Compensation Goes Begging

Sydney Morning Herald

Wednesday March 30, 2005

Michelle Innis

Money set aside for those burnt in a credit offer is sitting idle with the NSW Office of Fair Trading. Michelle Innis reports.

Former clients of a credit broker have claimed less than half of a $1.3 million fund set up to compensate them for losses.

The fund was established in June 2003 and, so far about 125 consumers have made claims for money they lost after dealing with Credit Accounting Consultancy (CAC).

In the 21-2 years that CAC operated as a finance broking business, the NSW Supreme Court heard it earned an estimated $8.84 million. Court papers state the company aimed to make between $60,000 and $70,000 each week.

It was shut down following complaints from borrowers who had been charged thousands of dollars for poor financial advice. ``People need to come forward and claim their money, says Katherine Lane, principal solicitor, Consumer Credit Legal Centre, NSW.

``Only a small number of the people who were affected have claimed any money, Lane says.

``It's fantastic the money is here for people. They just need to contact the Office of Fair Trading and provide evidence that they paid fees to Credit Accounting Consultancy.

Media spokesman for the Office of Fair Trading (OFT), Christian Fanker, says

borrowers have so far claimed about $460,000. Lane says the Consumer Credit Legal Centre heard many complaints about CAC before the Office of Fair Trading began an investigation into the business, which was based in Glebe, in Sydney's inner west.

In theNSWParliament in June last year, the then Minister for Fair Trading, Reba Meagher, said that CAC described itself as management consultants, willing to help consumers consolidate their debts, refinance or get new loans.

``Consumers paid an average $2,000 in upfront fees to CAC for services one consumer even paid $18,000,Meagher told State Parliament. ``In return for paying up-front fees, CAC would arrange unnecessary credit cards, generally leaving the consumer significantly worse off and liable for making enormous interest payments.

Lane says the business used the same approach with all borrowers who responded to advertisements that were placed in Sydney newspapers. Meagher told Parliament that CAC?s operations had harmed their clients. ``They took fees from people, they applied for credit cards . . . and then they left people with more debt at higher interest rates, Lane says.

``People were worse off.

In a judgement handed down in June last year, the Supreme Court ordered four people involved with CAC to pay back money to former clients.

In his June 2004 written judgement against CAC, Justice Jeff Shaw of the Supreme Court states that one of those involved appeared in the Federal Court of Australia in the early 1980s under another name.

In June 2004, the Supreme Court ordered the proprietor of Credit Accounting Consultancy to pay $700,000 into a trust fund for former clients who had lost money. Three others were ordered to pay $200,000 each into the fund, which is

administered by the Commissioner for the Office of Fair Trading.

The trust fund with a total of $1.3 million, will be used to compensate former clients, the Office of Fair Trading says in its 2003-2004 annual report.

If you think you might be able to make a claim, call the NSW Office of Fair Trading on (02) 9895 0378.

It all seemed too good to be true

Brett Wellfare was struggling to get his finances in order when he managed to land himself in even deeper trouble.

The 32-year old printer, who lives in Glebe in Sydney's inner west, wanted to

consolidate debts held on two credit cards and a personal loan, and to borrow a further $25,000 to help pay for his wedding.

``I wanted to make my life a lot simpler by being able to pay off one loan rather than a series of bills,??

Wellfare says. ``I saw an ad in the newspaper for Credit Accounting Consultancy (CAC) and it was right near where I live.

CAC said it could arrange a $25,000 loan, but it would cost Wellfare $2500.

He says CAC advised him to apply for store cards, such as Myer or David Jones credit cards.

``When we all got to the store, I discovered one of my credit cards had expired and I could only get $1000 worth of store vouchers,he says. ``I gave them those vouchers and then I didn't hear anything from them for a few days. Wellfare says he then received a letter in the mail telling him that CAC had applied for a credit card for him.

Once the card was approved, he was to get a $5000 cash advance and deposit that money into his bank account.

Wellfare says CAC told him that a bank would look favorably on the fact he had $5000 in cash in his bank account. But Wellfare decided this was not a good idea.

``I told CAC that, and then I went to the Office of Fair Trading because I had already paid them $1000. The next thing I heard was that CAC had closed.??

Late last year, Wellfare received a payment for $1100 from the Office Of

Fair Trading, which covered the $1000 he lost to CAC. He says the interest he

paid on his credit card when he purchased store vouchers for CAC totalled more than $100, ``but I got something, and it was a surprise ', he says.

``I?m married now and my finances are in better order, he says.

Lost his job

Ken Peard says when he went to CAC to ``consolidate his loans ' he was ``a pretty trusting sort of person '.

But the boilermaker from Blacktown ended up paying more than $14,000 in fees. And in the process of trying to recover his money, he lost his job.

``It was a nightmare," he says.

Peard, 39, says he paid CAC an upfront fee of about $850 or $1000 when he first went to the company's Glebe office. He wanted to reorganise his debts and was

thinking about borrowing $10,000 or $12,000 to renovate a property.

He agreed to pay a further $14,000 in fees for advice on how to restructure his loans and get another loan for the renovation.

``It took so much of my time chasing them up that I lost my job at the RTA. It's lucky I?ve got a trade and could get another job," Peard says.

Peard says he ended up getting $14,000 back through the Office of Fair Trading.Correction Last week's article "Compensation goes begging" should have said that the reimbursement fund for Credit Accounting Consultancy was established in 2004.

© 2005 Sydney Morning Herald

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