FINANCIAL COUNSELLING PROGRAM
CHILD & FAMILY SERVICES
Response to the
CONSUMER CREDIT REVIEW
The Financial Counsellors at Child & Family Services welcome the opportunity to
respond to some of the issues identified in the Consumer Credit Review Consultation
Paper. However due to the short time frame of the consultation and our current case load
we have decided to only submit a brief and informal response along with relevant case
We would like it noted that we have contributed to, and wholly support the FCRC’s
(Peak Body ) statewide response and recommendations to the Credit Review.
In this instance we have focussed our response on our Ballarat experience
We look forward to having further input when and if the opportunity arises after the
release of the reports of the review
Financial Counselling Program
Child & Family Services
115 Lydiard St
Terms of Reference 1:
Examine the efficiency and fairness of the operation of credit markets in Victoria
including but not limited to:
a) The nature and extent of micro-finance in Victoria including options for/barriers
to the provision of micro-finance
Commercial “Micro credit providers” Short term loans (secured)
In Ballarat we have seen an increase in Fringe lenders such as City Finance, Action
Finance, Cash Converters, pay day lenders etc. These short term money Lenders, we
believe, prey on the most disadvantaged and vulnerable in our community, unfortunately,
our clients do not always have the same opinion, and will often make comments such as:
“They are so nice and helpful”
“They even offered me more finance “
“They treat me with respect”
“No –one else would help me”
At the same time however, our clients will forgo paying their rent and utilities etc to
make sure they pay their loan repayments on time as they are fearful of their household
items being repossessed.
We have found that our clients do not consider the high interest rates, fees and
establishment costs as they only look at the fortnightly repayment and whether this fits
into their budget. Time after time it is noted that they cannot maintain this arrangement
which clearly indicates that a proper assessment of consumers capacity to repay their
loans had not been undertaken. Consumers will often seek a refinance as an answer to
their default or else not pay and live in fear of repossession.
It is also noted that often they will not include these loans in their bankruptcies for fear of
losing their furniture.We know, for instance that City Finance openly threatens
repossession ( copy of a letter enclosed) We also know that these short term loans are
increasingly applied for by our consumers to pay for household expenses such as rent,
utilities, and phone and mobile phone debts.
That household items should be banned from being held as security by these short
term fringe lenders, as these are protected under the Judgement Debt Recovery Act
That consumer protection regulations be strengthened to include these short term
Non – commercial short term loans (unsecured)
To assist people who are unable to access mainstream banking and financial services we
believe that a No Interest Loan Scheme or Low Interest Loan Scheme would be most
beneficial to our community, however these loans should not be used for debt
In Ballarat, Uniting Care operate a White Goods Loan Scheme, this is extremely helpful
for many of our community. Repayment of the loans is very high and this has been
enhanced since the development of Centapay which allows for the money to be recycled
for other borrowers
Consumers on Centrelink also rely heavily on their Centrelink loans for annual accounts,
Xmas and children’s education expenses. These loans being paid back at $38 per
fortnight over 6months, however it is often found that this payment is to high.
That Government support and increase funding for the No Interest Loan Scheme
That there be a intensive campaign on the value of “savings” as opposed to the
“buy now pay later” “have it now” advertising
b) Irresponsible and unethical lending practices by Credit Providers
In our case work practice it is well documented that not only commercial short term
money lenders but retail store cards and the banking industry credit cards are in most
cases provided without a proper assessment of consumers capacity to pay. These
credit cards increasingly are used to service the day to day living expenses of
Other predatory lending practices include targeting vulnerable consumers (sometimes
by post codes) ie security systems, charging high interest, upfront fees, loans that are
unaffordable, high late payment/default fees/charges, and the offer to refinance when
consumers fall into arrears without any explanation to the added costs and charges.
Often our clients will see this as the only way to get themselves out of their financial
crisis. We have also found that these lenders refuse to negotiate or change the loan
contracts, apply for moratoriums and variations on the grounds of financial hardship.
Unsolicitored Credit Cards and unsolicitored credit card increases are proving to be a
major concern for consumers leading eventually to loss of assets and bankruptcy.
The UCCC provides some consumer protection on some grounds however the ACT
Fair Trading Act 1992 has been amended to include s28A, which specifies a
requirement that a satisfactory assessment process be undertaken when a credit
provider offers a care or increase in a credit card limit.
This provision provides our vulnerable consumers some protection, however it does
not extend to personal loans and mortgages.
We believe it is an obligation of the banking and financial services sector to ensure
that the provision of credit is based on diligent assessments with realistic and
That the ACT Fair Trading Act 1992 s28A be incorporated into the UCCC or
the relevent Victorian legislation
All credit providers including short-term lenders (as discussed in this response)
come under the jurisdiction of the Consumer Credit Code
It is well documented that an increasing number of our clients are falling victims to
the predetory marketing of short-tem money lenders, finance brokers, etc. Adverts
appearing in local papers, radio, home delivery, public places etc are misleading
promising easy qualification, “even if you have a bad credit rating” car finance, debt
release, etc. These adverts do not inform consumers of fees, charges, interest rates,
(Several copies of adverts enclosed)
Consumers are enticed by the “Interest Free’ “Buy Now Pay later” advertising for
items such as car tyres, furniture, newest computers/tv/stereo etc which means
excessive interest if not paid within the advertised timeframe.
Credit providers such as pawnbrokers cash advance and pay day lenders etc avoid
provisions under the Credit Code.
Part 9 of the UCCC regulates the credit advertising and the promotion of credit as does
the Trade Practices Act and the Fair Trading Act.
That the Consumer Credit Code be reviewed in relation to advertising and that
penalties for breaches be increased and enforced
***Please note that we would have liked to respond to more of the issues and
included more case studies however time ran out****