture. A debt agreement is also a form of bankruptcy. It’ll affect your credit rating for up to five years, and can impact on your ability to apply for certain jobs. The repayments can be high, and the company charges its own hefty fees.

THEY SELL IT AS RAINBOWS AND UNICORNS, NO MENTION THAT IT’S, IN FACT, A CLASS 9 BANKRUPTCY.

– Marc, a former customer of Fox Symes. 

Consumer advocates say people are being pushed into debt agreements they don’t fully understand, and can’t really afford.

“A key problem with businesses that promote debt agreements is that they’re conflicted,” Gerard Brody from the Consumer Action Law centre told The Feed. “They get paid when they put you into a debt agreement, they don’t get paid to offer you other sorts of advice or options.”

Fox Symes is the largest provider of debt agreements in Australia, but earlier this year they were fined by ASIC, the financial regulator, for misleading statements in their advertising.

When you call the number on a debt help advertisement, you get put through to a customer service rep like Jenny (not her real name). Jenny used to work in the call centre at Fox Symes.

“It was a very money-driven company and the bonuses were very generous,” she told The Feed. “Individually you’ll have your own KPIs, and then you would have a team KPI. So there was always pressure.”

Jenny claims her job was effectively a sales position – each month they would have to deliver a certain number of debt agreements and if they met or exceeded the target, they’d receive a bonus. Jenny, and other former employees, told The Feed that this was often over a thousand dollars.

While they had to mention other options to potential clients, Jenny says in reality they pushed debt agreements. “You give them all the good things about it, but you really just don’t mention too much about the reality of actually being in one,” she said.

Former Fox Symes client, Marc Salter, says the company “only took into account the debt, and didn’t care that $585 a week was leaving me with nothing.” He entered into a debt agreement when he was 19 years-old in order pay off a $50,000 credit card debt.

Fox Symes declined an interview with The Feed. In a statement, they said the company “does not ‘push’ debt agreements” and that only 3.7% of those who contacted them agreed to go ahead. They did not answer The Feed’s questions about targets and bonuses.

Ben Paris from the industry’s peak body, PIPA, denied that KPIs and bonuses are compromising debt agreement companies. He says debtors are informed at least three times of the consequences of entering an agreement. “I’m not sure that the fears around KPIs that were present in other industries, for example the banking sector, are necessarily justified in the personal insolvency space,” he said in an interview.

Parliament has just passed new laws that are meant to address some of the concerns around debt agreements. The laws reduce the timeframe from five to three years and prevent repayments going above what someone can afford.

 

Delete and Dispute any Defaults on your Credit File with this Free trick!

One unfortunate factor with being in debt, is that thry will put a default on your credit file, which will stop you being able to get credit. So one tactic I would suggest, is to access for free you credit file and have a look for any defaults and if there is, then click dispute next to all of them. I have found many times, companies put defaults on your file much earlier than they should, so you can sometimes clear your file/improve your credit score straightaway. The free one I used was this one
 

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