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Behind Closed Doors: The Insidious Challenge of Financial Abuse
What area(s) of law does this episode consider? | Financial abuse and the government’s response through legislative changes to the National Credit Code and the Banking Code of Practice. |
Why is this topic relevant? | Financial abuse, also known as economic abuse, is the perpetration of abuse, often by a spouse or partner, through exerting control over the finances and financial resources of the other partner. Perpetrators of financial abuse aim to make their partner completely reliant on them financially in order to control their behaviour. Financial abuse is known for being particularly difficult to identify as it often requires a deeper understanding of what is going on in a relationship to understand how financial decisions are being made and whether coercion is taking place. Sometimes, victim survivors themselves are not aware that they are suffering financial abuse. Those facing multiple layers of disadvantage and/or without the financial means to support themselves are often excluded from appropriate pathways of redress and support to address both the legal and non-legal needs that are common of victim survivors of financial abuse. The Redfern Legal Centre’s Financial Abuse Service seeks to provide free legal advice and support to those experiencing financial abuse in New South Wales. Through the sponsorship of corporate partners such as AMEX Australia, RLC is given the resources to help combat financial abuse and restore financial independence to victim survivors. |
What legislation is considered in this episode? | National Consumer Credit Protection Act 2009 (Cth) (‘National Credit Code’) |
What cases are considered in this episode? | In a prepared case study for this episode, we explore financial discuss the fictional case of Laila and Adrian. Our Case Study is based on various cases and is not intended to bear a resemblance to any real person’s case or experience. You can read the case study in full in the transcript for this episode. Through Adrian and Laila’s case study, we explore the issues and remedies concerning:
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What are the main points? |
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What are the practical takeaways? |
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Show notes | AFCA Approach to joint facilities and family violence (PDF download) ASIC Regulatory Guide 209 (PDF download) ABA Industry Guideline – Preventing and responding to family and domestic violence (PDF download) |
David Turner: | Hello and welcome to Hearsay, a podcast about Australian laws and lawyers for the Australian legal profession, my name is David Turner. As always, this podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm making complex simple. Joining me today on Hearsay to discuss their experiences in identifying and responding to financial abuse are Laura Bianchi, team leader and solicitor at Redfern Legal Centre’s financial abuse service, and Julian Charters, vice president and senior legal counsel at American Express Australia. Laura and Julian, thanks so much for joining me today on Hearsay. |
Laura Bianchi: | Thank you for having me. |
Julian Charters: 1:00 | Thanks for having us. |
DT: | Laura, tell us a bit about your career as a lawyer and how you came to be working with the financial abuse service? |
LB: 2:00 | I grew up in Perth and when I was studying there I did a couple of student placements at a local community legal centre which was where I identified that I wanted to work in social justice. My first job as a lawyer was as a barrister and solicitor at the Aboriginal Legal Service in Western Australia where I worked in criminal defence and also did some coronial inquest work for Aboriginal deaths in custody. TIP: By the way, if you’re interested in learning more about coronial inquests, listen to the episode of Hearsay we released just before this one, our interview with former NSW State Coroner Mary Jerram AM! I then relocated to Sydney and was a senior lawyer at the National Justice Project where I continued to work on coronial inquest matters, but also strategic litigation to improve health outcomes for asylum seekers in offshore detention. I started at Redfern in 2017, initially heading up the credit, debt and consumer law practice, which is where I identified that there was a significant unmet legal need for people who had experienced financial abuse in intimate partner relationships. And went about seeking funding to establish a dedicated state-wide service which was launched in 2019. |
DT: | That’s fantastic, it’s a really wonderful service and I’m looking forward to talking about it a little bit more today, especially the policy work you do as well through the economic abuse reference group. Julian, tell us a bit about your experience in this area, you’re senior legal counsel at American Express Australia, how do you come to be involved with the financial abuse service? |
JC: 3:00
4:00
5:00 | Well, partly having a sort of mid-career crisis, I think, you know working at a corporate, you kind of miss the element of private practice that allows you to give back to the community. And so, I sort of got to a point in my career where I really was looking for a bit of a change and working in the community space was something that was of interest. And so my partner said to me, “well, rather than quitting and having a total crisis, why don’t you volunteer somewhere and see if you like it? And so with that in mind, I volunteered at Redfern Legal Centre on their Thursday night credit and debit nights so they sort of cover a range of consumer problems from insurance claims that aren’t being paid to credit card debt and so I did that on the Thursday nights and really got a lot out of that, and so I did that every other Thursday night for a period of a few years. And then Laura sort of came into the service as the senior supervising solicitor, so I worked with her quite a bit. When my wife and I were expecting our second child, it became harder and harder to make the time to volunteer on a Thursday night. So I’d sort of mentioned to Laura whether there might be opportunities to do the work a bit more flexibly, you know, rather than actually turning up at Redfern every Thursday afternoon, like maybe sort of doing some remote work. And Laura sort of discussed this idea she had around financial abuse and the clinic, and that it might allow for remote working and I was sort of looking at bringing in corporate sponsors for the service and so that began a conversation around the financial abuse legal service which ended up suiting me well because it has enabled me to fulfil that pro bono function. To be totally honest, financial abuse wasn’t necessarily something that was at the forefront of mind prior to that point, but it sort of started my journey and interest in the area. And so the financial abuse legal service would provide us with an opportunity to provide sponsorship in terms of funding for Redfern Legal Service, but as well as providing an opportunity to put some of our solicitors, me included, into the service as volunteers and that would all be done in business hours which meant for me personally, it wouldn’t require such a commitment from my personal life which made things a lot easier. |
DT: | Fantastic! Now we’re going to do today’s episode of Hearsay a little bit differently to our usual episodes. Today we’re going to be working through a case study and it’s a case study that Laura has written for us today, but just to be clear, Laura, while this draws on your experiences with real life cases, this is a fictional case and doesn’t reflect anyone’s particular experience. |
LB: | Yes, that’s right. |
DT: 6:00
7:00
8:00
