Private schools, luxury car financiers take on Australians with bankruptcy legal action
Some of our wealthiest private schools, luxury car financiers and body corporates are taking on Aussies in court, which has led to some people going broke. See the list.
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Exclusive: Private schools, luxury car financiers and body corporates are pursuing Australians, sometimes leading to personal bankruptcy, raising concerns among financial counsellors and fuelling calls for reform of the system.
Federal circuit court data compiled by News Corp shows private schools - among them elite names including SCEGGS, Scotch College and Presbyterian Ladies College - have launched bankruptcy action against at least 83 parents in a bid to recover unpaid school fees over the past five years.
Almost half of the bankruptcy proceedings involving parents logged by News Corp came from just one school, Sirius College in Melbourne’s north, which charges at most about $6000 a year but launched 36 cases between 2018 and the end of last year.
This was almost 10 times Melbourne’s exclusive Catholic girls school, Loreto Mandeville, which charges far more at up to $30,000 a year but launched just four cases.
Prestigious Sydney boys’ schools King’s and Trinity Grammar, which both charge up to $40,000 a year, each took action against parents twice.
The finance arms of luxury car companies BMW and Mercedes-Benz launched 94 bankruptcy cases over the same period, with BMW lodging 63 and Mercedes-Benz 31.
Industry sources say many luxury car cases are linked to gambling problems and relate to vehicles worth hundreds of thousands of dollars that fail to sell for close to the sticker price after being repossessed.
Financial counsellors have also sounded the alarm over the number of Australians at danger of becoming homeless after being bankrupted over unpaid body corporate fees.
Data compiled by Financial Counselling Victoria and provided exclusively to News Corp shows that last year alone body corporates launched 137 bankruptcy cases.
FCV chief executive Sandy Ross said unpaid school fees often coincided with family violence.
“So you can then be talking about a victim survivor being put in a position where they’ve got debts on their name that weren’t their doing,” he said.
He said that while banks and other institutions had hardship processes in place, many private schools were too quick to resort to debt collectors and bankruptcy proceedings.
“It can lead to, I think, extremely terrible outcomes, in terms of hardship or poverty, to people,” he said.
He said body corporate managers also failed to look out for residents in hardship.
“If the strata corp decides to do renovations or something, people can suddenly be whacked with a massive bill,” he said.
“These especially there’s a lot of people who are doing it really tough and don’t have big chunks of money lying around and they can easily pay for things with.”
Motor vehicle finance has been a problem area for regulators and advocates for years.
In 2016, BMW agreed to pay $77m in what was at the time the biggest consumer credit compensation program after the Australian Securities and Investments Commission slammed its finance arm for putting sales ahead of the interests of customers.
A BMW spokesperson said that bankruptcy proceedings were “rare and are regarded as a last resort, for example where the vehicle has not been returned or a fraud has been committed”.
A Mercedes-Benz spokesperson said the company always preferred to settle with customers and only went to court “when a settlement cannot be reached and there is a belief there are monies to be recovered and/or a very high value of debt”.
Sirius College did not respond to News Corp’s questions.
Financial counsellors and consumers lawyers pressed Attorney-General Mark Dreyfus for bankruptcy reform at a round table on the issue last month.
They want the amount of debt required to make someone bankrupt increased from $10,000 to $50,000, building on a temporary increase to $20,000 during the pandemic, as well as more time for people to respond to bankruptcy notices and increased protection for survivors of family violence.
Other asks include reducing the time period for simple bankruptcies from three years to one and removing the lifetime public listing of bankruptcies.
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