NAB has had more than 150,000 customers seek financial hardship assistance so far this year – a big increase from 20,000 in 2019. About 9 per cent of approaches for assistance are made on behalf of the customer by a debt management provider but the bank is about to get tough with the “credit repair” sector.
NAB announced yesterday that it will no longer deal with unlicensed fee-charging debt management companies.
NAB group executive personal banking, Rachel Slade, said the bank wanted to protect customers from the possibility that by using a credit repair service they will end up in a worse position financially.
Slade said the bank would promote free financial counselling services such as the National Debt Helpline, Way Forward Debt Solutions and other not-for-profit services.
It will also promote the NAB Assist team, which can help distressed customers with grants, low-interest loans and other support measures.
Slade said many for-profit providers do not hold an Australian financial services licence or Australian credit licence, despite often appearing to provide services that require a licence.
The role of credit repair companies has long been controversial. Earlier this month, the Australian Financial Complaints Authority used its power to exclude credit repair companies and other paid representatives for the first time, banning MCR Partners from lodging complaints on behalf of consumers and small businesses.
AFCA did not spell out the reasons for the ban but its rules allow it to take action where “the agent is engaging in inappropriate conduct which is not in the best interests of the complainant.”
A number of submissions to the 2014 Financial System Inquiry criticised credit repair companies for charging high fees to deal with matters that could otherwise be done free of charge, for promising to fix things they could not fix (such as default filings in credit reports) and for making the process of external dispute resolution more litigious.
In 2015, Ian Ramsay, Paul Ali and Lucinda O'Brien from the Melbourne Law School published a review the credit repair industry, arguing that the sector should be regulated.
And in 2018, ASIC issued a warning to consumers about companies that claimed they could fix a poor credit rating, saying credit repair and debt management companies charged high fees and often failed to fix credit issues.