How to avoid getting ripped off by under-regulated industries
Pet groomers and debt management companies don't appear to have much in common, but up until recently they were dangerously similar in 1 regard: regulation.
Dog groomers and debt management companies have both suffered from a lack of regulation. And we know a lack of regulation leaves consumers exposed and unprotected in the event that things don't go to plan.
Typically the hallmark of a well-regulated industry is the need for a licence of some sort. So if you look for nothing else when evaluating a company of any description, then researching licence requirements is a great use of time.
In the financial services industry, any business that sells, advises or deals in financial products needs an Australian financial services licence (AFSL) from the regulator, ASIC. This isn't an endorsement, but it does signal that the business has committed to meeting basic standards such as training, compliance, insurance and dispute resolution on an ongoing basis. The ASIC Connect Professional Registers tells you if the company or person holds an AFS licence.
But not all financial services businesses have the same licensing requirements.
Financial services businesses that are involved in credit are also required to hold an Australian credit licence. This includes businesses like credit providers and those who act as an intermediary between a credit provider and a consumer. Up until 1 July this excluded the expansive category of debt management services but the tide has turned.
Debt management services are a mixed bag and include companies offering credit repair and debt negotiation. These are companies that help consumers apply for a change to a credit contract, apply for postponement of enforcement proceedings or help make a complaint or claim against a credit provider.
A lesser-known fact is that they also include consumer refund companies like Get My Refund – companies which seek out refunds for consumers that have been ripped off by superannuation funds, banks, car finance and insurance companies selling junk insurance and products that just aren't fit for purpose.
A new era for regulation
From 1 July all companies in the debt management category must now hold an Australian credit licence and commit to meeting ongoing compliance obligations. They must also become members of the Australian Financial Complaints Authority (AFCA). This is the ombudsman where consumers can make complaints against providers.
For businesses like Get My Refund, this means very little change. We have long been self-regulated and a member of the AFCA, working closely with the AFCA to successfully negotiate refunds of $3.2 million in premiums and rip-off charges for over 1,000 clients.
The requirement for our competitors to regulate is good news for our industry as we want consumers to trust that refund companies are acting in their best interests. We want them to know they have adequate protection and an avenue for complaint if they are not happy. It only takes a few bad experiences to tarnish a whole industry.
This increased regulation of the consumer refund industry is important as it is growing exponentially and following the UK where billions have been paid out in refunds for shoddy financial products like consumer credit insurance (CCI), extended warranty insurance, gap insurance and tyre and rim insurance. Most people don't know they are even due refunds.
For anyone who is wondering whether they are due a refund, there are a number of considerations to ensure you get the best outcome and the maximum refund from your refund company.
- Make sure a company is regulated and holds an Australian credit licence by searching on the ASIC website here.
- You can also check if they are a member of the AFCA here.
- Find out exactly what service you will receive. Some companies like Get My Refund will search for all possible refunds you may have owing, others require you to have all the details to hand.
- Understand the costs of the service versus the likely return and refund. It's sometimes best to have a smaller slice of a larger pie!
While the risk of a bad "doggy do" from unregulated groomers remains very paw-sible (sorry) beyond 1 July, the new regulation we face is great news for our industry and the millions of Australians who are due refunds.
It is important to remember that regulation is almost always in the best interest of consumers and has been put there for their protection. It is indeed one of man's best friends.
Carly Woods, Founder and CEO of Get My Refund talks about how consumers can avoid getting ripped off, and the new regulation that will help protect consumers in the booming area of consumer refunds.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.