1.1 The purpose of this document is to outline the Inspector-General in Bankruptcy’s expectations and best practice principles in relation to advertising and marketing of debt agreements.
Who this guideline applies to
1.2 This guideline is relevant to debt agreement administrators (DAAs), brokers and others who promote debt agreements and their related services.
1.3 All DAAs should consider the above and this guideline when formulating and implementing their advertising and marketing strategies.
1.4 This guideline is applicable to all DAAs regardless of the size of their business and whether or not they are registered.
1.5 In reading this guideline and abiding with its principles, it is of paramount importance to keep in mind that advertising or marketing may be misleading and deceptive even where that is not the intention.
What this guideline applies to
1.6 This guideline applies to any communication by promoters of debt agreements and covers advertising and marketing in any medium and format, including:
- magazines and newspapers
- radio and television
- outdoor advertising (e.g. signs and billboards)
- internet (e.g. webpages, banner advertising, video streaming (e.g. YouTube), social networking and blogging sites (e.g. Twitter))
- social media and internet forums
- mobile phone messages (e.g. SMS, MMS)
- brochures and factsheets
- direct mail (e.g. by post, facsimilie or email)
- telemarketing activity and audio messaging
- seminars, presentation and advertorials.
Law and regulatory agencies
2.1 While there is no specific legislative duty regarding advertising or marketing in the Bankruptcy Act 1966, there are legislative requirements applicable to advertising and marketing generally in the Australian Consumer Law (ACL).
2.2 The ACL is administered and enforced by the Australian Competition and Consumer Commission (ACCC), in conjunction with state and territory consumer protection bodies, with the involvement of the Australian Securities & Investments Commission (ASIC) on relevant matters. The protections in the ACL are generally reflected in similar provisions in the Australian Securities and Investments Commission Act 2001 (ASIC Act), so that financial products and services are treated in the same way.
2.3 The Australian Financial Security Authority (AFSA) works with and refers potential breaches of the ACL to ASIC when identified.
Professional codes and bodies
2.4 Promotors of debt agreements and related services who are members of professional bodies may also be subject to codes of conduct that regulate their activities.
2.5 The main professional bodies representing personal insolvency practitioners in Australia are:
- the Personal Insolvency Professionals Association (PIPA)
- the Australian Restructuring Insolvency and Turnaround Association (ARITA).
2.6 Both bodies have a code of professional practice which govern the conduct of their members:
2.7 These codes provide specific guidance to members on the promotion, advertising and marketing of services. They require members to comply with the consumer laws and not:
- make marketing claims and then substantially change the arrangement without fully informed consent
- make negative remarks about fellow practitioners or their business as to competence, professional practices or fees charged
- claim endorsement of their professional body without consent
- claim association to or endorsement of AFSA
- create false or unjustified expectations of favourable outcomes
- imply the ability to influence any court, tribunal, regulatory agency or similar body or official
- make self-laudatory statements that are not based on verifiable facts or which contain unidentified testimonials or endorsements or contain representations that would be likely to cause a reasonable person to misunderstand or be deceived
- abuse registered names or terms that are trademarks, lawfully registered to other persons or entities.
2.8 The codes also provide that members will be held responsible for the form and content of any advertisement, publicity or solicitation:
- where expressly or impliedly authorised or
- that is placed or undertaken personally, or by another person on their behalf.
3.1 The expectations of the Inspector-General (IG) are in direct accord with the professional codes, regarding advertising and marketing of debt agreements.
3.2 The IG expects DAAs, brokers and other promotors to ensure that they do not mislead potential (but unsuitable) debtors into debt agreements through their advertising and marketing. This extends to the activities of any third parties working for (or on behalf of) DAAs in promoting debt agreements and/or their services to potential debtors.
3.3 It is also important that advertising or marketing is balanced in that it represents both the positive and negative consequences of entering into a debt agreement.