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| Fantastic, well without further ado, let’s meet our protagonist and antagonist, I suppose, in today’s episode: Laila and Adrian. TIP: Now this is going to be a bit of a long one so, bear with me while I read our case study in full, but if you ever want to review the facts during the course of this episode, you can access the full case study on the Hearsay website. Here we go! When Laila* met Adrian* they fell in love and their relationship progressed very quickly. They were building a life together so Laila wasn’t too concerned when their lease and utility bills were put in her name or when Adrian wanted to be added as a signatory to her bank account. After the birth of their first child, Adrian’s behaviour escalated. He was demanding and if she didn’t comply with his wishes he would have outbursts of rage which became more aggressive and emotionally manipulative over time. At first these were subtle but it eventually rendered her powerless and under his control. Laila was afraid of saying or doing anything that would set him off. She described it like walking on eggshells in her own home in order to protect herself. Adrian wanted an expensive luxury car but the lender said he would struggle to get a loan due to his poor credit history so Adrian told them to put the loan in Laila’s name instead. Adrian returned with Laila to sign the loan documents. Adrian told Laila to stay quiet and allow him to answer any questions that the dealer might have. Laila was not given an opportunity to speak to anyone alone, she was simply told where to sign and, with Adrian standing beside her, she was too afraid to say no. At the time, Laila was unemployed and caring for their two young children. She did not want or need a two-seater convertible car worth $70,000, and certainly couldn’t afford one. Laila already had a car when she met Adrian and this was suitable for her and the children. Adrian had exclusive use of the convertible and used the loan to further control Laila. He would threaten to stop making repayments if she challenged him and told her she’d be financially ruined if she tried to leave him. Laila felt trapped. Eventually, she managed to get help from a domestic abuse support service who assisted her to obtain a protection order removing Adrian from the home. When he left, Adrian abandoned the car and stopped making repayments on the loan, resulting in Laila being chased for almost $55,000. Laila also discovered that her driver license had been suspended as a result of $700 in unpaid traffic fines that Adrian had accrued in her name as she was the registered owner of the convertible. Laila didn’t have enough money to pay off the fines to regain her license, and unable to drive and with limited access to public transport in her area, Laila and her children were isolated from their support systems, including Laila’s DV social worker. When Laila sought legal advice about the car loan and the fines, she discovered that Adrian had provided false payslips in order to secure the loan in her name and had been hiding the fines notices from her. So that’s our case study about Adrian and Laila. Let’s hear more from our guests about how to untangle some of these issues. Now there are a few issues to unpack there, aren’t there? Let’s start with identifying the presence of financial abuse in this fact scenario. Here there’s some other indications of other forms of domestic and family violence, isn’t there? There’s emotional manipulation, there’s verbal outbursts, there’s these other kinds of abuse. But often financial abuse can be quite insidious in that it’s difficult to identify, is that right? |
LB: 10:00 | Yes, and it’s rarely identified by the victim survivor at least in the initial stages when it can be quite subtle. And what we know from research is that often that behaviour will escalate over time. And there may also be a particular life event that might trigger an escalation. So we can see in Laila’s case that initially when she started her relationship with Adrian and they were building a life together, there were a few initial signs like the fact that the lease and the utility bills were put in her name and not joint names or not equally between them and also that Adrian wanted to be added to her bank account. It’s not uncommon for decisions to be made when people are in the early stages of a relationship and they’re starting to have joint financial interests to be in a position where they don’t identify that these could be early signs of financial abuse. |
DT: | Julian, anything you wanted to add in terms of the signs of financial abuse? |
JC: | Yeah, what I would add to that and putting my American Express hat on here, it’s very difficult to identify financial abuse. You know by design, financial abuse is meant to be concealed from everyone. That’s how perpetrators of financial violence succeed. |
DT: 11:00 | Well I think it’s quite interesting that It’s not identifiable by providers of credit and, and that’s by design because they want to obtain credit as we’ll come on to see with the car loan a little bit later, under false pretences really to obtain credit for their own purpose, but under the name of the person that they’re inflicting this abuse on. But it’s also, and this is unique among other kinds of abuse, I suppose, it’s also often not identified by the victim survivor, as Laura said. |
JC: | Yeah, that’s right. And I think you know this scenario we’re talking about here was a situation where the lending happened in person. Can be very difficult in scenarios where the lending happens remotely, for example, if someone is applying for a credit card online to recognise a lot of those factors and particularly through the lifetime of a loan, being alert to those sort of factors is incredibly important but it’s very difficult to recognise. So you know it’s very important that banks and credit issuers like Amex have assistance in place to identify signs of financial abuse. And as you say, it may not even be recognised by the victims themselves at the time. That’s what part of the challenge is. |
LB: 12:00 | One of the important areas of work that we do in the financial abuse service is to think about ways that we can raise awareness about financial abuse in the community but also with industry and government, because we know that domestic violence is an epidemic in Australia and therefore it is the responsibility of every sector to think about how they can address this issue and support victim survivors. |
DT: 13:00 | And on that topic, let’s look at the first credit advance or provision of credit in this fact scenario, the car loan for the luxury car that’s in Laila’s name. In our facts here, Adrian and Laila are present in person when they’re applying for this loan. Laila doesn’t say a word, but she does sign the documents. What is the credit provider’s role or responsibility in a fact scenario like this to be on notice of the sorts of facts that might suggest a level of undue influence or financial abuse? |
LB: 14:00 | Over the last five years I would say there’s been a significant increase in an understanding of financial abuse, particularly in the consumer credit space. So we’ve seen a lot of the big banks undertake to be able to train their staff, particularly their frontline staff, in understanding what financial abuse is and how to recognise the signs of it. And so we’ve seen also the Australian Financial Complaints Authority approach documents that are made public which set out what the expectations are of credit providers when it comes to working with couples who may be seeking to obtain joint facilities or generally just identifying signs of financial abuse. In Laila’s case we can see that initially Adrian had contacted the lender and applied for a loan, but he was rejected on the basis of his credit report. And he then told the lender that he would return with his wife, and when he did that, it was clear from the fact scenario that Laila was not participating in any interview, answering any questions, or demonstrating that she in fact wanted that loan and was there voluntarily. So there were signs to the lender at that point where they were only engaging with Adrian and knew that he was the one that would be benefiting from the car that was under the loan. That there was some reason to make further enquiries in relation to whether or not Laila would actually receive any benefit from the loan. |
