- The purpose of this practice document is to outline the Inspector-General’s requirements and best practice principles in relation to the advertising and promotional activities of personal insolvency practitioners and by those acting on the behalf of personal insolvency practitioners.
To whom this practice document applies
- This practice document applies to registered debt agreement administrators and registered trustees, as well as pre-insolvency advisors, brokers and others who act on behalf of personal insolvency practitioners, to promote personal insolvency and their related services.
- All practitioners, along with their agents or representatives, must consider this document when formulating and implementing their advertising and promotional strategies.
To what this practice document applies
- This practice document applies to any communication by or on behalf of a personal insolvency practitioner that constitutes advertising and promotion of personal insolvency services and options. It covers advertising and promotion in any form or medium, including but not limited to:
- magazines and newspapers
- radio and television
- outdoor advertising (e.g. signs and billboards)
- internet (e.g. web pages, banner advertising, video streaming such as YouTube), social networking and blogging sites
- social media and internet forums
- mobile phone messages (e.g. SMS, MMS)
- brochures and factsheets
- direct mail (post and email)
- telemarketing activity and audio messaging
- seminars, webinars, presentation and advertorials.
Legal framework – debt agreement administrators
- All administrators and their representatives must comply with industry-wide conditions imposed by the Minister pursuant to subsection 186F(4) of the Bankruptcy Act 1966. One of these conditions requires that the advertising and promotion of services by administrators and those advertising or promoting their services on their behalf must:
- include the full name and registration number of the administrator
- not be false, misleading or deceptive.
- Failure by administrators and their representatives to adhere to this registration condition may lead to disciplinary action, including cancellation of an individual’s or company’s registration.
- There are also legislative requirements applicable to advertising and promotions generally in the Australian Consumer Law (“ACL”). 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 so that financial products and services are treated in the same way.
Legal framework – trustees
- For registered trustees and their representatives, there are legislative requirements applicable to advertising and promotion in the ACL. They are also required under the Act and Insolvency Practice Rules (Bankruptcy) 2016 to maintain professionalism, independence, impartiality, honesty and ethics.
- Failure by a registered trustee and their representatives to adhere to this document may call into question the trustee’s standing as a fit and proper person. For further information about what it means to be fit and proper person in order to maintain registration as a practitioner, see Fit and proper requirements for personal insolvency practitioners.
- Guidance can also be found at rules 250.2 of the APES 110 Code of Ethics for Professional Accountants, which states:
A Member in Public Practice shall not bring the profession into disrepute when marketing Professional Services. The Member in Public Practice shall be honest and truthful and not:
(a) Make exaggerated claims for services offered, qualifications possessed, or experience gained; or
(b) Make disparaging references or unsubstantiated comparisons to the work of another.
If the Member in Public Practice is in doubt about whether a proposed form of Advertising or marketing is appropriate, the Member in Public Practice shall consider consulting with the relevant professional body.
Professional codes and bodies
- Personal insolvency practitioners who are members of professional bodies may also be subject to codes of conduct which regulate their activities.
- The main professional bodies representing personal insolvency practitioners in Australia are:
- the Personal Insolvency Professionals Association (“PIPA”)
- the Association of Independent Insolvency Practitioners (“AIIP”)
- the Australian Restructuring Insolvency and Turnaround Association (“ARITA”).
- PIPA and ARITA each have a code of professional practice that governs the conduct of their members:
- These codes provide specific guidance to members about 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 regarding 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.
- 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
- which is placed or undertaken personally, or by another person on their behalf.
- The Inspector-General requires that advertising and promotion by administrators, their brokers or other third parties acting on their behalf is not false, misleading or deceptive.
- It is important that advertising and promotion are balanced in that they represent both the positive and negative consequences of entering into a debt agreement.
- The Inspector-General requires administrators 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 generally and the requirements outlined in this document. The Inspector-General will hold administrators responsible for any advertising or promotion undertaken on their behalf, either individually or jointly, and whether expressly or implicitly authorised by them.
- Administrators must ensure that any commercial arrangements with third parties into which they enter for promoting debt agreements and/or their services do not compromise their independence, certification duties and overriding fiduciary obligations to debtors.
- Upon the Inspector-General being informed of any unbalanced or non-compliant advertising that may constitute potentially misleading or deceptive conduct, the administrator will be contacted and requested to make amendments to bring the advertisement into line with the industry-wide condition, professional codes and this practice document. Non-compliance could lead to disciplinary action, such as conditions being imposed on their registration or, in serious cases, cancellation of registration. The matter may also be referred to ASIC, ACCC and/or PIPA/ARITA for investigation.
