For Immediate Release - 2007

Budget Services Say More Regulation Needed

A recent case of a lady convicted for benefit fraud, claiming the service provided by her budget adviser was to blame for her financial crisis, highlights a gaping hole in current legislation.

The 45 year old Flaxmere mother of seven was sentenced to 11 months prison in what Crown prosecutor Paul Frost said was the most serious case of benefit fraud in the East Coast in almost three years.

The New Zealand Federation of Family Budgeting Services has further investigated this and found that the client was not with one of its services.

All Federation certificated budget advisers must meet rigorous training standards and adhere to the Federation’s Code of Ethics when providing advice in the community.

Further, the Federation sets very high quality standards for all its member budget services that are audited every year. In the rare case of a client complaint, Federation clients have direct access to an escalating complaints process that is dealt with at the highest levels of the organisation. Where the budget service has not adhered to the criteria for affiliation the Federation provides it with resources and support to bring it up to standard; as a last resort the service may be ‘disaffiliated’ and removed from the network.

In the Flaxmere example, if this lady had taken advice from a Federation trained budget adviser, this case would have turned out very differently. Adhering to the Code of Ethics would have meant a Federation adviser could not have worked with this client had they known illegal activity was taking place, in much the same way as a Lawyer or Doctor is ethically bound.

The Federation’s internal client protection systems are robust and effective. Beyond the Federation’s reach, however, there is little protection for consumers.

Federation of Family Budgeting Services Chief Executive Raewyn Fox says, “there’s lots of organisations providing budget advice at the moment, many of whom provide a good level of service, but there are some out there offering sub-standard and sometimes dangerous services.”

“The New Zealand Federation of Family Budgeting Services has been developing its standards for over 30 years in consultation with local and national government, budget services, and the community. Few other providers can offer that assurance”, says Mrs Fox.

There are currently no national standards in New Zealand for budget advisers. In fact, someone convicted of fraud can set up shop as a budget service tomorrow and profit well by ‘managing’ the finances of unsuspecting consumers.

The recent example of Wellington firm ‘Debt Relief’ that went bankrupt last year provided this service to beneficiaries in the region. Many were left with unpaid bills just before Christmas and ended up far worse off than when they first sought help. This case is now being investigated by the Commerce Commission.

Recent government reviews of the financial intermediary industry have suggested that budget advisers do not have enough influence over their client’s financial affairs to warrant national standards. The Federation has submitted objections to this view and the Flaxmere case is a prime example of how important those national standards would be.

Federation of Family Budgeting Services President, Maureen Pitman, believes national quality standards for advisers and services should be enforced by legislation to ensure clients can expect the highest quality of service.

“Although there are very high voluntary standards being set, including our own, there are some advisers and services that are seemingly not accountable to their funders, the community or their clients.”

“Regulation would ensure national standard setting bodies like our own are accountable to all New Zealanders”, says Ms Pitman.

Until such legislation is developed it is a classic case of ‘buyer beware’. Ms Pitman suggests clients ask some important questions before seeking advice on their finances:

- What exactly is the service you’re offering me and is there a written agreement?

- How much will it cost me?

- Am I still in control of my own finances?

- If something should go wrong, is there an independent complaints process available?

- Who does the budget service account to for its activities?

If clients are in doubt by far the safest option is to see a Federation affiliated budget service, says Ms Pitman.

All Federation services can be found in the Telecom White Pages under ‘Budget Advice Services’. The service is free, confidential, culturally aware and non-judgemental. More importantly Federation budget advice is only provided by quality, trained and certificated budget advisers who are accountable to the whole network.

ENDS

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