DT: 15:00 | I guess this fact scenario is a really good reminder that credit providers really have to have their incentives and their training set up, as you say, to identify financial abuse with that greater knowledge of the issue that’s come up in the industry over the last few years. Because there would be a lot of situations and, buying a car is one of them I suppose, where your credit products are actually being distributed by people whose incentives to lend responsibly might not be aligned with your own. I’m thinking of car dealers who are you authorised to offer finance for purchasers who might be very motivated to do whatever it takes to get Adrian the car he wants to buy because they have some commission to earn off the sale, even if that means encouraging Laila to buy that car instead. Julian, what from a credit provider’s perspective, should a credit provider be doing to make sure that their products are being distributed responsibly and not being distributed in these sorts of situations? |
JC: 16:00
17:00
18:00 | Good question. I think what you’ve touched on there David are a lot of the issues that we saw during the Banking Royal Commission where people ended up in products that weren’t appropriate for them, where responsible lending checks hadn’t been conducted, and to your point, where the incentives for frontline staff or distributors were sort of misaligned to the objective of responsible lending. And I think that also identified potential gaps in the law in terms of where those obligations sort of exist or didn’t exist, and that’s sort of, manifested in an area of reform around design and distribution obligations which are relatively new. So in terms of how that works under the new laws, your obligation is to identify your target market so your requirement is to undergo a target market determination and find out who your products are suitable for based on their needs and requirements and objectives, and then once you’ve determined who your product is fit for, which includes sort of excluding classes of people for whom that product would be unsuitable, so you’d have to pay special attention to vulnerable individuals. Once you’ve got that idea of your target market, you’re then required to consider how you distribute your products to ensure that you’re only distributing those products to that target market. So, the first part of that is the design obligations which is designing products that are fit and suitable for a class of consumers. And then the second part of that is how you distribute. And so you have to look across your distribution partners, so that could be in our instance we acquire cards through professional organisations like law societies, accounting practices. You look at our airlines, Qantas, Velocity all require cards for us. There’s a whole range of channels for which we distribute, some of which allow you to gate and ask questions to sort of weed out people for whom a product might be appropriate and others that don’t. So you kind of have to work within the confines of those channels. You know I think, this sort of comes back to my earlier point, when it comes to financial abuse, it can be quite difficult because when you’ve got someone sitting at a computer answering very basic questions around income and expenses, you don’t ask them, “Well hey, are you a victim of financial abuse?” Because a) they’d have to identify that they were, and to the earlier point, often many of the victims don’t actually recognise it. It can be difficult to recognise. And secondly, they’re too afraid to admit to it because you know they’re in a situation where their safety is in threat, so it can be very difficult when it comes to online channels to sort of identify those types of problems. |
DT: 19:00
20:00 | Absolutely, you’d expect that the financier here would have a TMD or a target market determination that would identify that someone who was unemployed and not earning any money at all, let alone a handsome salary, is probably not a suitable consumer, probably not the sort of consumer for whom this particular finance product is right for and the distributor would be under an obligation to notify the credit provider that they’ve distributed a product outside of the distribution guidelines. TIP: The Design and Distribution Obligations (DDO) provisions came into force on the 5th October 2021, after a lengthy delay to their effective date brought on by the COVID-19 pandemic. The purpose of the provisions is to ensure that consumers are not offered financial products that are inappropriate for their financial situation. The DDO obligations apply to issuers of a financial product, who must consider the key features of their product and determine an appropriate target market for it, what’s called a target market determination (TMD). The target market for a product means the class of consumers for which the product is suitable, having regard to their needs, their financial situation and their objectives. Both issuers and the distributors of a financial product must take reasonable steps to ensure that a product is distributed only to the target market, and report on whether the product is being distributed outside that market. The target market determination itself also needs to be monitored for fitness – a large proportion of defaulting customers, or a lot of complaints about the product, might indicate a need to revisit that target market determination. We’ll include a link to ASIC’s Regulatory Guide on Design and Distribution Obligations in the show notes to this episode. And Julian, when you’re talking about responsible lending there, what is the focus of the responsible lending obligations under the National Credit Code? What is the code really requiring lenders to obtain from an applicant for credit? |
JC: 21:00 | So the National Credit Code and the responsible lending obligations under them, it’s one of those fantastic double negatives, so it requires you to assess whether a facility is ‘not unsuitable’ for the individual, and so that requires you to do an assessment of suitability which really lends to I guess two key obligations which are inquiries and then verification. So inquiry into their financial position and then verifying that information they provide about their financial position which would be income and outgoings, bank statements, verifying that they’re accurate and correct. So the focus from a lending perspective is heavily in terms of pure financial hardship and debt capacity rather than, you know, necessarily weeding out issues around financial abuse. So it feels like there is a slight gap in terms of the law in that regard. |
LB: 22:00
23:00 | I agree with that, however, under the National Consumer Credit Protection Act, section 130, it does require that an assessment make reasonable inquiries about the consumers’ requirements and objectives in seeking a loan, which is really what we use as the hook for responsible lending when it comes to financial abuse. That’s supported by the ASIC Regulatory Guide 209 which really talks about when a lender needs to get further information or make further enquiries. And it actually has an example in there of a financial abuse case and the fact that the lender needs to turn their mind to whether or not a borrower is going to receive a substantial benefit from that loan. So that’s sort of the act and the regulatory guide that we would point to. But then there’s also, I guess, a patchwork of other codes and guidelines that can be used to support an argument around a lender’s responsibility to assess and identify financial abuse. So we would, in a banking context, point to the ABA Guide in relation to family violence. But for other lenders, the AFCA joint facilities and family violence approach document sets out a lot of really useful expectations on a lender. And it’s essentially a case of putting those things together to form an argument that there is a responsibility on the lender. TIP: And by the way, a link to those guidelines will be in the show notes for this episode. |
JC: 24:00 | I think I would just add to that, a lot of that guidance, that sort of patchwork you refer to is focused on joint facilities. It can be difficult when it’s an individual applying for a loan, where the other party is not visible, they may be under duress for example, particularly when it’s a fairly straightforward facility like a credit card where the application happens online. Or where you’re buying a car and you’re in a car yard, clearly your objective is to buy a car. Not sure how many of those car sales people see their obligations to extend much further than that in terms of making enquiries, so the focus then just becomes on can they afford it? Yes or no. And that’s the beginning and end of it. |
