Small business prompt payment protocol

Many small business clients dealing with large business customers have complained how difficult it can be dealing with and get payments from those big companies. I think most people would be sceptical that anything can be done to fix this.

The Government is considering the introduction of a voluntary prompt payment protocol to tackle delays in trade payments between businesses, particularly late payments to small businesses. It says delays in payments are typically passed down the supply chain and are often borne by small businesses, which may in turn withhold payments to their staff, suppliers, financiers or the ATO. To facilitate consultation, the Government has issued a discussion paper which sets out the key design features of the Protocol which it says will help “encourage a necessary shift in Australia’s late payment culture”.

Closing date for feedback: 23 August 2013

1/10th of credit applicants give dodgy data

Up to 1.6 million Australian have misrepresented their financial information when applying for a loan in order to obtain credit, according to Veda Advantage’s latest Australian Debt Study.

While the study found the majority of Australians were honest about their current financial status, 823,000 people had understated their total expenses and 342,000 had overstated their income.

The study highlights around 15 per cent of Australian are looking to take on more credit in the next six months and 12 per cent of Australians have missed a minimum bill repayment in the past three months.

Chris Gration, head of external relations at Veda Advantage, says responsible lending is a huge step forward for consumer protection but without positive reporting, lenders face challenges in gaining an independent understanding of a person’s financial commitments.

“Under Australia’s current negative credit reporting system, banks do not have all the information available to help them make the most informed assessment of a person’s ability to repay their debts. They cannot see whether a consumer is overcommitted, leaving many vulnerable to falling into a debt trap,” he says.

Gration welcomes the Government’s plan to introduce positive reporting legislation by 2012.

“Implementing Government credit reporting reforms will assist lenders to more easily identify when a borrower is overcommitted.”

The Australian Privacy Foundation has strong reservations about this development.

The longstanding approach in the credit reporting industry is based on the central recording of applications for credit, and of defaults. The credit industry has fought a sustained battle to extend into something that the industry’s spin-doctors call ‘positive reporting’, but that from the perspective of consumers is simply consumer surveillance.

In 2005, Consumer Affairs Victoria released a “Consumer Credit Review Issues Paper”. This mainly concerned other issues but also asked a few short questions about a potential move to positive credit reporting. Submissions were divided on traditional lines. See the Review web-site. No change resulted from the consultation. The Victorian Government response noted there was insufficient evidence of the benefits of positive credit reporting and concluded that the issue was more suitable for Commonwealth consideration.
In addition to the APF, the Consumer Action Law Centre has been very active on these matters.

The Australian Law Reform Commission (ALRC) conducted a wide-ranging inquiry into the Privacy Act in 2006-08. The ALRC Report in August 2008 recommended “More comprehensive credit reporting: in addition to the limited types of ‘negative’ information currently permitted, it is recommended that some additional categories of ‘positive’ information should be allowed to be added to an individual’s credit file, in order to facilitate better risk management practices by credit suppliers and lenders” (ALRC 2008. See also Part G of the Report, paras. 52-59).

The Consumers’ Federation of Australia (CFA) (the national peak body for consumer groups in Australia) is concerned that the expanding the range of information collected on credit applicants will only exacerbate the current problem of inaccurate and incorrect data on customer files.

The draft legislation is expected later this year.

Australians sceptical on super

There’s a revolt underway in consumer land as Australians from all walks of life vote with their feet and shun superannuation in favour of personal savings and other investments.

Some push-back is to be expected given account balances struggled to fight the pull of gravity over the last two years, falling lower and lower for what seemed like an eternity to most members.

But what’s really interesting is what’s driving the distrust and scepticism of super. It’s not so much the performance of funds during the financial crisis but instead a fear that the Government will change the rules.

This message came through loud and clear in a recent Focus Group held by CoreData with pre and post-retirees aged 50 to 70.

Brad, a 55-year-old male, says he’s never trusted super because he doesn’t trust the government. He says successive governments keep “changing the laws arbitrarily” and we’re in for another wave of that this year with the election looming.

Brad is not alone in his line of thinking. Indeed there was wide consensus around the table that super is not the safe haven that the industry would have you believe, and while there are tax incentives to saving through super, this is irrelevant if the goal posts keep shifting.

Bruce, a 52-year-old male, thinks relying on super could cause him big problems in retirement. He’s developing his assets outside of super as well because he’s convinced that the Government has dug itself “such a deep debt hole” that they’ll use the superannuation system to recoup that.

The building scepticism is reflected in a recent study by CoreData which found superannuation is the number one financial concern for the average Australian.

Super, including fund rollover, Government super policy, planning for retirement, retirement income options and pensions, ranked ahead of tax, family financial matters, paying off loans, investing and saving.

Industry bodies such as the AIST, ASFA and IFSA have recently repeated calls for a hike of Superannuation Guarantee (SG) to 12% to avoid a $695 billion retirement savings gap.
If the dissent among consumers continues to grow, a legislated increase might just be the only way to boost contributions to the system.

From Burning Pants