Thursday 24 Jan 2019

Some excerpts from submissions to the Royal Commission and the Senate Inquiry

Below are some excerpts from submissions to the Royal Commission or the Senate Inquiry from regulators or government bodies that make positive references to financial counselling.

ASIC - Royal Commission

Another reform that would improve consumer outcomes, including by assisting regulators, is ensuring that independent consumer organisations and financial counsellors are adequately funded to meet growing demand and to play their important role in the financial system.

AFCA/FOS - Royal Commission

FOS works with a range of community organisations that assist FOS in the resolution of disputes by advising consumers about how best to resolve their problems. Financial counsellors and specialist community legal services help connect vulnerable and disadvantaged members of the community to EDR schemes such as FOS, and to other important support services where needed.

Without the support provided by community-based financial counselling and specialist community legal services, many consumers would have little or no opportunity for redress to help sort out their often complex and multi-faceted problems they face. We support initiatives to ensure sustainable funding for these organisations as an important element in ensuring consumers do have access to effective redress in the financial system when they suffer detriment.

Legal Aid Queensland - Senate Inquiry

…. Legal Aid Queensland’s Civil Justice Service works extensively with financial counsellors to assist clients in financial hardship with legal issues arising from interactions with financial services firms. In LAQ’s experience there is unmet legal and financial counselling need that could be addressed through the provision of further funding for legal assistance services and financial counselling services.

AFSA/FOS - Senate Inquiry

Financial counsellors are available in every State and Territory and work in non - profit community organisations. AFSA recognises the important role of financial counsellors in the personal insolvency system and identifies to the public the services provided by these organisations ... AFSA regularly engages with the financial counselling sector to achieve common objectives and in the sharing of information.

(The AFSA submission then includes a table about how people had sourced information about personal insolvency options and their use of financial counsellors. This shows that lots of people don't know about free financial counselling. This is particularly the case for people who end up in debt agreements.)

Australian Banking Association - Senate Inquiry

Financial counsellors are an essential public service and ABA members support the continuation of the existing funding of the sector.

The ABA supports an enduring model of government funding for financial counselling services to ensure these services continue to make a significant difference for many Australians experiencing financial difficulty and facing other economic and social challenges. It is important for the government to provide funding for financial counsellors’ casework.

NSW Small Business Commissioner - Senate Inquiry

In the operation of a legal services trial conducted in the drought affected areas of the Wimmera region in Victoria, Consumer Action Law Centre identified various business issues requiring advisory services, including insolvency, liability for debts and financial management concerns. They found the absence of an affordable specialist small business legal service a major impediment to providing assistance to these communities, making the final recommendation that a Small Business Community Legal Service and a Small Business Financial Counselling Service be established.

AFCA - Senate Inquiry

... the important role that financial counselling services play in the financial sector generally and in EDR in particular. Acknowledging this role, AFCA supports measures to ensure the services are funded adequately now and in future. We suggest that a sustainable funding model be developed and consideration be given to following an approach taken overseas, where an industry levy funds financial counselling.

While we understand that government regulation of pay day lending is in progress, we anticipate that this sector will continue to grow and with it the need for a well resourced financial counselling sector.

Free financial counselling, and other community services, play a very important role in the financial sector. These services connect vulnerable and disadvantaged members of the community to EDR schemes such as AFCA and other support mechanisms. They also raise the standard of financial competency through help with budgeting, dealing with credit issues and other practical financial matters.

Financial counselling services help consumers to avoid financial problems and, where problems do arise, help consumers to pursue and resolve complaints. If these services are not available free to consumers, many vulnerable and disadvantaged consumers may not be able to make complaints to financial firms or escalate complaints to EDR – and may turn to paid debt management firms.

At times, the predecessors of AFCA have seen gaps in the availability of financial counselling services and consumers have indicated that they have encountered long delays when accessing these services. When financial counselling is not available, or only available after long delays, consumers’ financial problems are exacerbated and their personal wellbeing suffers.

Financial counselling services form a crucial part of the infrastructure of our financial sector. They provide benefits by, for example:

  • •helping consumers to resolve financial problems and complaints – alleviating issues that can cause real hardship
  • •promoting financial capability
  • •reducing the risk that vulnerable and disadvantaged consumers will be targeted by predatory businesses.

Given the important role that financial counselling services play in the financial sector generally, and in EDR in particular, AFCA supports measures to ensure these services are funded adequately now and in future. We recommend the Government, industry and the community sector work together to develop a sustainable funding model for financial counselling services.

In the UK, debt counselling is provided under the auspices of the Money Advice Service. The service is funded from a levy collected by the FCA from firms that it regulates. Such a model could be considered as an option in Australia.

Personal Insolvency Professionals Organisation - Senate Inquiry

It is appropriate that adequate government funding be allocated to ensure that free financial counselling is available for those who are truly unable to afford to pay for any form of financial assistance.