LB: 25:00 | And I guess that I shouldn’t dismiss that as being also something that we point to as well. We often see a perpetrator under report liabilities, over report income, on credit applications and they can also be important indicators to assess whether or not there might be substantial hardship. And in Laila’s case we can see that there were actually false payslips provided to the lender. In my view there would be circumstances you know in Laila’s case, that should have led the lender to make further enquiries as simple as calling up that workplace to verify that she was employed there. That’s not, I don’t think, a terribly onerous thing for them to do in circumstances where the payslips have been provided by Adrian, who they know they’ve knocked back from a loan just a few days prior, that you know there’s been signs of financial abuse or some level of intervention by her partner in that interview process and we know that payslips are one of the sort of easiest ways of falsifying documents. So I think that there are some important considerations when it comes to accepting that financial information as well. |
DT: 26:00 | There’s almost a level of constructive knowledge there, isn’t there? That at some point you have to be on notice of an obligation to make further enquiries. Though you say, Julian, there’s probably a lot of distributors of financial products, not necessarily the issuer, but the distributor whose mind is on very different things, like their commission. |
JC: | And the other thing I guess, tell me if you disagree here Laura, but the emphasis of those obligations is at loan origination, so when someone comes in to apply for that loan you might see indicators of financial abuse though through the life of the loan or the credit facility, where someone you know like someone calls in and says “my partner’s using my credit card” for example. So then you’re on notice that facility isn’t for them, they’re not the beneficiary, therefore it’s not suitable. Does that trigger a responsible lending obligation at that point in time if you didn’t know it at the outset? |
LB: | Only if they were applying for a credit limit increase. |
JC: | Correct. So that’s you know again one of the gaps. There’s no trigger event where you’re not applying for a new card or a credit limit increase, then the obligations arguably don’t apply, which suggests a bit of a gap. |
DT: 27:00 | Laura, just on Julian’s point around the provision of credit online and making these sorts of applications online, is the ability to obtain credit without a face to face interview, and I’m thinking especially about the kind of technology-enabled payday lenders that exist now, as well as certain buy now pay later products, does that complicate your job in terms of responding to financial abuse? Have you seen cases in your experience where it’s been quite difficult to achieve a remedy for a client because of that interposition of the screen between the credit provider and the customer? |
LB: 28:00
29:00 | Yes, that’s correct it does provide both a more challenging environment to be able to assist victim survivors of financial abuse in, but I think it also creates a situation where it’s easier for perpetrators to commit financial abuse. It creates an environment where a person’s partner is able to sit behind a computer screen and obtain credit, either in both names or in their partner’s name, without having to overcome some of the barriers that are in place when they have to be face to face with a credit provider. It removes the ability for that credit provider to be able to observe the way that the couple might be interacting or answering questions in an interview, and it also creates a circumstance where the victim survivor may not even be aware that the credit is being obtained in their name. I think we can all think about our own relationships between our family and our close friends and the information that those people know about us that would make it very easy for somebody to essentially use that personal information to obtain credit contracts in your name without you even being aware of it. Your partner would know all of the answers to those secret questions, probably also know some of your banking passwords or your commonly used passwords. So an environment where we’ve got more of these credit contracts moving online does, in my view, facilitate financial abuse and in the COVID-19 environment I think that we will see in years to come, a significant increase in the number of people coming forward who have experienced financial abuse while they’ve been in lockdown with their partner and more of these transactions have moved to being electronic. |
DT: 30:00 | And one of the things that Adrian does in this fact scenario is that once he’s obtained the loan under Laila’s name, not only is that a benefit to him in terms of having this car that he wanted, but he then has that over Laila as another form of control that he can use the threat to default on the loan and create consequences for Laila as another form of control. Laura, do you see that often? The threat of default as kind of a further way to commit financial abuse? |
LB: 31:00 | Absolutely, it’s one of the most common scenarios that we see, and it creates a situation where a victim survivor may feel like they’re unable to leave a relationship, and if they do leave their relationship they are more likely, statistically research shows, to return to the relationship as a result of the financial hardship that they experience. And it also is an additional barrier for people who might be on partner visas who have concerns about what their debt might mean for them if they don’t have a good understanding of the way that the debt collection system works in Australia. And they’re often told that the debt could be in some way impacting on their visa, which is very concerning for them. And is not in fact true. |
JC: 32:00 | I was gonna say the other thing that it does is that it requires the victim and the perpetrator to continue to be in contact. So in order to resolve that situation, you might need someone to take legal ownership of a car, or you might need someone to do something, speak to the bank for example, and so constantly that requires the victim to call the perpetrator to say, “hey, I’m getting this letter, can you go and speak to the bank” and it keeps that line of communication open, which is part of the whole control structure is that there’s that sort of need, you keep going back and back and back, but you know from the victim’s perspective, it’s also you know re-traumatising to always go and have to speak to your abuser essentially and that’s the difficulty when it comes to resolving some of these solutions the solution is dependent on the perpetrator being cooperative. And so that’s where I think you know credit providers and banks have an obligation to create resolution processes that don’t require that level of interaction where they can speak directly to the victim and solve problems without talking to the perpetrator or without requiring that to happen. And I think you spoke about payday lenders previously, depending on sort of where you sit in the scale of lender, from the top banks who might have quite good systems and controls for dealing with financial abuse. You still have plenty down the other end who have nothing in place for victims when it comes to trying to negotiate a resolution. |
DT: 33:00 | And I suppose from a policy perspective, who are making the kinds of loans for the kinds of purposes that don’t even require them to. They might not have a credit licence, they might not be obliged to be part of an external dispute resolution scheme, they might have no obligation to be aware of this issue or to be motivated to solve it. Let’s talk about Laila’s attempt to make a clean break in this situation. Eventually she’s able to leave Adrian with the help of a support service who help her to obtain a protection order that removes Adrian from the family home. Laura, the availability of protection orders, here Laila and Adrian, again there’s other circumstances of abuse in the relationship Adrian’s verbally abusive, he’s emotionally abusive, is it possible to obtain a protection order or some kind of intervention by the police or the courts when there’s only circumstances of financial abuse? |
