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) 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
As you may be aware once a debt has been referred to External Dispute Resolution ("EDR") all collection action should cease pending the complaint or dispute being resolved. What happens though when you have a Judgment and a dispute or complaint is lodged?
Both of the current EDRs in the Financial Ombudsman Service ("FOS") and the Credit and Investments Ombudsman ("COSL") have Terms of Service which clarify their position when it comes to a Judgment with both indicating that where Judgment has been entered they have no jurisdiction but how does this work in a practical sense?
In our quest for answers we reviewed some of the outcomes where Judgment was entered and a complaint or dispute was lodged with an EDR. In our search we came across a Review by COSL in August 2016. The original complaint related to:
49. For the reasons set out in the Review and this Determination, I find that the consumer's claims have either not been made out or are outside our jurisdiction.
In summary it is now our opinion having read the Review, Determination and Decision that while enforcement of a Judgment Debt cannot continue while a complaint or dispute is before EDR that if a Defence or a Motion is filed by a consumer in the Court that the FSP has the right to respond to an action raised by a consumer.
Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.
Last month the Financial Ombudsman Service Australia ("FOS") released a new publication, "The FOS Approach to Financial Elder Abuse".
The publication is one of a series of documents released on a regular basis by FOS with this particular publication focusing on the challenges faced by identifying the warning signs of financial elder abuse, what is considered good industry practice and how they assess such disputes.
Philip Lead, Lead Ombudsman of Banking and Finance said, "As our society ages, FOS is seeing a greater number of disputes involving older Australians and their financial services providers. This abuse can involve the misuse of, or theft from, a bank account or other financial services product. Financial services employees need to be encouraged to trust their instincts when it comes to recognising this form of abuse."
Mr Field cited research indicating that between 2% and 10% of the older Australian population suffer such abuse every year with most abusers being relatives or caregivers or those who have gained the elderly persons trust and take an opportunistic approach.
You can download a copy of the publication from here.
New data released by FOS on 05/10/17 indicates that a record number of disputes were received in 2016-2017. The review shows that FOS received 39,479 disputes (a 16% increase from last year) with the increase predominantly driven by continued growth in insurance disputes. The number of insurance disputes increased approximately 38% during this period alone. FOS have said that this increase was due to a continuation of industry-specific issues including high claim numbers, organisational changes and the impact of Cyclone Debbie, all of which may have impacted upon the insurers' internal dispute resolution process.
Overall FOS claim that in 2016-2017 that the average time taken in which to resolve a dispute has reduced by 13% and a reduction of 43% from the previous year "without compromising the quality of outcomes". Chief Ombudsman, Shane Tregillis, said in a statement, "This means that people can have their cases resolved more quickly and get on with the rest of their lives."
Of the 39,479 disputes received by FOS 22,475 were accepted with 17,004 referred back to the Credit Provider as being outside of the FOS Terms of Reference. Of the 22,475 disputes received:
According to the Financial Ombudsman Service ("FOS"), the Bank of Queensland ("BoQ") is the worst offender for disputes when it comes to home loans.
For every 100,000 mortgages across Australia, BoQ was involved in 79 disputes during the last financial year. 40% were resolved by agreement between the parties while a further 29% were found in BoQs favour according to FOS.
A BoQ spokesperson said, "BoQ is dedicated to ensuring our customers' needs are properly met and has some of the highest industry standards in place to ensure we meet responsible lending requirements. Importantly, FOS has either found in favour of BoQ or the action was discontinued in about 45% of cases."
In a speech to the Financial Services Council Leaders Summit held in Sydney on 26/07, Minister for Revenue and Financial Services, Kelly O'Dwyer, announced the transition team tasked with the role of combining the existing External Dispute Resolution ("EDR") schemes.
Ms O'Dwyer said in a statement that the transition team would be led by former Reserve Bank Assistant Governor Dr Malcolm Edey. Dr Edy will lead the team with a view to have the new Australian Financial Complaints Authority ("AFCA") in place from 1 July 2018.
