By Graham Doessel, Founder & CEO and Non-Practitioner Director, MyCRA Lawyers. For mortgage brokers and consumers.

Credit repair is legal work. Here’s why.

Let me explain. You see, lots of businesses sell “credit repair”. Some are law firms. Most are not. Yet the work itself is the same. It means testing a listing against the law, then making the credit provider fix it.

So who is allowed to do that work? And what happens if the wrong person does it? Read on, so that you can choose well, whether you are a broker or a consumer.

The short answer

  • To dispute a default, judgment, clearout, enquiry or late payment mark, you apply the law to one person’s facts.
  • Courts in Australia say that kind of work is legal work by its nature. Calling it something else doesn’t change it.
  • In Queensland, only a lawyer may engage in legal practice (Legal Profession Act 2007 (Qld), section 24). Other states and territories have similar rules.
  • A regulator usually acts only on a complaint. But if one is made, a broker who referred to a law firm is in a far stronger spot.

What credit repair really involves

Real credit repair is not a form letter. Here is what a hard file can need:

  • A letter to the credit provider. It asks for the papers the provider must keep and must hand over, because they are the client’s personal information.
  • A close check of those papers against Part IIIA of the Privacy Act 1988 (Cth), the Privacy (Credit Reporting) Code and other rules. All up, that is almost 8,000 pages of laws, rules, decisions and guidelines.
  • A compliance notice that sets out where the listing broke the law and what must happen next.
  • A complaint to AFCA or the OAIC. AFCA is the Australian Financial Complaints Authority. The OAIC is the privacy regulator.
  • A court case, for example to set aside a judgment.

Each step takes legal skill. Each step is shaped to one person’s facts. What this means to you is simple. This is the kind of work the law keeps for lawyers.

What the courts say

Courts look at what the work really is. Here are the cases we rely on. You’ll find more detail in our case notes on what counts as legal work.

Now put that next to credit repair. A credit repairer claims to know the credit reporting law better than you do. Then it applies that law to your file, writes the letters and runs the complaint. That is what the courts call legal work. To read more, see why credit repair work is, by its nature, legal work.

The law in Queensland

Section 24 of the Legal Profession Act 2007 (Qld) says a person must not engage in legal practice in Queensland unless they are an Australian legal practitioner. Section 25 says they must not claim to be entitled to do so. The maximum penalty for each is 300 penalty units or 2 years in jail. There are some exceptions, such as an incorporated legal practice. MyCRA Lawyers is one.

There is one more rule. Since 1 July 2021, a credit repair business must also hold an Australian credit licence, or act for someone who does. It must also be a member of AFCA. ASIC explains this in its media release on the debt management licensing regime. But a credit licence does not make a business a law firm. It still can’t do legal work unless a lawyer does it.

Will a regulator actually do anything?

Here’s the honest answer. A regulator such as the Queensland Legal Services Commission mostly acts only when someone complains. Many clients never complain. So nothing may ever happen.

But complaints do happen. A client may be unhappy with the result or the fee. Or a matter may go wrong at AFCA or in court. The Walter case above was brought by the Legal Services Commissioner. So was Legal Services Commission v McKee (Magistrates Court of Queensland, Bundaberg, 11 December 2012, unreported). A man in Bundaberg who was not a lawyer was found guilty of doing legal work. The court ordered him to pay $10,000 in compensation, plus fines and costs. You can read the court’s decision, or read our article on the McKee case.

It still happens today. In October 2023, the Commissioner had a man jailed. He was not a lawyer, yet he gave legal advice to 33 clients he found through AirTasker. See the Legal Services Commission’s media release on LSC v Arulogun.

And once a complaint is made, the first question is simple. Who did the legal work, and were they entitled to do it?

What this means to you if you are a broker

Mortgage brokers have a duty of care to their clients. Since 1 January 2021, they also have a best interests duty. Section 158LA of the National Consumer Credit Protection Act 2009 (Cth), in Part 3-5A, says a mortgage broker must act in the best interests of the consumer. Section 158LE puts the same duty on credit representatives. If interests clash, the client comes first (sections 158LB and 158LF).

