The credit repair industry has fired back over a COSL release threatening to stop dealing with them.
The Credit Ombudsman last week announced it was proposing to no longer deal with representatives of consumers – namely credit repair companies – “who behave badly”. Ombudsman Raj Venga argued that credit repair firms charge significant amounts of money to consumers for using COSL – a free service. But Princeville Credit Advocates lead adjudicator Merri Mansfield told Australian Broker COSL was setting up a double standard.
“COSL will still accept complaints from other paid representatives, namely lawyers, accountants, specialist advisers, guardians, trustees in bankruptcy or an executor of the complainant, as long as they stick to some specific guidelines.
These paid representatives are very likely to have much higher fees than those charged by credit repair companies. And some of the current and known rogue credit repair companies in Australia are lawyers or are associated with lawyers,” Mansfield said.
Mansfield argued that COSL’s announcement could come with ulterior motives.
“It is hard not to think that COSL’s move to ban credit repair companies from making complaints is an attempt to force down the number of complaints (because consumers will not be able to afford to use a representative), or to force consumers to make complaints themselves with the effect of there being less successful complaints against credit providers about credit reporting. This will ultimately benefit the credit providers COSL represents,” she said.
While COSL has argued that consumers can use their service for free, while credit repair companies can charge significant fees to argue defaults, Mansfield said the value offered to consumers by credit repair can far outweigh the cost.
“The value to a consumer of having a reputable credit repair company work to remove a wrongly placed listing saves them upwards of $10,000 per year in interest. A small price to pay compared to the alternative.”
Moreover, Mansfield said COSL’s processes can be difficult for consumers to navigate.
“Consumers need to know far more than COSL would have them believe, in order to adequately run their own case. Consumers are asked to respond to questions which require in depth knowledge of the regulations and laws about credit reporting and this requires more skill than COSL communicates,” Mansfield said. “In my experience of helping thousands of credit impaired clients there are numerous cases where a consumer has attempted to deal with creditors directly over significant periods of time, with no success. On the other hand credit repair companies have achieved positive outcomes for consumers because their cases are based on a deep knowledge of a consumer’s rights in relation to credit reporting, and their tenacity in asserting those rights.”