A regulator ‘getting tough’

This broadcast – Getting tough on untrustworthy advisors – in fact comes from the bankruptcy regulator, AFSA, about what it says are ‘untrustworthy [debt] advisers’, the subject, among others, of a current Senate Committee inquiry on which AFSA and others have made submissions.

AFSA refers to untrustworthy, unscrupulous, unregulated and unlicensed advisers who give false and misleading information, fly under AFSA’s radar, prey around the edges of the insolvency system, often exploiting vulnerable people in financial crisis, giving dishonest advice which is either flagrantly illegal or unethical. These advisers range from the deliberate mercenary to the lazy incompetent, with the reputation of the insolvency profession being damaged and they being practitioners’ ‘No. 1 concern’. Fewer assets and lower fees for trustees and dividends for creditors are the result. 

We are all pleased to know that ‘AFSA has no tolerance for untrustworthy advisors’ and it will ‘use all the powers at [its] disposal to disrupt their activity’, including:

  • educating debtors, with specific warnings and videos and newspaper stories;
  • disrupting suspicious advice activity, by inspecting ‘hundreds of personal insolvency administrations, including attending and disrupting creditors’ meetings’;
  • putting pressure on insolvency practitioners who engage with untrustworthy advisors, even if unwittingly; and
  • working with other agencies.

Tell-tale signs

AFSA says that ‘tell-tale signs of an untrustworthy adviser’ are those who try to cut trustees and others ‘out of the equation’, by giving a trustee their own contact address as the contact address for the bankrupt and creditors; insisting all enquiries be done through them; mortgages being taken out on property just prior to a person becoming bankrupt; false companies being used to claim manufactured debts; high numbers of ‘friendly’ creditors; a lack of supporting documents of debts owed; late inclusion/submission of proofs of debt in compositions or personal insolvency arrangements, misuse of the PPSR.

People should use AFSA’s tip-off service and engage with professional bodies which ‘provide excellent professional training and uphold strong ethical standards.’

AFSA will ‘continue to look at the tools at its disposal, and the powers that it has’.

Comment welcome.

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