ASIC is suing a debt management business and its director for leaving most of their clients in a worse financial position.
The regulator has commenced proceedings in the federal court against Bakken Holdings, operator of Solve My Debt Now, following concerns of substantial consumer harm.
ASIC alleged Solve My Debt Now offered to manage the debt of customers who were experiencing financial hardship by collecting funds from them, to be used for paying their creditors and negotiating with creditors to reduce debt. The firm, however, failed to pass its customers’ payments to creditors in a timely manner or at all.
ASIC claimed that Bakken had collected a total $3.6 million from its customers, from April 2020 to June 2022, but paid only $1.1m of this money to creditors, with 64% of customers not having their payments made to their creditors at all.
Solve My Debt Now also allegedly charged fees for its services that exceeded the amount the debts reduced, leaving clients worse off. Only 5.3% of its customers achieved a debt reduction after fees.
“ASIC is deeply concerned by the impact on customers in this matter,” said Sarah Court (pictured above), ASIC deputy chair. “To have customers engage a debt management company and be worse off in their debt, as we allege here, is completely unacceptable.”
Court said that instead of helping people find a pathway out of debt, as debt management firms are supposed to do, Solve My Debt Now signed customers up to a service “that provided little to no financial benefit” and in many cases, “worsened the client’s financial hardship situation.”
Merrilyn Mansfield, Bakken’s director and co-owner, has also been sued for her involvement in some of the alleged false or misleading representations made by the company.
ASIC alleged that from April 2020 to June 2022, Bakken engaged in a system of unconscionable conduct, made false and misleading representations to customers about the benefits and qualities of the company’s service; and carried on a financial services business without the appropriate licence.
In a statement, ASIC said it has previously warned credit providers and debt management companies to expect strong, targeted action against predatory lending, high-cost credit, and misconduct impacting consumers experiencing financial difficulty as part of its continuing focus on protecting consumers.
ASIC is seeking declarations, pecuniary penalties, and a disqualification order from the court.
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