A Parliamentary committee has been told that debt management firms including personal budget services, debt negotiators, debt agreement brokers and credit repair companies need to be regulated.
The Senate Economics Committee inquiry into Consumer Protection in the Banking, Insurance and Financial Sector has been told that a regulatory loophole exists that is allowing these types of firms to operate.
Answering questions on notice from South Australian Senator, Nick Xenophon, the Financial Rights Legal Centre said that currently, and despite the recommendations of the Ramsay Review, such companies were not the subject of specific regulation.
“They are all part of a regulatory loophole or series of loopholes,” the Legal Rights Centre said.
“A new regulatory framework is required to be introduced by Government. In short, all debt management firms should be required to hold a relevant licence, have minimum required standards such as a fit and proper person test and maintain membership of an Australian Securities and Investments Commission (ASIC)-approved industry ombudsman scheme.
The committee was told that the final report of the Ramsay Review into the financial system external dispute resolution (EDR) and complaints framework, has recommended that debt management firms be the subject of a regulatory regime.
Further it said the Government had indicated its acceptance of that broad recommendation.