LB: 34:00
35:00 | No, unfortunately in New South Wales, the Crimes Personal and Domestic Violence Act 2007 (NSW) specifies only certain offences for which a person can seek a protection order, and most of those are violent offences. It’s not actually possible in a scenario where there is only economic abuse for somebody to obtain protection in New South Wales, which is quite distinct from other states where the definition for domestic and family violence includes forms of abuse such as emotional, psychological, coercive or financial. TIP: Unfortunately Laura is right here; NSW doesn’t afford the same legislative protections against financial abuse as some of the other states. For example, the Family Violence Protection Act 2008 (Vic) addresses ‘economic abuse’, which is defined in s 6 of that Act, to be: behaviour by a person… that is coercive, deceptive or unreasonably controls another person, without the second person’s consent—
That definition of course sounds very familiar to Laila and Adrian’s case. The Victorian Act also includes examples of economic abuse in the legislation, such as:
If Laila’s case happened in Victoria, she would be able to obtain a protection order under their legislation – something she would also be able to do under some similar provisions of Domestic and Family Violence Protection Act 2012 (Qld). |
DT: | So it sounds like NSW is really lagging behind in that area in terms of having a remedy to allow as Julian was saying to allow a victim survivor to break from the perpetrator because there’s no protection order or like order available. |
LB: 36:00
37:00 | Yeah, that’s correct. There was recently an inquiry in New South Wales in relation to coercive control and one of the recommendations that came out of that report was for the definition of domestic and family violence in NSW to be reconsidered. So there may be an opportunity to include economic abuse and financial abuse in that definition moving forward. TIP: Despite the absence of legislative provisions relating to economic abuse in NSW, in June 2021 the NSW Joint Select Committee on Coercive Control published its final report on the criminalisation of coercive control. Previously, Tasmania was the only Australian state or territory to have criminalised coercive control behaviour. The NSW Committee’s paper included a definition of coercive control as a ‘pattern of abuse that degrades, humiliates and isolates victims, and takes away their freedom and autonomy.’ The paper identified that this usually occurs through a ‘gradual escalation of tactics like isolating their partner from their family and friends, humiliating them and putting them down, controlling and tracking their movements, and taking away their ability to make decisions about things like what they wear,’ and importantly for the topic of this episode, ‘how they spend their money.’ Financial abuse is just one form or manifestation of coercive control. |
DT: 38:00 | Now, when Laila does leave Adrian, he abandons the car, stops making repayments, Laila’s in default of the loan in her name, and is pursued for a $55,000 shortfall on the loan. What kind of remedies are available here for Laila? I guess reminding ourselves of your point, Julian, that often these remedies require the cooperation of Adrian and there might be very few remedies that Laila can pursue alone. What’s her first step and does she have to do that with Adrian’s support, or is there some kind of remedy that she can seek on her own? |
LB: 39:00
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43:00 | So in Laila’s case, the loan was in her name only, so she can seek to resolve that loan without Adrian’s involvement, however, we often see a number of joint facilities, so loans where both partners are on the contract and it is possible for each borrower individually to seek an outcome, and it specifically states in the Australian Financial Complaints Authority (AFCA) approach to joint facilities and family violence that a lender can work with one borrower only in relation to an outcome which could include financial hardship. So in Laila’s case, the first step to resolving this would be to first make a complaint through internal dispute resolution direct to the lender. Basically, internal dispute resolution provides the consumer with access to a fair, timely, and effective dispute resolution process, which is actually a requirement under the law. So ASIC requires that credit licences have an internal dispute resolution framework and are also members of an ASIC approved EDR scheme. So an external dispute resolution scheme and at the moment that’s the Australian Financial Complaints Authority. So in Laila’s case, the first step would be to make a complaint on the basis of the responsible lending issues that we’ve discussed, so raising the fact that the loan was approved in circumstances where our financial abuse was, arguably, identifiable by the lender and that further inquiries should have been made in relation to whether she would obtain a substantial benefit from the loan. The IDR complaint would be usually in writing and directed to the IDR team for that lender where they would have for a standard complaint 30 calendar days to respond. And if that response was not one that Laila was happy with, or content with, then she would have the option of essentially re-filing that complaint with the Australian Financial Complaints Authority and starting the process of EDR by usually at first a conciliation which would be facilitated by a case manager from AFCA. If it was not possible to resolve that complaint by negotiation, then the AFCA complaint manager would provide a recommendation to the parties. At the point of a recommendation, if both parties accept the AFCA’s position then they can enter into a settlement on that basis. However, if one or both parties don’t accept that recommendation, then the complaint will move to an Ombudsman where an Ombudsman will make what’s called a determination. It’s quite a good process for consumers because it’s free, it’s independent, despite the fact that it is funded by industry, but there are no costs associated for the consumer. So if at the point where they receive a determination the consumer is happy with that decision and they accept it, it becomes binding on the financial firm. And if they can’t reach a point through that determination process that the consumer is happy with, then they still have the option to take the matter to court, provided there’s obviously merit and it’s within the time limit. TIP: So to summarise, in Laila’s case, one possible remedy available to her would be to commence internal dispute resolution complaint on the basis that the lender failed to comply with their responsible lending obligations under the National Credit Code, specifically by not making reasonable inquiries about Laila’s requirements and objectives in circumstances where there were indicators that Laila may be experiencing financial abuse and may not receive a substantial benefit from the loan, for example although Laila was the sole borrower, it was Adrian who picked the vehicle, negotiated the loan and handled all the communication. Laila was seen to be taking instructions from Adrian when signing the documents, Laila was not spoken to independently, away from Adrian. And Laila was mostly silent – Adrian did all the talking; all of which suggests that Laila was unlikely to receive a substantial benefit from the loan that she was taking out in her name alone. The lender also failed to verify the reliability of Laila’s payslips in circumstances where payslips are known to be easily falsified and were provided by Adrian who had been refused a loan just the week before by the same lender. Now, depending on the outcome of the internal dispute resolution, Laila could sell the convertible or surrender it to the lender for auction with any profit being credited toward the outstanding debt, or the lender could agree to waive the remaining debt. In the internal dispute resolution process though, all those possible outcomes would require Laila and the lender to reach agreement on settlement terms. |
