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Debt recovery legal proceeding complaints and EDR scheme jurisdiction reviewd by ASIC

Tuesday, October 09, 2012 - Posted by Philip Harvey

The review of the EDR scheme jurisdiction over debt recovery legal proceeding complaints has resulted in no changes to the existing practices. The ABA and ABACUS provided input into the process to try and have changes made, however this did not alter ASIC's belief that the current process was appropriate.

Everyone should take note of the Phase II Credit reforms commencing 1 March 2013;

  • remove  the $500,000 threshold for a consumer to apply for hardship or postpone enforcement proceedings.
  • make it easier to apply for hardship (in writing or verbally and on broader grounds, if debtors are unable to meet obligations under the credit contract).
  • requires lenders to not progress enforcement until a hardship variation has been properly considered.

Sourced from ASIC's website;

The review confirmed the appropriateness of the existing policy settings and reinforced the useful role ASIC-approved EDR schemes and their debt recovery legal proceedings jurisdiction plays in assisting consumers and financial investors who may benefit by a hardship variation, need more time to sell their home, may have been granted loans in breach of responsible lending requirements or face debt collection issues (i.e. being pursued for statute-barred debts).

ASIC Commissioner, Mr Peter Kell said, ‘This review has helped to focus attention on a number of areas where the dispute resolution system could be enhanced, beyond specific regulatory guidance. All participants in the system have a role to play in making it work more effectively – not just EDR schemes but also licensees who are members of the schemes and consumer representatives who advise consumers. We encourage participants to consider making some changes to their current practises to improve the effectiveness of the system’.

Opportunities for improvement include:

  • licensees taking steps to better identify hardship in its earlier stages, and better resourcing and training their complaints handling teams to become more efficient and effective
  • ASIC-approved EDR schemes (the Credit Ombudsman Service Limited and the Financial Ombudsman Service Ltd) improving their operations by working with scheme members and consumer representatives to improve scheme handling and processing of debt recovery legal proceedings complaints
  • enhanced consumer understanding of how an EDR scheme’s debt recovery legal proceedings jurisdiction can assist as well as the continued obligation to make repayments where possible.
ASIC's release can be found here.

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