There was about $50,000
in credit card debts. Electricity company, gas company… There are over $20,000
worth of traffic fines. People are in really
vulnerable circumstances. They’re overloaded with debt,
they’re wanting to get a solution. I think the debt agreement industry
is actually doing a really good job. It was a very money-driven company and the bonuses were very generous. I’ve been a chef from pretty much the time I left college. Started an apprenticeship,
like most people do, young. You know, I love what I do. I was 19 when it started. Marc Solder
lives in Chigwell, Tasmania. He’s worked hard
his entire adult life. But when he
was just starting out, at 19, he did something that
almost derailed his entire future. So, I applied for a credit card. I think I started with $1000 limit. Started going out with mates, buying new clothes,
little trips away. And then you start
tapping out that first card. And then you start
applying for the second card. And it just all, sort of,
just went down from there. Marc was young,
with huge debts he couldn’t repay, and too embarrassed
to tell those close to him. I had family that could have
lent me the money, but the shame stopped me
from asking for that help. And, yeah, at the lowest point,
yeah, you’d cry sometimes, because you didn’t know
what else to do. ‘One thing saved us, a phone call…’ Then one day,
Marc saw an ad on TV that seemed to offer
an easy solution. ‘They looked at our situation ‘and they tailored a plan for us
that’s working…’ The ad was for a company
called Fox Symes. They offer the promise
of getting out debt. And one way they do this is through
what’s known as a debt agreement. Just like that, they were debt free. Without having to worry about,
you know, a phone call from someone chasing some money. A debt agreement combines
all your debts into one lump sum that can be paid off over
up to five years. The creditors stop calling ..as they’re getting
their money back. And if you stick to the agreement, you won’t have to worry
about losing big assets like the family home. Marc thought
this sounded pretty good, initially. You ring up and the person I got,
female, you know, your best friend and they sell it
as rainbows and unicorns. No mention of that it is, in fact,
a part-nine bankruptcy. The reality is that a debt agreement is a form of bankruptcy. It puts a black mark on your credit rating for up to five years and you could have trouble applying for certain jobs. The weekly repayments can be high… and the company charges it’s own hefty fees. Fox Symes only took
into account the debt, and didn’t care that $185 a week was leaving me with nothing. Marc’s debt woes are not uncommon. Australians now have around
$2.4 trillion in personal debt. That’s about $100,000 each. Debt agreements
are increasingly popular. The market has grown
over 9% in the past year. A debt agreement creates
a lot of certainty for the client. Ben Paris is a board member of
the insolvency industry’s peak body. He also works for DCS Group, another big provider of debt agreements. A debt agreement, in general, has a definitive payment, a definitive time frame, in which the person has to fulfil those obligations and they no longer have to liaise with their creditors. You have a minority of cases where it doesn’t work out for the debtor. Debt help. But consumer rights groups say companies are over-selling debt agreements and misleading vulnerable consumers. They say, consolidate payments,
avoid bankruptcy. Rather than saying,
well, actually, this is insolvency. Gerard Brody heads up
the Consumer Action Law Centre. He says debt agreement companies
are fundamentally conflicted. They get paid when they put you
into a debt agreement. They don’t get paid to offer you other sorts of advice or options. So, for example, it might be that bankruptcy is a better option for you. Means you don’t have to pay back
your debts at all. Although, there are consequences. Or it might be better to negotiate
directly with your creditors. When you call the number
on the advertisement, like Marc did, you get put through
to a customer service rep. The Feed reached out
to a number of people who’ve worked in this role
at debt agreement companies. Most admitted they had concerns. Only one would appear on camera. Individually, you have your own KPIs. And then as team, you’d have a team KPI. So, there was always pressure. ‘One thing saved us, a phone call…’ Jenny worked for Fox Symes, the company that signed Marc up
to a debt agreement. They’re the biggest provider
of debt agreements in Australia. But earlier this year they were fined
by the financial regulator for misleading advertising. Jenny says it was effectively
a sales position. You would need to have a certain amount
of debt agreements per month. And you’d be given a bonus. And that bonus often
was over $1000. Jenny says,
the KPIs and bonuses lead many to aggressively push
debt agreements. You give them
all the good things about it, but you really just don’t mention too much about the reality of actually being in one. The Feed reached out
to Fox Symes for an interview. They declined,
but in a statement said… They don’t “push” debt agreements and that only 3.7% of those who contacted them agreed to go ahead with one. Ben Paris says,
while there are KPIs and bonuses, they aren’t compromising
his industry. There’s a whole process
that goes about prior to the person entering
into a debt agreement. Most organisations
will go through a process where the debtor is informed at least
three times of the consequences. The case for mis-selling is much less in the personal insolvency space than I think it is
in other industries. But Jenny says,
at the end of the day, she didn’t feel qualified
to be sorting out people’s finances. I’m not a qualified
financial counsellor and I’m here talking about… You know, this person who’s calling up and is putting their life in your hands to make the decisions for them, almost. So, if you’re struggling with debt
and want truly independent advice, where can you go? The program I’m thinking of,
with the fines, means that you cancel
the payment arrangement. We can take care of that
with a program. Two years ago, when Susan first
walked into this office, she was in a world of trouble. Her husband had walked out, leaving $40,000 worth of debt
on her shoulders. I really, at that point in time, it was only a feeling
of fear that I had. Nothing else. She sat down with Maria Turnbull, a financial counsellor
with the Salvation Army. This is a 100% free service. We were able to work through
one at a time, and negotiate payments
that I could afford. There were some credit card debts
that were waivered, after a lot of discussion. Yeah, I’ve got a name… Financial counsellors
can negotiate with creditors and work out a payment plan. They can also look at whether or not the original money was loaned
inappropriately. Many times I’ve called
creditors and debt collectors and just said, I’m not happy with how you’ve been doing this. And I’ve threatened ombudsmen schemes. I don’t give up. I will fight tooth and nail
for my clients. I will advocate strongly for them. I was, like, at the end.
I really was. She didn’t judge. She didn’t do anything. She just said
“We can do this together.” Parliament has just passed new laws
that are meant to address some of the concerns
around debt agreements. The new laws reduce the timeframe
from five to three years. And prevent repayments
going above what someone can afford. But consumer action groups
don’t think they go far enough. There are quite a few loopholes. We are concerned
that debt agreement administrators which can be quite canny
with their businesses will find ways to get around. Back in Hobart,
Marc is now on top of his debts. He just wishes
he’d gone about it another way. I found out afterwards,
if I’d approached lots of the financial institutions
I was involved with, they would’ve frozen things for me,
they would’ve set up a payment plan. People do get in trouble.
Don’t be embarrassed. Ask for help from the actual people
and companies involved.