Sector News

Here you’ll find the latest news relevant to the Financial Counselling sector and other related items.

10 April 2018

Australia takes from the poor to give to the rich

Source: www.canberratimes.com.au/national/australia-takes-from-the-poor-to-give-to-the-rich-20180404-p4z7sn.html

Last year, as the government prepared another round of welfare crackdowns, Minister Michaelia Cash said she expects “that those who can work should work and our welfare system should be there as a genuine safety net, not as something that people can choose to fund their lifestyle.”

The subtext was clear – those who need help are a drain on the rest of us.

This rhetoric is familiar, but it is wrong. It is the wealthiest Australians who enjoy the most support.

Research commissioned by Anglicare Australia shows that each year, a staggering $68 billion is spent keeping the wealthiest households wealthy. That is greater than the cost of Newstart, disability support, the age pension, or any other single welfare group.

The Cost of Privilege report, prepared by Per Capita, models four household types to show how these concessions and tax breaks work. One of the couples we modelled, Tim and Michelle, own their own home. They have two children in private schools, top health insurance, and two investment properties. Michelle doesn’t work, and Tim runs a small business. Each year, Tim and Michelle get $99,708 in concessions from the taxpayer, or $1917 per week. That is well over twice as much as a couple with two children on Newstart, and nearly three times as much as a family with one parent on the Disability Support Pension. Tim and Michelle do this by getting concessions on their superannuation, negatively gearing their investment properties to minimise their taxable income, and getting tax breaks for private schools and private health insurance. They also get generous Capital Gains Tax exemptions.

Each year, thousands of Australia’s wealthiest households profit from these loopholes and subsidies. Our report finds that tax exemptions on private healthcare and education for the wealthiest 20 per cent cost more than $3 billion a year. Superannuation concessions to them cost over $20 billion a year, and their Capital Gains Tax exemptions cost an astonishing $40 billion a year. Compare that to the annual cost of Newstart, which comes in at just under $11 billion a year.

Importantly, nothing that Tim and Michelle are doing is wrong or illegal. This is not a broken system. It is a system working exactly the way it was designed to work, supporting the wealthiest at the expense of the rest of us.

These numbers tell us that something has gone badly wrong. The eighties were the decade of trickle-down economics, where taxes were cut for the richest with the promise that everyone else would soon feel the benefits. But now it’s worse – we’re in an era of trickle-up economics where subsidies, tax breaks and concessions for the richest are paid for by everyone else.

At the same time as some people are enjoying generous support because of their wealth, those who have the least are being targeted. Parliament has just passed a set of welfare crackdowns that will include a demerit system for Centrelink recipients, expanding the cashless welfare trial, penalising job seekers who miss appointments, and forcing people to run down their bank account before they can seek help.

Other changes mean that personal crises, like relationship breakdown or a family death, can’t be considered when people have problems completing their paperwork. And to top it off, hundreds of millions of dollars is being cut from social security.

All of this shows us an uncomfortable truth. We have become a country that cuts from the poorest to give to the richest – a fact borne out by the government’s obsession with corporate tax cuts.

Some parts of the media have taken issue with the report, but they have missed the point. Anglicare Australia has never said that we should abolish all concessions and subsidies. We are simply making the point that if we can afford to forego such staggering amounts of money to support the very wealthiest people, then we can afford to support those doing it tough too.

If we want to tackle inequality in Australia, the answer is simple. First, we need to end the trickle-up economics by winding back some tax breaks to the very wealthiest people. Next, we need to lift income support. The OECD has already warned that our income support payments are far too low. They are being outstripped every year by the cost of living.

And finally, we need to stop demonising people who need help. Cutting from the poorest must stop.

It is well past time that we end the trickle-up economics, and build a tax system that works for everyone.

Kasy Chambers is the executive director of Anglicare Australia.