- The Inspector-General’s requirements are as follows.
- There is a need for debtors to have direct and reliable access to AFSA’s independent website. In the past, some administrators 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 administrator’s website. Should it come to AFSA’s attention that this practice is reoccurring, immediate action will be taken to ensure the administrator remedies their conduct..
- There is a need for the duties of an administrator and the available options in the Bankruptcy Act for debtors in financial distress to be clearly and accurately stated in language that is easily understood by the target audience.
- It is necessary to ensure ongoing confidence in the personal insolvency system and, in particular, the accurate representation of AFSA’s involvement in the debt agreement process.
- Administrators 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 promotion.
- It is important to acknowledge that advertisements may be misleading or deceptive even when there is no such intention. Administrators, trustees, brokers and other promotors should therefore consider how their advertising and promotion 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.
Representing debt agreements as debt consolidation
What is “debt consolidation”?
- 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.
- Debt consolidation falls under the definition of “credit assistance” under section 8 of the National Consumer Credit Protection Act 2009.
- 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 administrators do not provide credit assistance, many have included the term “debt consolidation” when advertising or promoting debt agreement services to consumers.
- The ASIC report, which only included entities which offer credit assistance (i.e. those that 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”?
- In The Debt Genie Pty Ltd v Kirstein Edwards  NSWLC, the NSW Local court found that an unregistered debt agreement administrator who advertised debt agreement services as “debt consolidation” had engaged in misleading and deceptive conduct.
- The administrator 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 -.
- These principles require the Court to review a published advertisement through the eyes of a reasonable consumer and to consider that:
- it is designed and calculated to be seen and read by a wide range of people
- the question of whether or not an advertisement is misleading or deceptive is tested by the effect it has on the those most 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.
- 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”.
- 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”.
- The Court noted that the term is not ordinarily used in the context of debt agreements as “the debtor remains liable to all existing creditors and there is no consolidation of debt”.
- The concern raised by the Court was that potential customers reading the term could misapprehend the nature of the services offered by the administrator by wrongly assuming the service “provides the option of financial support through consolidating of multiple debts through a single loan”.
- Given the findings in this case, the Inspector-General expects that administrators, brokers and others will not include any reference to the term “debt consolidation” in promoting debt agreements.
- The Inspector-General’s requirements of trustees directly accords with the professional codes regarding advertising and marketing of personal insolvency services.
- The Inspector-General expects trustees, brokers, pre-insolvency advisors and other promotors to ensure that they do not mislead debtors in respect to personal insolvency options. This extends to the activities of any third parties working for or on behalf of trustees in promoting personal insolvency services to potential debtors.
- It is also important that advertising and promotion are balanced in that they represent both the positive and negative consequences of entering into a personal insolvency option.
- The Inspector-General expects trustees to ensure that any third parties working for or on behalf of them in promoting personal insolvency and/or their services are aware of their obligations under the ACL generally and the requirements outlined in this document. The Inspector-General will hold practitioners responsible for any advertising or promotion undertaken on their behalf, either individually or jointly, and whether expressly or implicitly authorised by them.
- Practitioners must ensure that any commercial arrangements into which they enter with third parties for promoting personal insolvency and/or their services do not compromise their independence and overriding fiduciary obligations to debtors.
- Upon the Inspector-General being informed of any unbalanced or non-compliant advertising that may result in potentially misleading or deceptive conduct, the trustee will be contacted and instructed to make amendments to bring the advertisement into line with the professional codes and this practice document. The matter may also be referred to ASIC, ACCC, ARITA or other relevant professional bodies for investigation.
- Advertising and promotional activities can amount to conduct which is false, misleading or deceptive.
- Administrators, trustees, pre-insolvency advisors, brokers and other promoters of debt agreements and other insolvency options must be mindful that their target audience may be vulnerable – due to financial hardship or poor financial literacy – and find it harder judge what is in their best interests.
- AFSA recommends reading the regulatory and consumer law guides referred to below for specific examples of false, misleading or deceptive conduct. These guides should be read carefully by administrators, trustees, pre-insolvency advisors, brokers and other promoters of debt agreements and other insolvency options to ensure that they understand their legal obligations under consumer law.
