CIF Discuss Reckless Credit Investigations
The Credit Industry Forum (CIF) is chaired by the National Credit Regulator and has representatives from Credit Providers and Debt Counsellors, as well as, consumer groups. They meet regularly to look into areas of debt counselling and debt review that are not clearly explained or defined in the National Credit Act (NCA) and Regulations. They also meet from time to time to look into how to implement certain requirements of the NCA & Regs.
One such topic which has been discussed over time is that of Reckless Credit.
Reckless credit is where consumers are given credit incorrectly. It may be that the consumer could not really afford the credit, did not receive all the required information about the credit or really understand the obligations they were taking on.
At present, the CIF is trying to help shape policies that credit providers and Debt Counsellors use in considering reckless credit (this has been going on for a while).
One area of concern that credit providers have is that some Debt Counsellors are asking them for information on every account. While this is not in itself a bad thing (the NCR suggest it in a guideline) it does make a lot of work for them that they are struggling to do within the timelines outlined in the NCA & Regulations.
Asking for such documents creates huge costs and poses huge risks to credit providers and such investigations pose a significant threat to share prices. Not asking for such information might obscure bad behaviour that has caused consumers financial harm.
‘such investigations pose a significant threat to share prices’
What credit providers would like to see is a two-tiered approach to such investigations where (1) Debt Counsellors do an initial simple investigation using math and documents provided by the consumer before they then (2) start to seriously ask the credit providers for the documents required in the NCA & Regs. They would also like to be able to complain to the NCR where a Debt Counsellor starts to bad mouth them in the press or where the Debt Counsellor is demanding documents on all accounts.
The NCR Fee Guideline Changes
The NCR has already backtracked on their suggestion that Debt Counsellors charge a fee to investigate such matters. Credit Providers hope to now see a significant reduction in such documentation requests following the NCR retracting their suggested guideline. Debt Counsellor associations are not happy that the NCR has been seen to supposedly bow to pressure from credit providers and have even threatened legal action of some sort. The topic and the fees charged has become especially debated at present.
CIF Looking For A Happy Medium
At the same time, the CIF is still trying to find a happy medium that will enable all parties to best meet the needs of consumers and reduce workload and costs for them. No easy task. To look too closely is to possibly plunge credit providers into ruin, destroying these firms and their share prices and ultimately event the economy (yup, that serious) and to totally ignore it, is to possibly promote poor lending practices by credit providers harming consumers.