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 Securities & Investments Commission (ASIC), in conjunction with Nature Research, has recently compiled a report "The Consumer Journey Through the Internal Dispute Resolution Process of Financial Service Providers" which has looked at the consumer experience of the Internal Dispute Resolution (IDR) process.
The research found that:
In our August 2018 edition of Debt Collection News we reported that ASIC were recommending reform to the "buy now, pay later" providers such as AfterPay and zipPay.
Following a report from the Australian Securities and Investments Commission (ASIC) it is being reported by Financial Review that the National Credit Code would not extend to the buy now, pay later sector however ASIC are indicating that there will still be close monitoring of those involved in providing the service to consumers.
The report from ASIC identified 3 key areas of focus:
- ASIC states that it will take regulatory action to address misconduct and monitor industry and risks to consumers;
- ASIC is "considering their legal position" of scenarios where a merchant inflates the cost of the underlying goods if a consumer uses a buy now pay later arrangement.
- ASIC is also 'monitoring' the issue of consumers becoming increasingly indebted due to the ability to access an alternate providers where they have missed payments. According to ASIC, each provider reviewed takes some steps to refuse some credit applications eg if a consumer misses a scheduled repayment, five of the six providers suspend that consumer’s ability to make additional purchases until they have remedied the missed payment. However, only one out of six providers in the review examined the income and existing debts held by consumers before providing their services. ASIC also received reports of instances where consumers were allowed to the service despite having limited or no income and substantial existing debt; and
- ASIC states that it expects providers to ensure that:
(a) consumers adequately understand the terms of their arrangement;
(b) a complaints process is visible and accessible for consumers;
(c) consumers understand that they can request financial hardship assistance from their provider; and
(d) merchants act consistently with guidelines supplied by the provider which limit how these arrangements may be promoted and provided to consumers. ASIC writes that 'while we identified instances where providers could have done more, each provider demonstrated a readiness to work with ASIC by improving their practices in response to our recommendations' and that some have already implemented 'several improvements'.
A copy of the report released by ASIC can be read online at Report 600: Review of Buy Now Pay Later Arrangements November 2018.
In our June 2018 edition of Debt Collection News we published our article ASIC Regulatory Guide 165 Internal and External Dispute Resolution.
Regulatory Guide 139 (RG139) now appears to be out of amended draft form and can be download here with ASIC reminding Creditors that RG139 is only in place until all current disputes with the Financial Ombudsman Service and the Credit and Investments Ombudsman have closed -
Note (20 June 2018): In the transition to the commencement of the new, single EDR scheme—the Australian Financial Complaints Authority (AFCA)—on 1 November 2018, complaints made to the FOS and CIO schemes will continue to be dealt with under the relevant scheme’s terms of reference and rules that applied when the complaint was made.
This guide provides the framework for those versions of the terms of reference and rules. It will remain in force until all those complaints are closed. At that time, we will withdraw RG 139. Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) sets out how we will perform our oversight role in relation to the AFCA scheme.
As a reminder the Australian Financial Complaints Authority (AFCA) will start accepting complaints from 01/11/2018 with Creditors required to ensure that all final response letters and "delay" letters include reference to both relevant predecessor EDR schemes from 21/09/2018.
If you require clarification of the new requirements please contact Collection Law Partners on (02) 8923-1613.
A timeshare lender, Future Holiday Finance Pty Ltd (FHF) has recently been pursued by the Australian Securities and Investments Commission (ASIC) for breaches of responsible lending practices.
FHF provides finance for the purchase of membership in ULTIQA Lifestyle which is described as a points-based timeshare arrangement with many consumers being approached by employees of FHF providing scratch cards that tells them that they've won a free holiday. After attending a seminar, which is charged at between $20 to $40, consumers were being given the chance to sign-up to a timeshare scheme to enjoy cut-rate prices at major hotels. To be eligble consumers had to agree to enter into a Contract, with what appears to be a cooling-off period of 14 days, and paying between $12,000 to over $25,000 to secure their points and pay an ongoing yearly subscription.
In the action commenced by ASIC it was found that FHF signed consumers up to loans without assessing affordability and a review of the documentation attached to the loan identified potential unfair contract terms.
FHF has been fined and paid a penalty of $135,000 in response to 3 infringement notices and has been ordered to pay up to $3 million in compensation. FHF will also review loans provided to consumers between 01/07/2012 and 30/08/2018 and will provide refunds to customers where the loan was unsuitable. The refund scheme will be overlooked by an indepdent expert who will also assess FHF's compliance with future responsible lending obligations.
In a statement released to the media, ASIC Deputy Chair, Peter Kell, said, "Timeshare finance operators must ensure that they comply with their responsible lending obligations. 'Consumers should always take the time to consider upfront and ongoing costs of timeshare, including finance, given they are a long-term commitment and can be difficult to sell."
Consumers can get more information about the refund scheme by visiting the MoneySmart website.
Source: ASIC Media Centre - August 2018
In our January 2018 edition of debt collection news we posted an article AfterPay and zipPay Post-Christmas Warning which indicated that Westpac was warning their brokers that these payment schemes must be assessed as a liability when assessing a persons capacity to service a mortgage.
