At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.
The Australian Financial Security Authority (AFSA) are reporting that personal insolvencies fell 9.7% in the July to September 2018 quarter.
The personal insolvency statistics for this quarter show that the number of new total personal insolvencies reduced from 8,194 to 7,400 with only NSW recording a rise of 0.4% The rise in NSW has been attributed to an increase in consumer Debt Agreement Proposals (DAPs) and Personal Insolvency Agreements (PIAs). Bankrupties were at a record quarterly low in South Australia with Tasmania also recording their lowest quarterly level of bankruptcies since 1989.
Business related personal insolvencies, where an individuals bankruptcy is directly related to his or her proprietary interest in a business, represented 17.8% of total bankruptcies filed Australia-wide with the Australian Capital Territory recording the greatest increase across all States and Territories of 8.33% over the last 12 months.
Further information about the statistics can be read online at Guide to Personal Insolvency Statistics.
Do you know when your interest on the Personal Property Securities Register (PPSR) is due to expire?
It can be one of the more challenging things that we come across in the debt collection industry. A customer has relocated several times over a number of years however the debt is believed to be secured by an asset which, if repossessed, may finalise the debt or may entice the debtor to enter into a repayment arrangement which is maintained. Upon conducting a search of the PPSR it's then found that the security interest has lapsed. You now have essentially an unsecured debt with very little or no bargaining power.
While many organations used to employ a specialists securities agents this role has gradually been phased out and is now considered a day-to-day role of administration staff who may or may not keep an accurate register and may not know or realise the implications of the interest lapsing especially where a debt has been written-off. If this sounds familiar did you know that if you have a PPSR login that you can generate a report called Registrations Due to Expire?
The report includes information such as:
The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 received Royal Assent on Thursday, 27 September 2018 with a majority of the amendments commencing on Thursday, 27 June 2019.
The reforms have been passed in an attempt at tighter regulation and greater protections for people entering into Debt Agreement Proposals (DAPs). The Bill was passed in with several key amendments including:
On Thursday, 1 November 2018 the new Australian Financial Complaints Authority (AFCA) will begin receiving complaints.
AFCA has released their Complaint Resolution Scheme Rules which you can download from our website which outline the types of complaints that AFCA can deal with and how it will handle complaints from consumers against financiers.
The graphic below depicts how AFCA will determine if a complaint falls within their jurisdiction -
A.4 - Complaints that AFCA Considers
A.4.1 The Complainant must be an Eligible Person.
A.4.2 A complaint must be about a Financial Firm that is an AFCA Member at the time that the complaint is submitted to AFCA (even if not an AFCA Member at the time of the events giving rise to the complaint).
A.4.3 There are some additional requirements that must be met in order for AFCA to be able to consider a complaint. In summary:
a) The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA’s jurisdiction.
b) There must be a sufficient connection with Australia.
c) Generally, there is a time limit within which the complaint must be submitted to AFCA.
d) If the complaint is about a Traditional Trustee Company Service that involve Other Affected Parties, the Complainant must get the consent of all Other Affected Parties.
Section B sets out these requirements.
A.4.4 There are some types of complaints that AFCA must exclude and some situations in which AFCA can decide to exclude a complaint.
Section C sets this out.
A.4.5 If AFCA excludes a complaint, AFCA will give written reasons to the Complainant and specify the timeframe within which the Complainant may object to this decision.
A.4.6 If the Complainant objects within the specified timeframe, AFCA will review the decision if AFCA is satisfied that the objection may have substance. If this is the case, AFCA will inform the Financial Firms involved in the complaint and provide them with an opportunity to make submissions before AFCA makes a final decision as to whether to consider the complaint.
A.4.7 Despite other rules, AFCA may consider a complaint if all parties to the complaint consent in writing and AFCA agrees to this. This does not apply to complaints about payment of a death benefit excluded under the time limits in rule B.4.1.3.
B.4 Time Limits for Complaints
B.4.2 Complaints to Which the National Credit Code Applies
Where a complaint relates to a variation of a credit contract as a result of
financial hardship, an unjust transaction or unconscionable interest and other
charges under the National Credit Code, AFCA will generally not handle the
complaint unless it was submitted to AFCA before the later of the following time
a) within two years of the date when the credit contract is rescinded, discharged or otherwise comes to an end; or
b) where, prior to lodging the complaint with AFCA, the Complainant was given an IDR Response in relation to the Complaint from the Financial Firm - within two years of the date of that IDR Response.
