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COSL proposal to prevent Credit Repair Companies representing debtors

Wednesday, July 30, 2014 - Posted by Michael McCulloch

The Credit Ombudsmen Service ("COSL") is proposing to exclude credit repair style companies from accessing COSL's free services, as authorised representatives on behalf of debtors.

A credit repair company is typically engaged by a debtor who has outstanding debts that have been listed on their credit report. These debtors are often trying to borrow. The credit repair style companies have been presenting creditors with 2 options - either remove the default listing for the outstanding debt for a relatively low cost, or, they threaten to go to the ombudsmen which costs the creditor significantly more money than removing the listing and ties up significant internal resources to liaise with the ombudsmen for what is a legitimate credit listing. Creditors have been having to weigh up the cost and benefit - the cost of removing a listing is less than $100. The cost of the ombudsman's process can exceed $1,000.

COSL's reasoning to exclude these companies is that credit repair companies acting as a representative on behalf of debtors have been regularly approaching external dispute resolution schemes such as COSL to have valid default listings removed for debts that are outstanding. The debtor is often paying these credit repair style companies large up front fees to remove default listings for outstanding debts that have a value of less than the fees paid. COSL's view of this service is that a debtor is paying a significant amount of money for a service that is supposed to be free.

In addition to this, COSL's view is that credit repair companies are not informing debtors that if a default listing is correct, it cannot be removed from their records and that the credit repair company is not always acting fully in the best interests of the debtor, often ignoring the avenue of financial hardship applications that is available and which in turn may have been the basis of the credit repairs application to the ombudsmen.

Representatives such as lawyers, accountants, trustees will still be permitted to act as authorised representatives with COSL. However, COSL will not deal with these representatives where they obstruct or delay the process,  make unreasonable decisions on the debtors behalf, do not inform the debtor of all available options, engage in misleading or deceptive conduct amongst other things, largely in line with the ACCC and ASIC Debt Collection Guideline.


This article was sourced from COSL's consultation of credit repair guideline and can be viewed online here.

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