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9 April 2018

Consumer Groups call for tougher penalties, ban on broker commissions in submissions to Royal Commission

Source: Consumer Action Law Centre, CHOICE and NSW Legal Aid today published submissions in response to the first round of hearings before the Royal Commission into Misconduct in the Banking, Superannuation and Finance Sector on consumer lending and add-on insurance

Consumer Action Law Centre (Consumer Action) argues in its submission (available at: https://policy.consumeraction.org.au/2018/04/03/submission-on-round-1-hearings/) that directors of the big banks may have breached their director duties under the Corporations Act by failing to have systems in place to prevent systemic breaches of financial services law.

It submits that the case studies of Robert Regan, Irene Savidis and Nalini Thiruvangadam involved numerous breaches of the law which were systemic in nature. Consumer Action is concerned that similar breaches might have affected hundreds of thousands if not millions of other people. Mr Regan, Ms Savidis and Ms Thiruvangadam are represented by Consumer Action.

The submission also covers the need for:

increased penalties to ensure banks cannot profit from misconduct (including disgorgement of benefits illegally obtained, and fines of up to 10% of annual turnover);
better compensation for victims of banking misconduct where banks breach irresponsible lending laws;
stronger powers and more resources for the Australian Securities and Investments Commission to enforce the law;
banks to take responsibility for the sales practices of their brokers and other salespeople; and,
funding for free legal advice and financial counselling to assist victims of misconduct.

CHOICE’s submission (available at: https://www.choice.com.au/consumer-advocacy/policy-submissions) concentrates on mortgage brokers and other intermediaries, including:

unacceptable risks created by conflicted incentives structures;
inadequacy of self-regulation;
the need for a ‘best interests duty’ for brokers;
the limitations of disclosure; and
risks of outsourcing the sales process and improper financial advice.

NSW Legal Aid, Financial Rights Legal Centre (Financial Rights) and Financial Counselling Australia (FCA) echoed calls by CHOICE and Consumer Action for improved responsible lending practices and tougher penalties for misconduct. Financial Rights Co-ordinator Karen Cox was the first witness to appear at the Royal Commission consumer lending hearings, providing evidence of the harm that results from irresponsible lending.

Quotes attributable to Gerard Brody, CEO Consumer Action Law Centre:

“Accountability of boards and senior management is essential to improving banks’ lending practices. We are urging the Royal Commission to consider whether bank directors have breached directors duties of care and diligence by failing to have systems in place to prevent systemic misconduct. Breach of director duties can result in individual fines and even disqualification.”
“There needs to be tougher penalties and better compensation for customers when banks break the law. Irresponsible lending can ruin people’s lives, and often those who pay the highest price are those least able to afford it. Wavier of debt, and release of security, is appropriate where lenders breach irresponsible lending laws.”

Quotes attributable to Alan Kirkland, CEO CHOICE:

“The promises that mortgage brokers make simply don’t match reality. Too often we’ve seen easy profits and self-interest put ahead of the interests of people”
“Mortgage brokers should be required to provide advice that is good for their clients. That’s simply not the case now.”
“We also need to put an end to a model that’s driven by sales commissions. If mortgage brokers are providing a good service, then consumers will have no problem paying for it. Hiding commissions hides the true cost of a mortgage and leads to conflicts in the advice consumers receive.”

Quotes attributable to Brendan Thomas, CEO Legal Aid NSW

“Too often, when brokers and bankers do the wrong thing, it’s ordinary families who face the consequences.”
“We see people through our doors every day who have been devastated by debt and are trying to pick up the pieces. The financial services industry can do better.”
“Legal Aid NSW strongly supports a ‘best interests’ test for brokers, to be enshrined in law. The community rightly expects that where a broker is acting on behalf of a customer, the broker will act in the customer’s best interests. A best interests test is a straightforward move that would help safeguard consumers’ rights.”

Quotes attributable to Karen Cox, Co-Ordinator Financial Rights

“We see the harm caused by irresponsible lending every day at our organisation. Irresponsible lending can lead to serious financial and emotional stress, family breakdown and going without essentials like rent and food.”
“During the hearings, we saw evidence of banks failing Australians throughout the customer journey. From the design of dangerous financial products to inadequate dispute resolution, Australian bank customers have been getting a raw deal.”