DT: | Obviously Redfern Legal Centre’s financial abuse service clients will have the benefit of assistance with any AFCA complaint they make, but is it common for AFCA complainants to be legally represented, or can you make a complaint without representation? |
LB: 44:00 | Most complaints I would say usually are without representation. Community legal centres do provide representation for people that may be experiencing vulnerabilities, but it is designed to be a process that consumers can navigate without legal representation. In our case, we would love to be able to represent everybody, but as a state-wide service we obviously have to decide how we can allocate our resources to ensure that we have the biggest impact. So we tend to prioritise matters that are quite complex in legal nature and will require strong advocacy. Obviously it’s not a court process, there isn’t the rules of evidence and it is sort of easy for consumers to navigate it, there is obviously still a significant power imbalance between a consumer, particularly somebody who’s experienced family and domestic violence to go through that process and be really facing somebody on the other side who has quite significant knowledge of the financial services space and an understanding of the laws that regulate that. So it is desirable for somebody who has experienced family violence to have an advocate and to have a support person to help them navigate that process. |
DT: | And I suppose also to navigate the AFCA’s own terms of reference, because they can’t consider all complaints, can they? |
LB: 45:00 | No, there is some limit to what they can consider, however, we have found that there’s been no issue with any of the matters that we’ve had at Redfern in getting them to be considered by AFCA because they do tend to be under the limit or the cap that AFCA sets in relation to the amount of the credit contract or the type of the credit contract. |
DT: | Now in Laila’s case, what are the remedies that either through internal dispute resolution or external dispute resolution she could reach by agreement? Or otherwise with the lender? |
LB: 46:00 | So we see a lot of cases like Laila’s and we usually seek a remedy that would result in Laila selling the vehicle or surrendering it to the lender, who would then auction it and any profit being credited towards the outstanding debt. Usually the lenders are very willing to at least accept that initial stage and then what we try to negotiate is a waiver of any remaining debt because unfortunately vehicles are a depreciating asset and it’s often the case that it’s not possible for the vehicle to be sold for an amount that would cover the full outstanding debt, and so it is important to ensure that if you are advocating for a client like Laila, that you’re raising the responsible lending issues to leverage an outcome that results in her not having to pay any of that remaining debt on the basis that she should never have had the loan in the first place. |
DT: 47:00 | Julian from your perspective, I imagine there are some financiers who would say, “well, unless we’re legally obliged not to pursue the balance of that debt, why on earth would we agree to waive it unless an Ombudsman or a court requires us to?” What are some of the reasons why a credit provider would agree to an arrangement like this by consent? |
JC: | So I think the simple answer is that it’s the right thing to do. And I think a lot of corporates have made commitments under corporate social responsibility statements to the community in relation to these types of social issues. And so from that perspective there is also an element of self-interest which is there is often reputational harm when these things go wrong. I mean, I don’t think you need to look much further than what happened during the Banking Royal Commission where you have situations where banks did the wrong thing and you see what happened to their share prices and to the share prices of organisations like AMP. So there is an element of self-interest to it, but there is also this idea that it’s part of being a good corporate citizen and it’s the right thing to do. |
DT: 48:00 | Absolutely. Now for those organisations that are lending for purposes that don’t require them to hold an Australian credit licence, that might be less concerned with their reputation in the eyes of the Australian public, perhaps if we were to change the scenario a little and Adrian was instead borrowing to support his failing business from a lender of last resort – what sort of remedies would be available for Laila, then? Because she couldn’t go to an internal dispute resolution process, there probably wouldn’t be one, and they wouldn’t have to be a member of AFCA? |
LB: 49:00
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51:00 | We see this actually come up quite a bit in a couple of different scenarios. One common scenario is that a lender has allowed a borrower to essentially sign up to a business loan, or a non-consumer loan using an ABN or a very old ABN, that means that they don’t have to comply with any responsible lending obligations because it’s not a consumer contract. And they will also have to get them to sign a business purposes declaration. So one of the things that we would look at is: was the loan in fact for a business purpose, what was that money actually used for, and whether or not the business purposes declaration can be challenged either on the basis that the loan was wholly or predominantly for a non-business purpose, or whether the business purposes declaration was in fact not signed with full consent of the borrower. We also see circumstances where a person’s partner has essentially appointed them as a dummy director of a company that they control. And they have then gone on to accrue business debts that fall to the liability of that director, being the victim survivor who has actually no knowledge or control over that the business itself. There’s also tax liabilities that flow from that, so it can get very complicated very quickly when there is a business involved and there are very few rights because they’re not given the consumer protections that they can get under the NCCPA. So we often see people who come to us after discovering that they actually can’t get Centrelink as a result of being a director of a company that they didn’t even know that they were the director for. So there’s a lot of flow on impacts for people once they leave a relationship if they’ve been tied up in all of these business issues and it’s an area that is critical to them being able to move forward and achieve any sort of financial empowerment or financial independence. However, there’s very few legal services that are able to assist with this on a pro bono basis because as you can imagine business and corporations law is not typically the area of expertise of a community legal centre or a legal aid service, so our service is quite unique in that we will provide at least some preliminary advice in relation to these issues. And the fact that we have corporate partners assist, allows us to leverage off their corporate skills and knowledge and those important pro bono partnerships in order to ensure that those people can get some assistance in navigating those business, tax and company issues. |
DT: 52:00 | One of the first pro bono cases I ever did as a lawyer was for a man at risk of homelessness whose estranged father had appointed him as a dummy director and shareholder of a company which invested in property. And he discovered that he was a director and shareholder of that company when he found that his Centrelink payments had been reduced by 75% because of the dividends that the company had declared. So it’s on an awfully Byzantine system to deal with the social security system, especially if you don’t know why you’ve had your payments reduced and you don’t know who to turn to, so it’s fantastic that your clients are able to access some of that corporate legal advice to deal with that issue. |
