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The credit repair industry should be regulated by ASIC and be legally required to act in clients’ best interests, according to a new report.
A report published by the Consumer Action Law Centre and Melbourne Law School has called for sweeping reform to the credit repair industry to ensure clients are better protected.
One concern raised by the report was that the “high fees” charged by credit repair companies can compound their clients’ financial problems rather than solving them.
Another concern was that the new credit laws introduced in March have allowed credit bureaus to collect more information, which has in turn made it more likely that errors will appear on credit reports and that people will have to turn to credit repair companies.
The report recommended the introduction of an ASIC-administered licensing and reporting regime to eliminate “rogue operators”.
“A licensing regime would impose clear duties on credit repair companies, such as a duty to act in the client’s best interests,” according to the report.
“It would also require credit repair companies to belong to an ombudsman scheme, allowing clients to lodge complaints without having to go to a court.”
The report also recommended a prohibition on up-front fees and a mandatory two-week cooling-off period for all credit repair contracts.
Another recommendation was that credit repair companies should be required to publish detailed information about their fees, terms and conditions on their websites.
“A system of legal rules would promote transparency and consistency, providing the public with a clear framework for dealing with credit repair companies,” it said.
[Related: Is credit repair ethical?]