Quotes attributable to Fiona Guthrie, CEO Financial Counselling Australia

Financial counsellors provide a lifeline to Australians who have been given loans they cannot afford.
Financial counsellors provide independent, free advice to those who are trying to get their debts under control.

CHOICE, Consumer Action, Financial Rights and FCA are available for comment.  We also have clients available to share their stories.

The next round of hearings will commence before the Commission on 16 April 2018.

MEDIA CONTACT: Mick Bellairs, media@consumeraction.org.au, 0413 299 567

 

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13 March 2018

FCA publishes 2017 Rank the Banks Report

Financial Counselling Australia, in partnership with the State financial counselling associations, has released the 2017 Rank the Bank Reports

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8 March 2018

Commbank dumps junk – Consumer Credit Insurance (CCI) scandal must end now: Consumer groups

Junk insurance sold with credit cards and loans is on its deathbed according to consumer groups (Consumer Action Law Centre, Financial Rights Legal Centre and Financial Counselling Australia). The comments follow today’s announcement that Commonwealth Bank will stop selling Consumer Credit Insurance (CCI).

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6 March 2018

Jubilee Debt Campaign seeks £40bn write-off of consumer borrowing

Charity behind Drop the Debt initiative in Latin America and Africa turns attention to Britain

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6 February 2018

Welfare crisis payments cover rent-to-buy plans

WELFARE recipients are turning to taxpayers for emergency cash because rent-to-buy schemes are taking up to 35 per cent of their payments, consumer groups warn.
In a statement, the Department of Human Services said that it would introduce changes once the Turnbull Government passed legislation
– laws it promised last year.

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18 January 2018

Centrelink gave companies accused of exploitation direct access to welfare payments

Centrelink has given companies accused of exploitation and misconduct direct access to welfare recipients’ money through its automated debit system.
The companies were granted access to the Centrepay system, which allows Centrelink to deduct money from welfare payments to pay approved businesses early.

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9 January 2018

Payday lenders ask customers to share myGov and banking passwords, putting them at risk Payday lenders ask customers to share myGov and banking passwords, putting them at risk

Payday lenders are asking applicants to share their myGov login details, as well as their internet banking password — posing a security risk, according to some experts.
It also goes against the advice of the government website.Payday lenders are asking applicants to share their myGov login details, as well as their internet banking password — posing a security risk, according to some experts.
It also goes against the advice of the government website.Payday lenders are asking applicants to share their myGov login details, as well as their internet banking password — posing a security risk, according to some experts.
It also goes against the advice of the government website.

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12 December 2017

Government to review rules for early release of superannuation, including victims of crime compensation

The Turnbull Government has announced that Treasury will review the current rules governing early release of superannuation on grounds of severe financial hardship and compassionate grounds.
It will also review whether, and the circumstances in which, superannuation assets should be available to pay compensation or restitution to victims of crime.

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20 November 2017

Red Balloon pays penalties for excessive credit & debit card surcharges

Source: Australian Competition and Consumer Commission (ACCC)

We recently issued 4 infringement notices to Red Balloon Pty Ltd for charging four of its customers excessive surcharges when making either credit or debit card payments. Red Balloon has paid the penalties totalling $43,200 for alleged breaches of these new laws.

Since 1 September 2016, a ban on excessive surcharges applied to large businesses in Australia. Red Balloon is classified as a ‘large business’. This ban now applies to all businesses both large and small.

The ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

As a business, you can only charge what it costs you to accept the payment when your customers are paying with card. Essentially the only costs businesses can include are external costs charged to you by your financial provider. You are responsible for determining the cost, which you can get from your financial institution.

Remember all businesses risk being investigated if they impose excessive surcharges.

Read our guide on payment surcharges to find out more about requirements for businesses.

For more information see our media release: Red Balloon pays penalty for excessive payment surcharges

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