Professor Ian Ramsay, Assoc Prof Paul Ali and Ms Lucinda O'Brien

We see extremely high value in the work of financial counsellors, borne out by our empirical studies of Australian financial hardship schemes and the personal insolvency system.

Our recently completed studies of financial hardship and personal insolvency have explored the nature of financial counsellors’ work with financially distressed Australians. These studies have shown that financial counsellors perform a vital role. At the same time, they show that financial counsellors are currently unable to meet the demand for their services.

(a) Financial hardship We have recently completed a research project, funded by an Australian Research Council Discovery Grant (DP140101031), entitled The Legal and Social Dimensions of Financial Hardship in Australia: Implications for Legal, Regulatory and Policy Frameworks. Our project involved an analysis of the legal protections available to Australians suffering financial hardship. It also entailed an empirical study of how these protections operate in practice. Between 2014 and 2018, we conducted surveys of, and focus group interviews with, financial counsellors and other professionals providing advice and advocacy services to consumers in financial hardship. We also carried out a survey of 1,100 Australians who recently found themselves unable to pay one or more debts when they fell due.

These studies yielded strong empirical evidence that financial counsellors play an important role in assisting low income consumers to exercise their rights under Australia’s legal hardship protections. These protections allow consumers in financial hardship to negotiate repayment arrangements with creditors, with the aim of enabling them to avoid enforcement action, energy disconnection, and in the most serious cases, bankruptcy. Consumers who negotiate directly with their creditors often obtain less favourable outcomes than those who are represented by a financial counsellor. Many consumers are unaware of their right to seek hardship assistance. Even when they do contact their creditors to discuss their financial difficulties, they are frequently pressured into accepting inflexible and unaffordable repayment arrangements. A large part of financial counsellors’ work involves renegotiating repayment arrangements after they have broken down, either because the consumer was unable to make scheduled repayments, or because the repayments have left the consumer with insufficient income to cover food, heating, medical care and other essentials.

The financial counselling sector needs more funding, so that more consumers in financial hardship — particularly those on low incomes — can receive timely, impartial assistance to resolve their existing debt problems and to avoid becoming further indebted. At present, many consumers — particularly Indigenous Australians and recent migrants and refugees from non-English-speaking backgrounds — are unaware that financial counselling services are available free of charge. Yet demand for these services continues to exceed supply, with consumers waiting weeks to secure face-to-face appointments with financial counsellors. Additional funding is also needed to allow financial counsellors to be integrated into community organisations providing mental health, family violence and other support services. Consumers presenting to these services are often dealing with debt problems.

These findings are discussed in detail in the following publications:

  • Evgenia Bourova, Ian Ramsay and Paul Ali, ‘The Experience of Financial Hardship in Australia: Causes, Impacts and Coping Strategies’, Journal of Consumer Policy, online edition, 2018 (available at .
  • Paul Ali, Evgenia Bourova and Ian Ramsay, ‘The Role of the Legal Hardship Protections in Coping with Debt Problems: Insights from a Survey of Consumers’, 2016, Competition and Consumer Law Journal, Vol. 24, No. 2, pp. 77-100 (available at
  • (b) Personal insolvency We have also recently completed a major empirical study of Australia’s personal insolvency system, funded by an ARC Linkage Grant (LP130101022: Evaluating Australian Personal Insolvency Laws in the Context of Changing Demographics and Increasing Financial Stress). In the course of this project, we conducted an evaluation of on-site financial counselling services offered to self-represented debtors in the Bankruptcy List of the Federal Circuit Court, as part of a pilot project. This evaluation involved a formal partnership with the Federal Circuit Court and the Federal Court of Australia. It entailed a written survey of self represented debtors, completed at the Court; an online survey of legal practitioners representing creditors in the Bankruptcy List; focus groups with financial counsellors and three Deputy Registrars of the Court; and the analysis of data and case notes compiled by Court staff.

    This study found that the work of financial counsellors provided significant benefits to self represented debtors. The financial counsellors at the Court helped some debtors to establish solvency, when they may otherwise have been made bankrupt. They also helped other debtors to identify bankruptcy as a positive step for them, in their circumstances, reducing the emotional distress that would otherwise have attended the process. Irrespective of the outcome, access to financial counselling enabled debtors to understand the nature of the bankruptcy proceedings and to participate meaningfully in the Court hearing. In this way, the financial counsellors significantly increased both the procedural fairness and the efficiency of hearings in the Bankruptcy List.

    This study identified the need for greater support for self-represented litigants in the bankruptcy system, including greater access to on-site financial counselling services. It informed the Federal Circuit Court’s decision to continue the project beyond the pilot stage and to implement on-site financial counselling in other courts around Australia.

    The results of this study are reported in the following article:

  • Paul Ali, Lucinda O’Brien and Ian Ramsay, ‘Financial Counselling and the SelfRepresented Debtor in the Federal Circuit Court Bankruptcy List: An Analysis of a Recent Pilot Service’, Insolvency Law Journal, 2015, Vol. 23, No. 4, 161-180 (available at