LB: 53:00 | Yeah, and that’s also a really good example of the fact that people will often present with really a web of debt, a web of legal issues when they are finally in a position to be able to get legal advice. And it’s not always as straightforward, I guess as the case that we have got here with Laila, and where there’s just two distinct legal issues. Often people do present and they don’t even know what their liabilities are. So one of the really critical things that I think we can do as lawyers to help them with understanding what their position is, is to assist them to get a copy of their credit report, which they can get for free, which is goes some way in being able to provide a little bit of a picture as to what their partner may have signed them up for during the relationship, and that is often a really good start in trying to unpack the different issues that might be involved for that person. |
JC: | The problem sometimes is as you unpack that and as you go down the rabbit hole, it gets deeper and deeper, and then you discover things that even the victim hadn’t been aware of and it’s quite depressing really sometimes because you know they might think they’re in trouble and then you do further investigation and you realise they’re actually in more trouble than they thought. |
LB: 54:00 | Yeah, and often they will come to a lawyer with what then what they think is their most pressing issue or their most urgent legal issue, but by trying to approach the client as a whole person and get an understanding of everything that’s going on in their life, we as experts can identify other issues that are actually probably more important and urgent that they would not have necessarily thought to raise. So that’s often how we identify the business and company issues, because they might initially present with a question about their Centrelink or, you know, another legal issue that actually isn’t really going to be resolved unless the root cause problem is addressed. TIP: Now in previous episodes of Hearsay, we’ve covered the topic of assisting vulnerable clients who face a multitude of both legal and non-legal issues before. For example in Episode 7 ‘Invisible Needs – Advising Vulnerable Clients’ with Ali Mojtahedi and Joshua Strutt from the Immigration Advice and Rights Centre and Leona Bennett from Southern Waters Legal. In the second half of that episode, we discuss with Leona on how to advise clients experiencing financial abuse and her experiences witnessing financial abuse as a family lawyer. So if you’re interested in more financial abuse content, why not give that episode a go after this one? |
JC: 55:00 | A lot of your role then, would you agree Laura, it’s like issue spotting and then triage, so you’re trying to work out what the issues are. There might be a family law component, there might be a responsible lending component, there might be a need for financial counselling and it’s sort of getting all the information together, breaking it down into its component parts. Some of it will be like going to another referral pathway, briefing out to a financial counsellor, bringing in a specialist family lawyer, and then just kind of having a, I guess, a hit list of prioritisation and just sort of going through things one by one by one. And as you get through every one of those steps, it’s like the burden is just kind of lifted slowly and slowly until ideally you get to a point where they’re back on their feet again. |
LB: 56:00
57:00 | Yeah, that’s right, and that’s probably one of the most rewarding things about working in the financial abuse services that you can see as you start resolving some of these issues you can see the client regaining some of that financial independence, some of that control over their life and that they’re being freed slowly from their partner and the financial abuse that they’ve experienced. And you’ve touched on a really important point about the various non-legal needs that somebody who’s experienced financial abuse might have as well. And we’re actually just coming to the end of a project where we’ve been researching and consulting with both community organisations and people with lived experience to design a best practice model for a holistic service that brings together both legal and non-legal supports. Because we’ve identified in the first few years of running this service that clients have diverse legal needs, but those legal needs are best addressed when they’re well supported by financial counsellors, social workers, and other supports that they really need to be able to get themselves in a position where they are able to deal with the legal problem. Otherwise they will fairly disengage from the legal process because it is stressful, it is really time consuming, and if they’re not in a place where they feel like they’ve got a team around them, it can be really difficult to have the energy to go through that. So I think that’s something that you know is best practise and we’re working towards increasing funding to be able to provide that more holistic service to clients. |
DT: | That’s fantastic that you’re developing that model because I think in your experience, you have this kind of earned or developed experience in identifying those non-legal needs in triaging as you said, Julian. But for a solicitor in private practice, one of our listeners who might have a client experiencing financial abuse and advising someone on how to deal with some of these issues, they might not have the experience with that kind of interdisciplinary response to abuse to identify what those other needs are. |
LB: 58:00 | That’s true. I think that’s one of the good things about having local community legal centres. I know I can speak for my service when I say that we’re always really happy to have a phone-a-friend type conversation with another practitioner if they’re trying to support somebody who’s experiencing financial abuse, and they’re not quite sure what supports they might need or what strategy even to approach a matter with. We’re in a fortunate position, we’re specialists and this is what we have done for many years. But I can understand that not every service has got that experience, or has the referral contacts that we’ve got, so we’re always very happy to share that, but I think it’s just important to remember that when you are working with somebody who’s experienced any form of family violence, the best place to start is by really thinking about them as a whole person and what are their most primary needs at that point. ‘Cause they’re in the best position to tell you that. I think listening to the client is really important, and that goes a long way in also building that relationship of trust with them. |
DT: 59:00 | Absolutely. Returning to Laila’s situation and the last one of her issues that she’s grappling with after leaving Adrian, she discovers that her licence has been suspended because she has $700.00 of unpaid fines that Adrian’s accrued in her name, driving the convertible registered in her name. And of course, that has a knock-on effect for her because she’s then unable to access the kind of support services that we were just describing, she was unable to access her social worker, for example. What can Laila do to get those fines out of her name and have her driver’s licence reinstated? |
LB: 1:00:00
1:01:00 1:02:00
1:03:00
