Consultation: Unacceptable conduct by representatives of complainants

Consultation: Unacceptable conduct by representatives of complainants

The Credit Ombudsman Service Limited (COSL) previously sought comment from industry and consumer bodies in relation to its proposal to limit access to its services by paid representatives acting on behalf of consumers. Under the previous proposal, COSL would not deal with a paid representative unless they were a lawyer, an accountant, a specialist adviser or a guardian, trustee in bankruptcy or executor of the complainant.

Both industry and consumer groups were very supportive of the previous proposal, but there is a view that the proposal should target the conduct of a representative, rather than the fact that the representative operates on a cost-for-service basis. Further, the previous proposal may have been inconsistent with the intent of recent changes to privacy laws which require complaints to first go to a dispute resolution scheme before they are referred to the Office of the Australian Information Commissioner.

In view of this, COSL is again seeking comment from industry and consumer bodies in relation to a revised proposal. The revised proposal is aimed at those 'credit repair', 'credit fix' and 'debt solution' companies which engage in inappropriate conduct and to whom consumers pay significant amounts of money to access a dispute resolution service that is available to them without charge.

Comments should be sent to by close of business Friday 29 August 2014.

COSL intends to introduce a guideline (guideline) which sets out a number of circumstances in which COSL will not deal with a representative and, instead, deal directly with the consumer. These are where the representative engages in any two of the following, after due warning:

  • obtaining a financial benefit from the complainant for performing a service (such as, seeking to have a default listing corrected or removed, or negotiating a debt settlement) that can be readily accessed by the complainant free of charge and not being able to demonstrate that that the complainant was adequately informed (for example, via the representative’s website) that the complaint can be dealt with by COSL (or other appropriate external dispute resolution scheme) at no cost to the complainant,
  • obstruct or unreasonably delay COSL’s process,
  • make unreasonable decisions on the consumer’s behalf – for example, a decision which increases, or is likely to increase, the consumer’s liabilities,
  • not inform the consumer of all available options, offers of settlement, offers of hardship assistance or other proposals by the financial services provider or COSL,
  • engage in a deceptive or misleading manner in their engagement with the consumer, financial services provider or COSL,
  • ask COSL to enquire into or investigate matters that the representative knows or ought reasonably to know are irrelevant or lacking in merit, 
  • not inform the consumer of the potential risks and consequences of a course of action the representative is pursuing, or
  • otherwise act contrary to what is in the consumer’s best interests (for example, imposing a contractual term in any agreement between the complainant and the representative that has the effect of prohibiting, discouraging or hindering the complainant from dealing directly with COSL).

The above broadly replicates the approach adopted in the ACCC/ASIC Guidelines on when a debt collector may bypass a debtor’s representative and approach the debtor directly. 

The guideline will not prevent or in any way affect access by an unpaid representative acting on behalf of consumers, such as community legal centres, financial counsellors and Legal Aid offices.

Nor will consumers be disadvantaged if COSL ceases to deal with their representative. Consumers will be invited to submit their complaint directly to COSL or elect to be represented by another representative. 

If COSL finds that the representative continues to act inappropriately despite being warned not to, COSL may cease dealing with the representative in relation to all other complaints made to COSL by the representative and also decline to accept any future complaints made to COSL by the representative.

COSL will only deal with the representative again if it is able to demonstrate that it will no longer engage in the inappropriate conduct and has taken such steps as COSL considers may be appropriate.

The proposed guideline can be viewed here.