C.1 Mandatory Exclusions
C.1.2 Exclusions Applying Generally
AFCA must exclude:
a) A complaint about the level of a fee, premium, charge, rebate or interest rate – unless:
(i) the complaint concerns non-disclosure, misrepresentation or incorrect application of the fee, premium, charge, rebate or interest rate by the Financial Firm having regard to any scale or practices generally applied by that Financial Firm or agreed with that Complainant;
(ii) the complaint concerns a breach of any legal obligation or duty on the part of the Financial Firm; or
(iii) the Complainant’s complaint is with a medical indemnity insurer and pertains to the level of medical indemnity insurance premium or the application of a risk surcharge (as defined in the Services Contract between the Health Insurance Commission, and the Commonwealth of Australia represented by the Department of Health and Ageing, and medical indemnity insurers).
b) A complaint that relates to a decision by a Financial Firm as to how to allocate the benefit of a Financial Service between the competing claims of potential beneficiaries, unless the complaint relates to a Superannuation Complaint or a Traditional Trustee Company Service.
c) A complaint that raises the same events and facts and is brought by the same Complainant as a complaint previously dealt with by AFCA and there is insufficient additional events and facts raised in the new complaint to warrant AFCA considering the new complaint.
d) A complaint that has already been dealt with by a court, dispute resolution tribunal established by legislation or a Predecessor Scheme, unless the Complainant has requested a stay on the execution of a default judgment on the basis of financial difficulty, and the Financial Firm has declined the Complainant’s financial difficulty assistance request, and the request has not previously been dealt with. For the avoidance of doubt, AFCA may consider a complaint by a Primary Producer about issues unresolved after a farm debt mediation.
e) A complaint where the value of the Complainant’s claim when the complaint is submitted to AFCA exceeds $1 million or higher amount that applies as a result of an adjustment in accordance with rule D.4.3. This jurisdictional limit does not apply to:
(i) a Superannuation Complaint; or
(ii) a complaint by a borrower arising from a credit facility provided to a Small Business (including Primary Producer); or
(iii) a complaint to set aside a guarantee supported by security over the guarantor’s primary place of residence.
f) A complaint where the Complainant is a member of a group of Related Bodies Corporate and that group has 100 employees or more.
g) A complaint that would require review of a trustee’s exercise of discretion but this does not exclude:
(i) a complaint to the extent that an allegation is made of bad faith, failure to give fair and proper consideration to the exercise of the discretion, or failure to exercise the discretion in accordance with the purpose for which it was conferred; or
(ii) a Superannuation Complaint,
h) A complaint about professional accountancy services provided by an Accountant unless they are provided in connection with one of the following:
(i) a financial service within the meaning of section 766A of the Corporations Act or section 12BAB of the ASIC Act;
(ii) credit activity within the meaning of the National Consumer Credit Protection Act 2009; or
(iii) tax (financial) advice services within the meaning of the Tax Agent Services Act 2009.
i) A complaint about a:
(i) Privacy Act Participant that does not relate to a right or obligation arising under the Privacy Act; or
(ii) CDR Participant that does not relate to a right or obligation arising under the Consumer Data Framework.
C.2 AFCA's Discretion Not to Consider Complaints
AFCA may in its discretion exclude a complaint, if AFCA considers this course of action is appropriate.
AFCA will not exercise its discretion to exclude a complaint lightly. The discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint.
D.3 Compensation for Complaints Other Than Superannuation Complaints
An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for direct financial loss. When calculating the value of such a remedy, monetary compensation and any remedy where the value can readily be calculated, such as the waiving of a debt, are included.
D.4 sets out the maximum amount that an AFCA Decision Maker can award for direct financial loss.
In addition or instead, an AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for indirect financial loss. This is not the case if the complaint arises as a result of a claim:
a) on a General Insurance Policy that expressly excludes such liability; or
b) by the Complainant under another person’s Motor Vehicle Insurance Product.
D.4 sets out the maximum amount that an AFCA Decision Maker can award for indirect financial loss.
An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for non-financial loss:
a) for a complaint relating to an individual’s privacy rights - injury has occurred to the Complainant’s feelings or humiliation has been suffered by the Complainant; or
b) for other complaints – an unusual degree or extent of physical inconvenience, time taken to resolve the situation or interference with the Complainant’s expectation of enjoyment or peace of mind has occurred.
This type of compensation, however, is not permitted if the complaint arises as a result of a claim on a General Insurance Policy that expressly excludes such liability.
D.4 sets out the maximum amount that an AFCA Decision Maker can award for non-financial loss.
D.4 Monetary Limits for Complaints Other Than Superannuation Complaints -
As indicated above, AFCA will apply a new definition for small business and will also introduce the following monetary limits and compensation caps:
The Australian Securities & Investments Commission (ASIC) has provided transition relief for members of the Credit and Investments Ombudsman (CIO) who are currently awaiting membership certificates to be issued by the new Australian Financial Complaints Authority (AFCA).
In a statement to the media ASIC said, "ASIC understands that some licensees and credit representatives who are members of the CIO scheme have not yet obtained their membership to the AFCA scheme. ASIC understands that this includes licensees and credit representatives who: have lodged an application with AFCA Ltd, but membership has not yet been approved; and have not yet lodged an application with AFCA Ltd."
The initial deadline for licence holders was Friday, 21 September 2018 however ASIC said it would be giving transitional relief to prevent authorisations from becoming invalid due to circumstances however stressed to representatives affected by the changeover delays that they would only be granted relief as long as they ensure that their membership with CIO is maintained. A representative of ASIC went on to say that, "If you are not a member on 1 November, your authorisation will become invalid, and you will need to cease providing credit activities."
ASIC has recently sent a reminder to all financial services and credit licensees to join AFCA which combines the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman.
Source: TheAdviser - September 2018