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Debt agreement ads: investigation exposes fox in sheep's clothes
By Tammy May

Study warns consumers about debt administration companiesThe Consumer Action Law Centre has investigated the web advertising of some Australia’s most high profile debt agreement administrators and found that many of their claims “confuse consumers and mislead them about the consequences of bankruptcy and debt agreements.”

Part IX Debt Agreements have been rising significantly in recent years — a trend that is concerning given that many people who enter into a debt agreement don’t fully understand the implications. Formal debt agreements are more flexible than bankruptcy, but the consequences are not dissimilar.

Few people understand that simply applying for a Part IX Debt Agreement — even when the application is rejected — is considered an act of bankruptcy under the law. Creditors can use this to force a debtor into bankruptcy.

Some of the Consumer Action Law Centre’s concerns about debt administration advertising include that it often:

  • Highlights the negative effects of bankruptcy, while downplaying similar consequences of undertaking a debt agreement — particularly the effect on credit report listings;
  • Indicates that debt agreement administrators are balanced or independent advisers acting in the best interests of a consumer, while underplaying the fact that administrators charge for their services;
  • Is extremely optimistic about what a debt agreement can achieve for someone in debt, such as the amount of debt that could be forgiven by creditors or the likelihood of saving assets;
  • Does not give a balanced picture of the positives and negatives of applying for a debt agreement, usually simply not mentioning the negatives;
  • Implies or claims endorsement by the government or AFSA (formally known as ITSA).

The report cited that 88 per cent of people who enter into a debt agreement have only sought advice from a debt agreement administrator, companies that are often foxes masquerading in sheep’s clothing. Debt administration companies make money by putting people into debt agreements — they charge a fee to set up the agreement and manage it on an ongoing basis. That's why it pays to talk to someone independent about debt help.

At MyBudget we avoid insolvency for our clients around 95 per cent of the time. Our business is to help people manage their way out of debt without the severe consequences of insolvency and legally binding agreements.

We recognise that insolvency has its place for some people and MyBudget is licensed to administer debt agreements for those who would benefit, but in most cases insolvency is avoidable. There are no one-size-fits-all debt solutions. Make sure you understand all of your options.

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