1:04:00 | So there’s a few things that Laila can do, depending on whether or not she feels safe to nominate Adrian as being the driver. And we see this come up a lot in our practice, and it really has to be considered on a case-by-case basis depending on the safety of the client at that particular time. So the mechanism to essentially have those fines transferred to Adrian would be to complete a nomination of driver form. There is some limitations with that though, there is a time limit upon which you need to do that and it’s actually improved in the last 12 months, which is great. It was initially 28 days from the time that the penalty notice was issued, which was frankly just way too short for somebody experiencing financial abuse because they may not be aware of it at that time, or they may have not been in the position to deal with it as a result of the control that they’re experiencing in their relationship. But since the 1st of July 2020, that has been extended, so essentially now it is, you can nominate the driver provided that there it’s still within the limitations period for the other driver to be pursued for that fine. So in most cases it’s about 12 months now, which is a significant improvement. So Laila could do that if it was safe for her to nominate Adrian as the driver, but for many people who have experienced financial abuse that can actually be something that could trigger their ex-partner and create a situation where they are really unsafe, and so there’s still unfortunately quite a few issues for people that can’t nominate their partner as the driver. They can seek a review, but they will be required to provide evidence, probably both about the driver and why they can’t be nominated. So they’ll have to share quite a bit about their experience of family violence and if that review is unsuccessful, then the only option that they would have is to have the matter taken to court, which would again require evidence and is also a very stressful and re-traumatising process, particularly given that there’s very limited legal representation for matters at that level of the court. There’s also the option of seeking a write off of the debt, but that would only deal with the debt itself. It wouldn’t remove the fines from Laila’s traffic record or deal with any demerit points that might have stemmed from those fines. So we’ve got a situation at the moment where in, at least in New South Wales, there’s still a bit of an inadequate system or response to family violence when it comes to fines and we would really like to see some improvement in this area because unfortunately we see a lot of, mostly women, who have had fines accrued in their name, but they were not driving the vehicle. TIP: So just to summarise that part, Laila could contact Revenue NSW to request a hold on collection activity and reinstate her licence while dealing with the unpaid fines, and, if it’s safe for her to do so, she could nominate Adrian as the driver as per the Fines Act 1996 (NSW). Now this has to be done within 12 months of the date of the penalty notice, which seems short but prior to 1 July 2020, you actually had to nominate the other driver within 28 days of the penalty notice due date which understandably is very difficult if the financial abuse delayed the victim survivor from knowing about or dealing with the fine. Now where the victim survivor does not feel safe to nominate the driver, because of a fear of revenge or reprisal for doing so, at the moment there are pretty inadequate options for removing liability for the fines. If there are no demerit points that flow from the fine and/or if the victim survivor isn’t concerned with having a traffic record, the victim survivor may choose to seek a write off of the debt. But even if Revenue NSW agrees to that, it still leaves a black mark on their traffic record. |
DT: | And tell me a little bit about the economic abuse reference group that the Redfern Legal Centre is a part of that’s doing some of the policy work in this area? |
LB: 1:05:00 | So with the fines work we’re actually trying to advocate for better outcomes through the Economic Abuse Reference Group NSW which we coordinate. Essentially, the Economic Abuse Reference Group is an informal group of community organisations which work collectively to influence government and industry responses to reduce the financial impact of family violence. The group originated in Victoria following the Royal Commission into family violence there and has since grown to include our formal chapter in New South Wales, which is coordinated by Redfern Legal Centre but also organisations around Australia who work in financial abuse and want to contribute to policy and law reform in this space. So our members include domestic violence support services, community legal centres and financial counselling services. And our recent work includes things like appearing before the Senate Economics Legislation Committee in Canberra to give evidence about the impact of the government’s consumer credit reforms for people experiencing economic abuse. We also have input into industry codes, guidelines and other government policies that can hopefully improve outcomes for people experiencing financial abuse. |
DT: 1:06:00 | Fantastic. Well, we’ve talked about a few different issues in financial abuse today, we’ve talked about obligations on credit providers to lend responsibly, we’ve talked about internal and external dispute resolution, we’ve talked about state debt and some of the challenges in that area, and some of the needs for reform in that area. Laura, if you were going to leave our listeners with one tip today about identifying and responding to financial abuse, what would that one tip be? |
LB: | If you’re supporting somebody who has experienced financial abuse, I would recommend assisting them to obtain copies of their credit reports which can really shed light on any liabilities they might not be aware of and assist you in understanding what you might need to help that person with. |
JC: | They’re now free, aren’t they? |
LB: | Yeah, they’ve always been free, but you can get them more frequently now. |
JC: | That’s right. |
DT: | And Julian, from the perspective of the credit provider, if you were to give one tip to our listeners, if they’re advising someone who’s engaging with a credit provider to resolve an issue like this, what would that tip be? |
JC: 1:07:00 | Well, I think the simple answer is a fairly pragmatic one, which is to appeal to their reputational interests. That’s always going to convince a corporate I think more than a strictly legal outcome. You need to sort of persuade them why it’s the right thing to do. I’ll just anecdotally share this, but people often talk about this idea of a pub test. When I think about these types of issues on the other side of the fence I have what I call the ‘A Current Affair test,’ which is like if Tracy Grimshaw had this story and she’s on A Current Affair, how is your organisation going to sound? So I think that’s the approach that I would look at these issues from in a situation where someone has suffered from financial abuse and you’re for example, making it difficult for them to come to seek a refund or to have a debt waived, how is that going to look when it’s on A Current Affair? How are you going to look as an organisation? And I think that more than anything, is compelling to a major corporate than throwing the book at them so to speak. |
DT: | That’s a really great practical tip, I’ll have to remember that one for my next negotiation with American Express. Laura and Julian, thanks so much for joining me today on Hearsay. |
LB: | Thank you so much for having me. |
JC: | Thanks David. |
DT: 1:08:00
1:09:00 | As always, you’ve been listening to Hearsay The Legal Podcast. I’d like to thank my guests today Laura Bianchi from the Redfern Legal Centre and Julian Charters from American Express for coming on the show. Now as I mentioned during the show, we covered financial abuse a little bit in Episode 7 of Hearsay, specifically in a family law context, so you might want to listen to that episode next if you want some content in this area. Or, you might want to learn more about elder abuse which can comprise or include financial abuse. If that’s the case, listen to my interview with Adeline Schiralli about the basics of elder law; that’s Episode 18. If you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self-assessed, as you well know, but we suggest this episode entitles you to claim a substantive law point. More information on claiming and tracking your points on Hearsay can be found on our website. Hearsay The Legal Podcast is proudly supported by Assured Legal Solutions a boutique commercial law firm making complex, simple. You can find all of our episodes as well as summary papers, quizzes, transcripts and more on our website. And if you’re a subscriber, we’ll let you know by email everytime we release a new episode. And by the way, our free trial episodes are now available on Apple Podcasts and on Spotify, so if you like us give us a rating on your preferred platform and maybe tell a friend to listen to an episode too. Thanks for listening. |
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