3.4 The IG expects DAAs to ensure that any third parties working for or on behalf of them in promoting debt agreements and/or their services are aware of their obligations under the ACL generally and this Practice Guideline specifically.
3.5 DAAs should ensure that any commercial arrangements which they enter with third parties for promoting debt agreements and/or their services do not compromise their independence, certification duties and overriding fiduciary obligations to debtors.
3.6 Upon the IG being informed of any imbalanced advertising that may result in potentially misleading or deceptive conduct, the DAA will be contacted and requested to make amendments to bring the advertisement into line with the professional codes and this practice guideline. The matter may also be referred to ASIC, ACCC and/or PIPA/ARITA for investigation.
3.7 The IG’s expectations are based upon the need for:
- Debtors to have direct and reliable access to AFSA’s independent website. In the past some DAAs have used the phrase or acronym 'AFSA' as Google sponsored advertising. This created the potential for users attempting to access the AFSA website to be misled into accessing the DAA’s website. Should it come to the IG’s attention that this practice is reoccurring, AFSA will take immediate remedial action.
- The duties of a DAA and options under the Bankruptcy Act for debtors in financial distress to be clearly and accurately stated in language that is easily understood by the target audience.
- Ensuring confidence in the personal insolvency system and, in particular, the accurate representation of AFSA’s involvement in the debt agreement process.
3.8 DAAs are to ensure that they are aware of and comply with the relevant Commonwealth, state and territory legislation when developing and implementing their advertising and marketing.
3.9 It is important to acknowledge that advertisements may be misleading or deceptive even when there is no such intention. DAAs, brokers and other promotors should therefore consider how their advertising and marketing may be interpreted or how it may affect the person receiving the message. This involves understanding the target audience and appreciating their backgrounds, vulnerabilities, circumstances and understanding of the financial environment.
3.10 It is expected that DAAs include details of their AFSA registration number and individual or corporate name in any advertisement for identification purposes.
3.11 The IG will hold DAAs responsible under this guideline for any advertising or marketing done by them (or on their behalf), either individually or jointly, and whether expressly or impliedly authorised by them.
4.1 Advertising and marketing can amount to conduct which is false, misleading or deceptive.
4.2 DAAs, brokers and other promoters of debt agreements should be mindful that their target audience may be vulnerable—due to financial hardship or poor financial literacy—and unable to judge what is in their best interests.
4.3 AFSA recommends the regulatory and consumer law guides referred to at the end of this document for specific representations and conduct that has been held to be false, misleading or deceptive. These guides should be read carefully by DAAs, brokers and other promoters of debt agreements to ensure that they understand their legal obligations under consumer law.
4.4 Common ways in which advertising and marketing of debt agreements and related services may mislead or deceive include (but are not limited to):
- mis-describing the essence of a debt agreement
- conveying that a debt agreement is less serious (and has less significant consequences) than is in fact the case
- implying that the DAA is able to readily facilitate a debt agreement being made that will not be overly onerous on the debtor to satisfy
- representing that the entire debt agreement process is regulated by AFSA (or some other authority/instrument of the Commonwealth government)
- adversely comparing a debt agreement with bankruptcy (to convey that it does not have certain negative consequences or to understate them).
4.5 The following table represents some examples of unacceptable forms of advertising due to their potential to mislead and/or deceive consumers:
Why it is unacceptable
'STOP DEBT NOW. Commonwealth Government-guaranteed and regulated debt agreement will free you of debt forever.'
The advertisement makes two incorrect claims:
That the debt agreement is guaranteed by the Commonwealth Government; and that a person who enters into a debt agreement will be released from all of his or her debts.
A debt agreement will only release a debtor from unsecured debts incurred up to the time the debt agreement proposal is accepted for processing, and then only if the terms of the agreement are complied with and completed.
There are also types of debts that the debtor will not be released from upon successful completion of a debt agreement. These include and are not limited to, penalties and fines, child support and fraud related debt.