- Common ways in which advertising and promotion of personal insolvency services may mislead or deceive include (but are not limited to):
- misleading information describing the essence of personal insolvency
- conveying that a debt agreement or personal insolvency agreement is less serious and has less significant consequences than a bankruptcy
- implying that the administrator 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 or approved by AFSA (or some other authority/instrument of the Commonwealth government)
- concealing or understating negative consequences of a personal insolvency option by, for example, adversely comparing a debt agreement with bankruptcy or vice versa.
- 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
- a person who enters into a debt agreement will be released from all of their debts. A debt agreement will only release a debtor from unsecured provable 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, such as penalties and fines, child support and fraud-related debt.
Australian Government logo
It is improper for a practitioner to use the Commonwealth Coat of Arms in any material. Unauthorised use of the Commonwealth Coat of Arms may breach the CCA, Trade Marks Act 1995 (Cth) or the Criminal Code Act 1995 (Cth).
“Consolidate your debts into one easy repayment through a government regulated debt agreement.” Use of the terms “Government legislated” and “Government approved”
- 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, nor should the terms “government legislated” or “government approved”.
“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 uses AFSA’s name in a misleading manner.
“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, e.g. 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 to potential debtors that AFSA has reviewed, approved and/or certified the administrator’s system as “compliant”, when AFSA does not do this.
“Freeze your interest”
If a debt agreement is terminated at any time, the interest on the debts will start accruing again, whereas this statement may give the incorrect impression that it is frozen forever.
Testimonials or promoting debt write offs of up to 80%
This is incorrect as it is up to a creditor to write off a debt. Testimonials and claims of high percentage savings that are false and unable to be substantiated are misleading.
“A debt agreement will let you write off debt”
This is incorrect as it is up to a creditor to write off a debt.
“You can keep your home”
This may give a potential bankrupt a false sense of security that their home will never be sold once they become bankrupt. The property will vest with the trustee and may be realised if there is sufficient equity.
A debtor or bankrupt’s name will appear on the publicly available National Personal Insolvency Index (NPII).
There is no guarantee as debt agreements are subject to creditor approval and bankruptcies are subject to Official Receiver acceptance.
- The below case study reflect the issues arising from advertising and promotion 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 reports, they are eventually persuaded to enter into two debt agreements. John and Jane are renters with no property and struggle to make payments and provide necessities for their children while also making payments under the debt agreements.
John and Jane felt confused by the broker’s services and what the best option was for them.
- While this case study does not represent the experience of all debtors with administrators and brokers, it indicates some typical concerns raised by stakeholders.
- AFSA regularly monitors the activities of administrators, trustees, pre-insolvency advisors, brokers and others who promote personal insolvency services 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 or disciplinary action will be taken.
- 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 us by:
- phone: 1300 364 785
- online: Feedback form
- email: practitionersupervision [at] afsa.gov.au.
- People wanting to contact AFSA and remain anonymous can complete an online tip-off form available on our website
- tip-off: Make a tip-off.
- 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 section 12BAB
- Bankruptcy Act 1996 (Cth): subsections 12(1)(bb), s12(1)(bd), 12(1D), 186F(4), 186G(2B)
- Bankruptcy (Registered Debt Agreement Administrator Conditions) Determination 2020
- Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law): sections 18(1), 29(1)
- Criminal Code Act 1995 (Cth)
- Fair Trading Act 1987 (NSW)
- Insolvency Practice Rules (Bankruptcy) 2016
- National Consumer Credit Protection Act 2009 (Cth): section 8
- 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  NSWLC
ACCC consumer law guides
- Avoiding unfair business practices – a guide for businesses and legal practitioners (2010)
- ACL Compliance and enforcement – how regulators enforce the Australian Consumer Law (2010)
- Advertising and selling guide (2014)
- Unconscionable conduct (2012)
- Don’t take advantage of disadvantage – A compliance guide for businesses dealing with disadvantaged or vulnerable consumers (2011)
- ARITA Code of Professional Practice
- PIPA Code of Professional Practice
- APES 110 Code of Ethics for Professional Accountants
ASIC reports and information sheets
- Report 229 – Australian national financial literacy strategy
- Report 230 – Financial literacy and behavioural change
- Report 465 – Paying to get out of debt or clear your record: The promise of debt management firms
- INFO 139 – Australian Consumer Law infringement notices: Your rights (presently being revised)
- INFO 140 – Australian Consumer Law substantiation notices: Your rights
- INFO 151 – ASIC’s approach to enforcement
- Black’s Law Dictionary (9th edition 2009)
 ASIC REP Review of credit assistance providers’ responsible lending conduct relating to debt consolidation.