Risk Management and financial counselling Presentation Kat Lane & Greg Russell– Consumer Credit Legal Centre NSW 27 September 2011 This presentation is for information only.

Insurance Law Service Phone: National Servicesolicitors available for advice and casework assistanceWeb-based resources resources, presentations and mediaAdvocacy and reform

Problem Solving 1.What is the problem? (a)What does the client think the problem is? (b)What do you think the problem is? 2.Risk Management! 3.What do we need to know? 4.What is the solution going to look like? 5.What are the realistic options? 6.How do we get there? The pathway 7.Settlement checklist

Case study – how things can go wrong! Ben and Jen had been married for many years. Ben then got severely injured at work. After waiting some years he received a significant compensation payout. He used this payout to buy a home to be owned jointly by Ben and Jen. Ben then qualified for the Disability Support Pension. Jen also received Centrelink as she cared for their children and Ben.

Case study cont. Jen got into trouble with a credit card with a major bank. She went to see a financial counsellor for assistance. She owed over $3000 on the credit card. She could not cope with the minimum repayments required. The bank was threatening legal action. The financial counsellor assisted Jen to go bankrupt. The financial counsellor considered the home was protected as it had been bought with a compensation payment.

Case study cont. A private trustee is appointed and immediately begins action to sell the home to recover Jen’s part ownership of the house. The private trustee fees are mounting up at $450 an hour. Jen and Ben are distraught as they face losing their home. They approach a pro bono barrister for assistance to sue the financial counsellor.

Why manage risk? To protect our clients To protect ourselves To protect our reputation To protect the interests of our stakeholders and funders

Risk Management – what is it? Assessing and putting procedures in place to manage risk. The main concern today is operational risk management. This means how to put in processes to manage risk.

Protecting your clients Being clear about what you are doing and not doing for the client Knowing your knowledge boundaries – when to get help! Knowing when the matter is too complex Knowing a high risk case v. low risk case Setting boundaries about what you can and wont do (and sticking to them) Setting up processes to help you deliver quality information

Protecting your clients – the checklist  Have you told the client what you are doing? For example: I am agreeing to do the following: 1.Send a letter to NAB requesting a repayment arrangement on the grounds of hardship I have not agreed to do anything further at this stage.  Have you told the client what you are not doing and given appropriate referrals? For example: I am unable to assist you with: 1.Your tenancy dispute. You should seek assistance by calling ??

Sample Intake Form Action to be completed Sheet Client’s name To be completed by client 1._______________________ 2._______________________ Client’s signature To be completed by financial counsellor: 1._________________________ 2._________________________

Protecting your clients – the checklist cont.  What matters can your agency assist with? For example:  Repayment arrangements  Money plans  Assisting with bankruptcy  EDR for hardship  Utilities  What matters can your agency not assist with? For example:  Business insolvency  litigation

Sample list – what we do/don’t do What we do 1._______________________ 2._______________________ What we don’t do 1._________________________ 2._________________________

Case study Wanda approaches a financial counsellor for help with a personal loan where there is a judgment against her. You discuss the enforcement options available to the judgment creditor. You also do a money plan and find out that Wanda is repaying a home loan. High risk or low risk???

Protecting yourself Arguably the most important part of risk management – YOU! Insurance – Professional Indemnity Insurance – does your agency have it? Does it cover everything? Do you know when to notify? Abusive/difficult clients – you do not have to help everyone! OHS is important. Complex matters – do you know where to get help? Have you got contacts set up to help you?

File management processes Avoiding conflicts of interest Keeping file notes Opening files Closing files Reviews – including diary for review, file review meetings Black hole files Unbundling – a big matter - what bits are you doing?

Quality information (advice?) – how to make it happen Teamwork! No-one knows everything. Work in a team to review and discuss files regularly. Resources: – Fact sheets – Sample letters – Credit Law Toolkit – EDR (for contact points) Getting help: – Experienced financial counsellors – CLC or Legal Aid Lawyers – Contacts in ITSA

Problem Solving 1.What is the problem? (a)What does the client think the problem is? (b)What do you think the problem is? 2.Risk Management! 3.What do we need to know? 4.What is the solution going to look like? 5.What are the realistic options? 6.How do we get there? The pathway 7.Settlement checklist

Settlement Checklist  An agreed repayment arrangement  Does the repayment arrangement need to be reviewed? Remember: the client cannot continue to be extended indefinitely.  What happens at the end of the reduced repayment arrangement?  Client’s credit report.

Settlement checklist cont.  Legal costs and default fees refunded?  Statement of Claim/Summons discontinued if a Statement of Claim/Summons has been served

Case study – solving a financial hardship case David has a loan with BIG FINANCE COMPANY. He got into financial hardship due to reduced employment. BIG FINANCE COMPANY has now issued a Statement of Claim (Summons) for the outstanding debt of $4500. David comes to see you 10 days after he received the Statement of claim. What are the risks? What do you need to do to manage David’s risks?

Compliance with the law Financial counsellors need to comply with: 1)Exemption under National Consumer Credit Protection Act 2)ASIC Class Order under the Financial Services Legislation. Failure to comply exposes the financial counsellor to prosecution for failure to be licensed to provide credit assistance or financial advice

The exemption conditions Cannot charge a fee for service Must be a member of an eligible financial counselling association Financial counsellors have appropriate training and knowledge Advocacy and financial counselling is allowed as long as meeting conditions of exemption See fact sheets on FCA website