Australian Government logo
It is improper for a DAA to use the Commonwealth Coat of Arms in any advertising material to promote their services or debt agreements generally.
'Consolidate your debts into one easy repayment through a government regulated debt agreement.'
A debt agreement is not a consolidation of debt. It is inappropriate to refer to a debt agreement as debt consolidation.
Referring to a debt agreement as 'government regulated' implies that each and every debt agreement is regulated. This is not the case. It is the industry or Part IX regime that is regulated.
The phrase 'government regulated debt agreement' should not be used.
'If you complete the debt agreement you will get full release from only those creditors listed in the debt agreement.'
This is factually incorrect and misrepresents the intention of the Bankruptcy Act.
'All stages of the debt agreement are legislated, monitored and facilitated by AFSA.'
This misrepresents AFSA’s involvement in the process and again uses AFSA’s name
'Debt agreements show up more favourably on your credit record than a bankruptcy.'
This is actually factually incorrect as there is no difference in the reporting of debt agreements and bankruptcies on a credit report. Also, the lending policies of banks and other credit providers are matters for the individual institutions.
'You can choose which debts to include and which ones to exclude, eg you will want to maintain electricity in your home so it may be best to exclude essential services.'
This is factually incorrect and misrepresents the intention of the Bankruptcy Act.
'AFSA compliant — Our system complies with legislation as required by AFSA.'
This misrepresents the potential consumers who might purchase a DAA's business system that AFSA has reviewed, approved and/or certified their product as 'compliant' when it does not.
4.6 The below case study reflect the issues arising from advertising and marketing of debt agreements:
John and Jane contact a broker after seeing a TV advert as they want to 'clean' their credit reports. The broker provides a number of other debt services, including debt agreements, debt negotiation and debt consolidation. John and Jane are told that the broker offers a 'credit restoration process' and a 'debt solution process'.
While John and Jane are interested in the service to ‘clean’ their credit, they were eventually persuaded to enter into two debt agreements. John and Jane are renters with no major assets and now struggle to make payments and provide necessities for their children under the debt agreements.
John and Jane felt confused by the broker’s services and what the best option was for them.
4.7 While this case study does not represent the experience of all debtors with DAAs and brokers, it indicates some typical concerns raised by stakeholders.
What is 'debt consolidation'?
5.1 ASIC issued a report in July 2013*, which reviewed responsible lending conduct by credit assistance providers. The report defined 'debt consolidation' as:
...a financial service whereby new credit is secured to pay off other existing credit contracts or reduce total payments. Debt consolidation may affect several types of credit contracts including home loans, credit cards, personal loans and payday loans, and frequently involves a lower interest rate over a longer term. Debt consolidation may be facilitated by taking security over what were previously unsecured debts. It is promoted as helping consumers manage their repayment obligations under multiple credit providers or multiple credit contracts.
5.2 Debt consolidation falls under the definition of 'credit assistance' under section 8 of the National Consumer Credit Protection Act 2009.
5.3 Debt consolidation is not to be confused with debt agreements, which do not refinance existing loans or consolidate the underlying indebtedness into one new obligation. While most DAAs do not provide credit assistance, many have included the term 'debt consolidation' when advertising or marketing debt agreement services to consumers.
5.4 The ASIC report, which only included entities that offer credit assistance (i.e. arrange new or extra credit for consumers to deal with pre-existing credit obligations) provided examples of advertising language used by credit assistance providers:
- ‘Debt problems can be solved by simply consolidating existing debts’
- 'Help you consolidate and save’
- 'Debt consolidation is one of the best ‘debt help’ solutions’
- 'Debt consolidation will help you regain control of your financial situation’.
Are debt agreements 'debt consolidation'?
5.5 In The Debt Genie Pty Ltd v Kirstein Edwards (2011) NSWLC, the NSW local court found that an unregistered DAA who advertised debt agreement services as ‘debt consolidation’ had engaged in misleading and deceptive conduct.
5.6 The DAA in that case advertised ‘no interest debt consolidation’ to promote debt agreements to consumers seeking relief from overwhelming debts. The court considered the principles relating to ‘“misleading and deceptive conduct”’ under section 42 of the Fair Trading Act 1987 (NSW) summarised by Goldberg J in Telstra Corp Ltd v Cable & Wireless Optus Ltd  FCA 1478 at -.
5.7 Those principles are that a court reviewing an advertisement published to the world at large through the eyes of a reasonable consumer, must consider that:
- it is designed and calculated to be seen and read by a wide range of persons
- the question of whether or not an advertisement is misleading or deceptive is to be tested by the effect on the class of persons who are likely to consider it
- no person must be assumed to be able to supply any omitted facts or resolve ambiguities
- an advertisement may be misleading even though it fails to deceive more wary readers.
5.8 The Court accepted that “the ordinary understanding of the term ‘debt consolidation’ involves refinancing of one or more high interest debts into a single loan that has the advantage of lower interest rates and often over a longer term to produce a single affordable and regular repayment plan”.
5.9 The Court also referred to Black’s Law Dictionary (9th ed 2009) which defines 'debt consolidation' as “The replacement of multiple loans from one or more lenders with a single loan from one lender, usually with a lower monthly payment and a longer repayment period”.
5.10 The Court noted that the term is not ordinarily used in the context of debt agreements as "the debtors remains liable to all existing creditors and there is no consolidation of debt”.
5.11 The concern raised by the Court was that potential customers reading the term could misapprehend the nature of the services offered by the DAA by wrongly assuming the service “provides the option of financial support through consolidating of multiple debts through a single loan”.
5.12 Given the findings in this case, the IG expects that DAAs, brokers and others will not include any reference to the term ‘debt consolidation’ in promoting debt agreements.
*ASIC Report Review of credit assistance providers’ responsible lending conduct relating to debt consolidation.
6.1 AFSA regularly monitors the activities of DAAs, brokers and others who promote debt agreements across the internet, TV, radio, print and social media on a regular basis and will investigate false and misleading representations or misleading and deceptive conduct when identified. Where necessary, corrective action will be taken.
6.2 AFSA also investigates complaints received from stakeholders and the public generally. Anyone with concerns or information about the possible breach of bankruptcy or consumer legislation outlined in this guidance is encouraged to contact AFSA by:
Phone: 1300 364 785
Online: www.afsa.gov.au or Contact us form
Email: regulation.enquiry [at] afsa.gov.au or regulation.complaint [at] afsa.gov.au
6.3 People wanting to contact AFSA and remain anonymous can complete an online tip-off form available on our website.
7.1 This guideline outlines the IGs position in relation to advertising and marketing by DAAs, brokers and other promotors of debt agreements.
7.2 When there are other specific issues where clarification is required, following consultation with AFSA stakeholders, the IG will continue to develop policy and practice statements to assist and guide practitioners.
ASIC RG 234 – Advertising financial products and advice services: Good practice guide
Australian Securities and Investments Commission Act 2001 (ASIC Act): Pt 2, Div 2 s12BAB
Bankruptcy Act 1996 (Cth): s12(1)(bb), 12(1D)
Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law): s18(1), 29(1)
Criminal Code Act 1995 (Cth)
Fair Trading Act 1987 (NSW)
National Consumer Credit Protection Act 2009 (Cth): s8
Trade Marks Act 1995 (Cth)
Trade Practices Act 1974 (Cth)
Telstra Corp Ltd v Cable & Wireless Optus Ltd  FCA 1478
The Debt Genie Pty Ltd v Kirstein Edwards (2001) NSWLC
Consumer law guides
ACCC Advertising and selling guide (2014)
ACCC Unconscionable conduct (2012)
Black’s Law Dictionary (9th edition 2009)