Australian debt management firm accused of threatening clients with jail for ‘unnecessary purchases’ | Personal finance

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Australia’s second-largest debt management company has made threats against its customers, including telling them they could go to jail if they spend money at McDonald’s, the companies regulator said.

In documents filed in federal court on Tuesday, the Australian Securities and Investments Commission accused A&M Group, which operates as debt negotiators and advertises itself as a “reputable debt aid company that uses our knowledge and expertise to help you get out of debt “. break the law by harassing or forcing customers.

This included contacting people ‘s relatives and workplaces “to embarrass or intimidate” customers, as well as pressuring them with threats of bankruptcy or criminal prosecution over the phone, Asic said.

Debt management companies offer to help people who are struggling to pay off their personal debts, including loans and credit cards, usually by consolidating what is owed into one loan or by making an agreement with them. creditors to repay a reduced amount.

In return for entering into such an agreement, companies receive a percentage of what their customers pay their creditors.

In its federal court filings, Asic said Debt Negotiators was “the second largest of 34 debt agreement administrators registered in Australia and administers around 5,060 debt agreements, representing around 14% of the market. “.

Asic accuses the company of having misled and deceived six customers, including telling them that creditors were investigating their accounts for non-payment “in order to consider legal proceedings” such as bankruptcy and fraud charges “” .

The statements were not true, but were instead based on models used by the company, the regulator said.

Asic also claims that four clients were told their debt agreements would be terminated unless they paid $ 1,000 that day.

The regulator alleges that debt negotiators contacted a client, LH, and his relatives, by text and phone seven times between September and December 2018.

In a phone call with LH on December 7, 2018, an employee of Debt Negotiators reportedly said that the debt agreement was about to be terminated and that LH could be forced into bankruptcy, meaning that “someone ‘one will literally take care of your expenses with a fine tooth comb’.

“If they feel you can afford your debt contract, if you’ve shopped at McDonald’s, if you’ve made unnecessary purchases, you know things you don’t need, you can potentially be sent to prison, ”said the Debt Negotiators employee. said, according to a transcript of the conversation filed in court by Asic.

“This is a very real situation, which you have to take into account, you have small children, I think it is not a joking situation,” the employee continued.

In some cases, according to Asic’s claims, clients have learned that debt negotiators “may need to contact friends, family, neighbors, workplaces, or even homeowners.”

“We don’t like to go that far, but if that’s what it requires, we’ll have to resort to it,” company staff reportedly told customers.

Asic asked the court to fine the company and declare it had broken the law.

Company and regulatory records show that the sole director of The debt negotiators are Ahmed “Adam” Ibrahim, from Sydney Oatley suburb.

The company and Ibrahim have been contacted for comment on Asic’s claims.

Asic first expressed concerns about the debt management industry in 2016, when research commissioned by the regulator found that the fees charged by companies were opaque and difficult to assess.

He also said fees were often billed up front by being billed before services were provided and some companies used high-pressure sales techniques. Guardian Australia understands that debt negotiators were not named in this research.

As many as 1.9 million Australians paid debt management companies for help in 2020, according to a report released by the Consumer Action Law Center (Calc) in December which described the industry as ” debt vultures ”.

Calc CEO Gerard Brody said it was “great to see Asic take this step”.

“People have also complained about this matter to our center,” he said.

He expressed concern over Asic’s claims that debt negotiators threatened to contact relatives of clients.

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“The conduct in the claim is horrible,” he said.

In its December report, Calc said the industry was largely unregulated and called for protections similar to those in the UK, where advice must be in the best interests of the client and tailored to their circumstances.

Up-front charges should also be banned, Calc said.

As of July 1 of this year, debt management companies are required to hold a credit license and be a member of the Australian Financial Complaints Authority program – the changes, Calc says, haven’t gone far enough .

Debt Negotiators fulfills both obligations, according to its website.

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