One of Australia's big banks has cracked down on "debt vultures" - businesses or individuals that claim to assist those struggling with debt but actually rake in big fees.
National Australia Bank said it will no longer deal with unlicensed, fee-charging debt management provides.
"Debt vultures exploit loopholes in the law to prey on the vulnerable and target those in desperate need," Consumer Action Law chief executive Gerard Brody said.
"All banks should follow NAB's lead and stop dealing with debt vultures if they care about their customers."
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Many for-profit debt assistance providers do not hold a current Australian financial services (AFS) licence or Australian credit licence from ASIC, despite often appearing to provide services that require a license.
Now there are suggestions debt management and credit repair firms held to the kind of regulatory and ethical standards financial advisers are held to.
The Consumer Action Law Centre wants these debt assistance providers to have membership with the Australian Financial Complaints Authority to be compulsory and for these firms to be licensed by regulators.
"We often hear from Australian families wooed by these 'debt vultures' with promises of fixing their credit report, wrangling their debts, and taking away financial worries. And all too often, these promises are just pure fiction," Brody said.
"With growing financial difficulty due to COVID-19, business will be booming for debt vultures."
NAB said that in 2019 20,000 of its customers sought financial hardship assistance and about 9% of those engaged debt management providers that charged fees.
So far in 2020, NAB has already seen 150,000 customers seeking assistance - raising concerns about how many would seek debt management help from fee charging providers.
"As more Australians seek help it is important that we no longer deal with unlicensed, fee-charging debt management providers," NAB group executive, personal banking Rachel Slade.
The bank wants to direct customers to its own services to assist with financial distress without charging fees.
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