This month the Australian Securties & Investments Commission (ASIC) has come out and released a report "Design and Distribution Obligations and Product Intervention Power"which recommends broadening their powers to cover the buy now, pay later sector which is not currently regulated by the National Credit Code. In the report ASIC noted:
In our April 2018 edition of Debt Collection News we reported that the ABA announced a new Banking Code of Practice which was subject to approval by ASIC.
ASIC has now signed off on the new Banking Code of Practice following an independent review and extensive consultation with the ABA.
The new Code provides for increased protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms. Expanded protections for consumers included:
The Code will commence operation from July 2019.
Source: Money | Management - July 2018
A debt collection agency who act for Telstra has lost their case in the Federal Court following proceedings being commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).
The proceedings, which commenced in June 2016, highlighted the pressure some agencies apply to collect payment including engaging in misleading, deceptive and unconscionable conduct in it's dealings with 2 particular customers.
The first customer, CT*, who was living in a care facility on a disability support pension, after having suffered 3 strokes, received in excess of 60 demands for payment for a debt of $5,770. The Court found that the agency knew of CT's condition, which left him with the inability to care for himself or readily speak, however called the care facility approximately 40 times and sent approximately 20 demand letters seeking payment. Several times CT was threatended with legal action despite the agency not having any plans to follow through with the threat.
In the other matter a single Victorian mother of three, who worked part time and received a Centrelink payment, was demanded to pay $3,150. It was alleged that the woman was told that legal proceedings would be commenced against her and that a payment default would be recorded. The woman in question promised a payment of 50% of the debt in an attempt to avoid legal proceedings, despite this payment leaving her unable to pay rent and meet her other day-to-day expenses.
The Judgment, which you can read online, also criticises the capitalised use of words in demand letters and the use of “the words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings .....".
In a statement to the media the ACCC said that they will be seeking Orders preventing agencies engaging in misleading, deceptive and unconscionable conduct and will be seeking for large fines to be imposed.
Source: itnews - July 2018
* Name noted as per the original Judgment
The Australian Securities and Investments Commission (ASIC) has now released Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority ahead of the 1 November 2018 transition.
The RG sets out how ASIC will perform their oversight role in relation to the Australian Financial Complaints Authority (AFCA) and includes guidance regarding members AFCA membership obligations.
ASIC has noted that it will retain its existing guidance under RG 139 until all complaints made under the existing schemes have been resolved and also stated, "Licensees and credit representatives must continue to maintain their EDR [external dispute resolution] membership through the transitional period, including paying membership and other scheme fees in full as required."
The Australian Securities & Investments Commission (ASIC) has recently released a revised version of Regulatory Guide 165 - Licensing: Internal and External Dispute Resolution.
The guide, which should be read in conjunction with RG139, which is currently in an amended draft form, specifically updates the transitional arrangements for disclosure of AFCA contact details in final response letters and "delay letter". An extract of which has been reproduced below:
AFCA will commence receiving complaints about financial service providers (including superannuation trustees and RSA providers), credit providers, credit service providers or unlicensed COI lenders on 1 November 2018.
To promote consumer awareness of their rights to pursue a complaint in the transition to commencement of AFCA, these providers and lenders must:
• ensure that IDR final response letters and ‘delay letters’ (see RG 165.92) issued on or after 21 September 2018 and before 1 November 2018 include references to both the relevant predecessor EDR scheme (which will be able to receive complaints only up until 31 October 2018) and AFCA (which will be able to receive complaints on and after 1 November 2018)—we have set out example text below for IDR final response letters; and
• ensure that such letters issued on or after 1 February 2019 include references to AFCA but not the predecessor EDR schemes. Letters issued between 1 November 2018 and 1 February 2019 may continue to include references to both the predecessor EDR scheme and AFCA, provided it is clear that only AFCA can receive complaints after 1 November 2018.
Example text for members of the Financial Ombudsman Service:
If you are not satisfied with our response, you may lodge a complaint:
• with the Financial Ombudsman Service Australia if lodged before 1 November 2018:
Phone: 1800 367 287
Mail: Financial Ombudsman Service Limited
GPO Box 3
Melbourne VIC 3001; or
• with the Australian Financial Complaints Authority if lodged on or after 1 November 2018:
Phone: 1800 931 678
Mail: Australian Financial Complaints Authority
GPO Box 3
Melbourne VIC 3001
Download RG165 May 2018
Throughout the month of June 2018 the Australian Securities and Investments Commission (ASIC) ran a public campaign designed to inform consumers of the high level of fees charged by credit repair and debt management firms.
The campaign aimed to highlight the alternative approaches available to consumers rather than paying high fees for a service that they may not receive. These available options include approaching the Creditor concerned about an adverse listing on a credit report, utilising a service such as financial counselling or contacting the relevant external dispute resolution centre if the original complaint cannot be resolved after going through internal dispute resolution.
This is a follow-up campaign to the 2016 ASIC report which found that credit repair and debt management firms: