Easy Money - But What's The Catch?
Sydney Morning Herald
Wednesday July 22, 1998
EASY credit is one of the hallmarks of our society, but usually if you have a bad credit rating or are unable to pay debts, credit cannot be had. But financial counsellors have growing concerns about the rise of so-called "credit repair" businesses.
These are businesses advertising that they can get you credit even if you have a bad credit rating, or if you are bankrupt, or if you are a pensioner. In fact, they target people in this position.
They target customers who feel that a refinance or more money would assist them through a difficult time, "if only they could clear their credit rating", says Narelle Brown, president of the Financial Counsellors' Association of NSW.
Michael Funston, from the Consumer Credit Legal Centre, says he has heard of such cases from its advice lines as well, and he is aware of least two cases involving fraudulent activity.
While he doesn't know if it happens in all cases, he says there was one case in which a person was encouraged to apply for a credit card, with a small limit, in her maiden name.
"There is presumably no credit history in that name," he says. "They are then told to use those funds and put them in a bank account and then make an application for a bigger loan to that [lending] organisation. This is what one client said a friend did. She said it had worked."
That is not to say people with several loans or debts should not look into consolidating them. It may be a good idea, especially if some of your borrowings have been taken out at high interest rates, and you can put all your debts together at a lower rate.
But if you are at the stage where no financial institution will lend you the funds to consolidate your debts through the normal channels, it may be time to see a financial counsellor.
Funston agrees. He says the people taken in by these schemes are people who are up to their eyes in debt. "These loans wouldn't have been approved in the normal course of events," he says.
While it is a judgment call as to how much the people applying for credit are involved in fraud themselves - after all, they must have been aware they were applying for credit in a false name - he says they should not get all the blame; the operators of such businesses are exploiting people who are usually in a desperate situation.
"Some people are ignorant of what is right and what is wrong, and what is legal, and if they walk into a well-appointed office and someone in a suit tells them it is OK to do it, they will get caught up in it without fully understanding what is going on," he says.
Brown agrees. "Some clients are being advised to change their name - they think if they change their name that they don't have the responsibility of the debts acquired in their own name," she says.
"Of course, this is ludicrous. If you change your name, it is your responsibility to advise all cred-itors of this fact and it does not stop creditors from chasing you for the money."
She says court proceedings have started on a number of businesses.
News of one of these court proceedings has come from the Australian Competition and Consumer Commission. The commission says it has obtained interim Federal Court orders to prevent the advertising of a personal loans facility aimed at people such as penioners, bankrupts and people who
otherwise would not get credit.
Brown says she knows of some people who are paying hefty telephone call charges on 1900-type numbers - some are $5 a minute - to listen to an advertising spiel that tells them of the many ways they may be assisted in obtaining finance.
Other credit repairers offer to clear your credit rating for $500.
Of course there is no such way they can do so, she says.
"Don't be conned," Brown says. "Don't pay $500 to obtain a credit report that you can get for free from the Credit Reference Association of Australia."
She says people who have been taken in should contact the Department of Fair Trading's legal section or the Financial Counsellors' Association on 98581377.
"It would be worthwhile to know how many people have been affected by these unscrupulous operators," she says.
CREDIT REFERENCE ASSOCIATION: Collects credit data on borrowers. Phone 133124 to check your records.
© 1998 Sydney Morning Herald
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