ASIC explains how it checks this in ASIC Regulatory Guide 273: Mortgage brokers: Best interests duty. It looks at what you did and why. And it asks if it was in your client’s interests at the time. ASIC also reminds credit licensees that section 31 of the same Act stops them doing business with unlicensed persons (see ASIC media release 25-101MR).

Now picture a complaint about a credit repairer that is not a law firm. It may not stop with that business. Your client might say, “My broker told me to use them, and I relied on that.” So the complaint can pull you in too.

Did you send your client to a business that wasn’t entitled to do legal work? That is hard to defend. Or did you refer them to a law firm that is entitled to do it? That is easy to explain, so that your duty of care and your best interests duty stay rock solid.

Better still, a referral to a law firm makes it far less likely a complaint will ever arise. And if one is ever made, it is easy to record and easy to explain. Keep a note of why you referred.

See why brokers refer to specialist credit repair lawyers.

What this means to you if you are a consumer

Before you pay anyone to fix your credit file, ask 3 questions:

  1. Is this business a law firm? Ask for its full legal name.
  2. Who will do the legal work? Is that person a lawyer, or a paralegal working under the direct supervision of a legal practitioner?
  3. Which regulator can I go to if something goes wrong?

A law firm has to follow strict rules. It may hold your money in a trust account. And you have somewhere to turn if things go wrong. That protects you.

How MyCRA Lawyers fits

MyCRA Lawyers is an incorporated legal practice regulated by the Queensland Law Society. We only do credit repair. MyCRA began in 2009. MyCRA Lawyers, the law firm, began in 2013. In our experience, more than 9 in 10 defaults have errors. We find them and work to have them removed.

We’re not a lender and we’re not a broker. So clients that brokers refer go back to their broker, ready to borrow. To learn more, read our guide to credit repair lawyers in Australia.

Frequently asked questions

Is credit repair legal work?

Yes. Disputing a listing means applying the law to one person’s facts, writing legal letters and notices, and sometimes going to AFCA, the OAIC or court. Courts look at what the work really is, not what it is called. Work like this is legal work by its nature. That is true whether it is done well or badly. Poor work is still legal work.

Can a credit repair business say it is not giving legal advice?

It can say so, but the label doesn’t change the work. In Van der Feltz v Legal Practice Board [2017] WASC 2, an ad said the person was not a lawyer and did not give legal advice. The court still found the ad offered legal work. The Court of Appeal refused leave to appeal against the conviction in Van der Feltz v Legal Practice Board of Western Australia [2017] WASCA 113.

Will the Legal Services Commission act against a credit repairer?

Usually only if someone complains, and that may never happen. But if a client does complain, the first question is: who did the legal work, and were they allowed to do it? That is why it pays to use a law firm. It is also why MyCRA Lawyers offers referring brokers a formal written referral agreement, to help protect brokers and their businesses.

Why should a mortgage broker refer credit repair to a law firm?

Brokers must act in their clients’ best interests. That duty is in Part 3-5A of the National Consumer Credit Protection Act 2009 (Cth), including s 158LA. A complaint about a credit repairer that is not a law firm can pull in the broker who referred the client. Referring to a law firm that is entitled to do legal work makes a complaint less likely. It is also easy to record and easy to explain if a complaint is ever made.

Further reading from our credit law series

Got a credit file problem, or a client with one? Consumers, call us on 1300 667 218. Brokers, refer your client through our broker portal. Postal: PO Box 169, Aspley QLD 4034. We’ll tell you straight if we think the chances are low.

P.S. Credit repair is legal work. So use a law firm, so that you are protected if anything goes wrong.

MyCRA Lawyers is the trading name of Legal Practice Holdings Group Pty Ltd (ABN 12 615 900 788), an incorporated legal practice regulated by the Queensland Law Society. Liability limited by a scheme approved under Professional Standards Legislation. This article is general information only and is not legal advice.