The Credit Ombudsman Service Limited (COSL) is proposing to no longer deal with representatives of consumers who COSL determines are acting improperly.

It has issued a draft guideline which defines an improper purpose as where the representative engages in any two of the following, after due warning:

• obtaining a financial benefit from the complainant for performing a service (such as, seeking to have a default listing corrected or removed, or negotiating a debt settlement) that can be readily accessed by the complainant free of charge and not being able to demonstrate that that the complainant was adequately informed (for example, via the representative’s website) that the complaint can be dealt with by COSL (or other appropriate external dispute resolution scheme) at no cost to the complainant,
• obstruct or unreasonably delay COSL’s process,
• make unreasonable decisions on the consumer’s behalf – for example, a decision which increases, or is likely to increase, the consumer’s liabilities,
• not inform the consumer of all available options, offers of settlement, offers of hardship assistance or other proposals by the financial services provider or COSL,
• engage in a deceptive or misleading manner in their engagement with the consumer, financial services provider or COSL,
• ask COSL to enquire into or investigate matters that the representative knows or ought reasonably to know are irrelevant or lacking in merit,
• not inform the consumer of the potential risks and consequences of a course of action the representative is pursuing, or
• otherwise act contrary to what is in the consumer’s best interests (for example, imposing a contractual term in any agreement between the complainant and the representative that has the effect of prohibiting, discouraging or hindering the complainant from dealing directly with COSL).

The proposal is aimed at those ‘credit repair’, ‘credit fix’ and ‘debt solution’ companies which engage in inappropriate conduct and to whom consumers pay significant amounts of money to access a dispute resolution service that is available to them without charge.

COSL says consumers will not be disadvantaged if COSL ceases to deal with their representative. Consumers will be invited to submit their complaint directly to COSL or elect to be represented by another representative.