Taking action to help protect victims of family violence, ASIC has embraced a new policy, which family lawyers have regarded as an impressive and positive step forward to protect victims of financial abuse.
Background – ASIC to protect victims of family violence
Licensees have raised concerns with the consumer watchdog, insisting that including specific credit information in the credit reports of victims of family violence (specifically victims of financial abuse) could place those consumers at risk of further harm. Following this, ASIC has implemented a more flexible policy to protect vulnerable consumers.
ASIC has enacted a temporary no-action position to authorise large banks (“eligible licensees”) to withhold the reporting of specific credit information on consumer credit reports in cases where disclosing the information could lead to consumer harm.
For example, a victim may hold a loan jointly with their partner (who is the perpetrator of family violence) and is experiencing financial hardship. In addition, situations may occur where a victim-survivor does not want their partner to know they have entered a financial hardship arrangement with an eligible licensee. In such circumstances, ASIC’s position will permit eligible licensees to help the victim by withholding financial hardship information on their credit report.
ASIC acknowledges that these risks for victims could also surface when a credit provider or lessor informs a joint account holder of the outcome of a survivor’s request for hardship assistance per the credit provider or lessor’s legal obligations; ASIC said in a statement.
Accordingly, ASIC has adopted a no-action position that enables credit providers and lessors to withhold notices to joint account holders in these circumstances.
Lawyers welcome ASIC efforts to protect victims
Family lawyers have welcomed the new measures. Three firms revealed how the new policy might benefit their clients and other victims of family violence.
Justin Dowd AM, head of growth and markets at Australian Family Lawyers, welcomed the announcement and called it a small but significant recognition of the importance of providing all possible protection where justified.
It will affect that persons in need of protection need not fear that ASIC will disclose any application they make for financial assistance on hardship grounds to the other party. Apart from a fear of retribution, it should also give the person in need of protection some additional financial assistance when it is most needed. It will provide a layer of protection and confidence when most needed,” he said.
This is part of the ongoing and increasing recognition of family violence in its various forms, including financial coercion and adds to the culture of the legal system to provide whatever practical assistance is possible. It reiterates to family lawyers and society that family violence must be recognised and responded flexibly and nuancedly.
Macpherson Kelley’s principal lawyer and accredited specialist in family law, Natalie Fielding, echoed a similar sentiment and said that this move might help protect victims from further abuse.
This decision by ASIC is a positive step for maintaining the privacy and autonomy of victims of family violence who are undergoing the complex process of fleeing their perpetrator. Many victims of family violence are subject to years of financial abuse before their separation. It intensifies when they separate and struggle to pay their mortgages, loans, and other bills. Unfortunately, this financial abuse can continue even after they have left their home.
She explained that anyone familiar with family violence would know that victims often fear that their perpetrator will discover that they are leaving or seeking help. In the example where a victim has agreed to a financial hardship arrangement, it benefits the victim’s safety that this information is not readily discoverable by the perpetrator and provides them with an opportunity to have some financial relief whilst they get the assistance they require.
Sometimes perpetrators of family violence will withhold consent for financial hardship from their estranged spouse to make it more difficult for the victim to apply for financial hardship, leading to further financial abuse, she said.
Hayder Shkara, principal at Justice Family Lawyers, said the new policy was “interesting”.
The purpose of ASIC’s no-action position is to help protect debtors who may be victims of family violence and to enable credit providers to support these debtors. It is a small but fantastic step in recognising the needs of those in vulnerable positions, and our firm has many clients who will benefit from this change if there is a correct implementation.
From a family law perspective, it is impressive that ASIC uses the term ‘family violence’ broadly. He expects the threshold to qualify as family violence to be very low. That is, there will be no test to qualify someone as a victim, and it would be up to the person to declare and be truthful about their circumstances.
What needs to occur now is an education campaign to credit providers, helping them understand their current obligations and ensuring they have processes to assist and guide those victims of family violence.
Elements to monitor to protect victims
In addition to an educational campaign, several other elements need to monitor, added Mr Dowd.
It will be essential to monitor this policy’s application and assess its effectiveness at the end of the trial. Presumably, such assessment will consider its extension (assuming it is deemed successful) to other financial institutions, Mr Dowd added.
It will also be essential to consider/assess how these actions may impact the legal duty of each person engaged in a financial dispute under the Family Law Act to disclose their financial position ‘fully and frankly’. There is potentially an inconsistency in the ASIC policy announcement and the relevant considerations of the operation of the Family Law Act.
Ms Fielding added that whilst victims of family violence will be reassured by this position, more needs to occur to protect them.
From a legal perspective, family lawyers can certainly reassure their clients that they can seek a financial hardship arrangement. But, additionally, seek it with discretion and not have their estranged partner block their ability to claim financial hardship leading to further financial abuse.
This announcement will stop information used in their hardship application against them in Magistrates’ Court proceedings concerning intervention orders and Federal Circuit and Family Court proceedings and their potential safety, she said.
As a society, we must look for ways to provide further opportunities to protect from family violence, particularly financial support and services to enable people to flee violent situations.
Financial adviser perspective
When a consumer is experiencing complications meeting their loan or other credit product repayments, they can ask their credit provider/lessor for assistance. Depending on the circumstances, the consumer and credit provider/lessor may agree to a financial hardship arrangement, such as deferring or reducing payments temporarily.
Since 1 July 2022, information about financial hardship arrangements has appeared on consumer credit reports. It will only include hardship arrangements concerning consumer credit contracts—credit cards, personal loans, and home loans. Financial hardship information will only remain on a credit report for 12 months. It does not include details of the arrangement or the reason(s) for the hardship arrangement.