The AFCA will replace the "overlapping, inconsistent and narrower" system that includes the Financial Ombudsman Service ("FOS"), the Credit and Investments Ombudsman ("CIO") and the Superannuation Complaints Tribunal ("SCT"). Ms O'Dwyer went on to say, "It will [the AFCA] provide access to justice in a timely manner, with an independent arbiter and compensation where appropriate. It will make a real difference for those caught up in disputes with financial services providers".
The establishment of the AFCA was recommended following The Ramsey Review, conducted by Paul Ramsay of Melbourne University, however attracted criticism within the industry as there was a preference to favour consumer advocates and may not deliver fast and effective resolutions.
Ms O'Dwyer stated that because the AFCA was a central body for EDR that there will no longer be uncertainty or confusion about which body has jurisdiction to hear a particular dispute and that the central body will have the power to deal with multiple issues.
You can read the Final Report - Review of the Financial System External Dispute Resolution and Complaints Framework here.
The Credit and Investments Ombudsman ("CIO") have released their statistics for the fourth quarter of 2016 / 2017.
CIO reported that in the fourth quarter 1,821 enquiries were received. This represents a decrease of 3.65% however complaints received rose from 1,564 from 1,518 representing a 2.94% increase.
Financial Service Provider ("FSPs") who received the most complaints were:
Recently the Australian Government has released a consultation paper for Financial Service Providers ("FSPs") to submit responses to the proposed External Dispute Resolution ("EDR") framework.
As part of the proposed new scheme a single dispute resolution body will be established called the Australian Financial Complaints Authority ("AFCA") which will replace the Financial Ombudsman Service ("FOS"), Credit and Investments Ombudsman ("CIO") and the Superannuation Complains Tribunal ("SCT"). It is believed that AFCA will be operational from 1 July 2018 with all FSP's required to be members.
The new EDR sceme will give ASIC additional powers for oversight and monitoring while FSP's will need to adhere to enhanced transparency and accountability of Internal Dispute Resolution ("IDR") processes.
2 new bills will be introduced to parliament as a result of the proposed change. The Treasury laws Amendment (External Dispute Resolution) Bill 2017 and Treasury Laws Amendment (External Dispute Resolution) Regulations 2017.
The closing date for submissions on the scheme is 14 June 2017.
We recently received communication from the Credit and Investments Ombudsman ("CIO") that they've received reports about Financial Service Providers ("FSP's"), particularly in Queensland, filing police reports about items under lease or finance as being stolen when payment isn't received.
The action taken by the FSP's is under the Criminal Code 1899 (QLD) however the CIO remind FSP's that enforcement rights are available under the National Credit Code which would be more appropriate when enforcing a regulated credit agreement due to non-payment.
In one example a customer made a complaint to CIO, which should stop enforcement action, however the FSP argued that it was now a criminal matter and outside of the CIO's jurisdiction. CIO in response indicated that police involvement comes with a broad definition of enforcement and activity should cease while the complaint was being considered.
It remains unclear at this stage as to the final outcome of the investigation by CIO regarding the above example however as CIO have indicated, stopping a criminal investigation would prove to be very difficult and that involving police in a regulated credit agreement is not an industry best practice.
Raj Venga, CEO of the Credit and Investments Ombudsman ("CIO") has expressed concern about a proposal by the Federal Government to establish a tribunal to hear complaints about financial service providers.
In a Statement Mr Venga said, "Australia is currently very well served by the existing dispute resolution architecture in financial services. The types of disputes referred to in the current debate about the need for a new body generally involve amounts that exceed the monetary limits of CIO and the Financial Ombudsman Service (FOS), and so have not been able to be considered by either scheme".
Mr Venga pointed out that any such tribunal would:
• Create a tax-payer funded right of appeal to the courts, defeating the objective to resolve disputes fairly, cheaply and expeditiously,
• Not have the multiplicity of access points for industry and consumer representation that the current structure affords,
• Not have specialised industry knowledge required for the sensible resolution of disputes,
• Be substantially more inflexible, and
• Not be capable of responding quickly to changes in relevant markets.
Time will only tell at this stage if this is the beginning of the end for External Dispute Resolution ("EDR") however we will continue to monitor the progress of any such move to abolish the EDR process.
Source: CIO Media Release August 2016
Compared to the last quarter FOS are reporting a 9% increase in disputes and overall a 22% increase compared to the same quarter last year.