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Released every month our debt collection blog contains news, stories and tips to keep you informed.

AFCA Averaging 5900 Complaints Per Month

Friday, June 28, 2019 - Posted by Michael McCulloch

The Australian Financial Complaints Authority (AFCA) has recently released a snapshot of statistics following their first 5 months of operation.

The release of these statistics follows an article, 'Appalling Treatment': Bank Customers Making 5,900 Complaints a Month in the Sydney Morning Herald where the Chair of AFCA, Helen Coonan said in a speech allegedly seen by The Sydney Morning Herald and The Age, "Poor culture in financial institutions has been identified as the main culprit that permitted a slew of bad practices, appalling treatment of consumers and small businesses, and in many cases arrogant indifference to regulatory and compliance risk. Now almost seven months old, AFCA is playing an important part in restoring shattered community trust and confidence in the financial services sector."

The statistics show that between 01/11/0218 and 31/03/2019 AFCA -

  • Received 29,873 complaints (closing 55% as of 31/03)
  • Awarded $67 million in compensation
  • Identified 81 system issues that are still currently under investigation
  • Attended and / or held 138 events and meetings across the ACT, NSW, QLD, SA, VIC and WA
  • Received more than 61,237 phone calls; and
  • Had 568,933 visits to their website

Both credit reporting and responsible lending topped the most complained about issues for credit providers (1,935 and 1,198 complaints) with 45% of complaints relating to credit related products. 1,142 complaints were received about debt collectors or buyers however the nature of these complaints were not disclosed.

Download a copy of the full released statistics at Snapshot of AFCA's first five months.

Social Media Complaints and IDR

Thursday, May 30, 2019 - Posted by Michael McCulloch

It is now being widely reported across several media sites, including Money | Management, that the Australian Securities and Investments Commission (ASIC) has issued a discussion document to Financial Service Providers (FSPs) regarding complaints made via social media platforms such as Twitter and Facebook.

It is a move that appears to recognise that there are other channels for complaints to be made meaning that even a single tweet on Twitter could require the IDR process to be applied and legally acted on. ASIC Deputy Chair Karen Chester said in a statement to itnews.com.au, "It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate. The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA."

The discussion paper, which can be downloaded here, asks contributors several questions including what constitutes a complaint, are complaints made via social media channels dealt with under IDR processes and is the treatment of a complaint handled differently if the complainant is made via an external platform and not the FSPs own social media platform.

ASIC have have indicated that it plans to release the revised regulatory guide by December 2019.

Moves to Track IDR Within FSPs

Thursday, May 30, 2019 - Posted by Michael McCulloch

Mirage News is reporting that the Australian Financial Complaints Authority (AFCA) has welcomed the news from the Australian Securities and Investments Commission (ASIC) that financial service providers will be required to supply standardised data on their internal processes for handling customer complaints.

The proposed standard, which is pending public consultation, will include new mandatory data reporting with FSPs required to meet new standards when a complaint goes through the Internal Dispute Resolution (IDR) process with a view to make complaints handling performance transparent. In making the announcement, ASIC Deputy Chair Karen Chester, said, "It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. The Ramsay Panel Review, recent ASIC research, case studies before the Financial Services Royal Commission (FSRC) and our own supervisory work have all identified shortcomings in consumer complaints handling. Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate. The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA. With the benefit of broad consultation, ASIC’s new standards will lift complaints handling performance of firms and ultimately consumer outcomes and fairness of the financial system. And transparently so. These standards will also apply in their entirety to all APRA regulated superannuation funds".

In response to the news, AFCA Chief Ombudsman and CEO David Locke said, "Increased transparency is good news. It will help firms to continuously improve, and that will be good for the firms and their customers alike. We also welcome the idea of requiring firms to provide a standard set of data – this will help companies know how they compare to their competitors and help to inform consumers about the companies they’re dealing with. In this digital age, the move by ASIC to require firms to include complaints made on social media platforms, is entirely appropriate".

ASIC has sought public input on the consultation documents by 9 August 2019 and aims to release the new standards in a new Regulatory Guide by the end of 2019. You can find out more and read the media release by ASIC at ASIC Media Release 19-115MR


AFCA Approach to Financial Difficulty - Early Release of Superannuation

Thursday, May 30, 2019 - Posted by Michael McCulloch

Following on from last month where we looked at the AFCA Approach to Mortgagee Sales this month we look at the Australian Financial Complaints Authority (AFCA) approach to Financial Difficulty - Early Release of Superannuation.

The purpose of this article is to summarise the approach AFCA have regarding the early release of superannuation and what lenders obligations are when considering a request from a consumer to support the early release of superannuation.

Grounds for Release
There are 2 primary circumstances where a consumer may apply for the early release of superannuation. These are due to several financial hardship or compassionate grounds (mortgage arrears). A consumer that has been in receipt of a Government support payment, such as Newstart Allowance, continuously for 26 weeks may be entitled to the early release of superannuation on the grounds of financial hardship. A consumer may access between $1,000 to $10,000 once a year and the application must be made directly to their superannuation fund. The payment can be utilised for any purpose and does not require the support of the FSP.
Where the application is being made on compassionate grounds (mortgage arrears) the process is administered by the Australian Taxation Office (ATO). A consumers application to the ATO for payment of mortgage arrears will need a letter from their FSP stating that the amount is overdue and if the overdue amount is not paid by the due date the mortgagee will foreclose or force the sale of the consumers principal place of residence. More information is available from Access on Compassionate Grounds on the ATO website.

AFCA Expectations
There is an expectation from AFCA that FSPs will consider alternatives rather than simply supporting a request for the release of superannuation as the release of superannuation is a last resort. AFCA expects FSPs to take appropriate steps to understand the consumers financial position, decide what assistance it can provide the consumer and communicate its decision to the consumer. 

Factors to Consider
When considering if support should be given for the early release of superannuation the FSP, , should explore all alternative options -
Where it is apparent that the consumer can afford to continue with the contractual repayments but unable to clear the arrears the FSP may consider it more appropriate to capitalise the arrears. 
Where the FSP is unable to determine if the consumer can meet their ongoing contractual obligations it may be more appropriate for the FSP to provide a reasonable moratorium period to allow the consumer time for their situation to improve.
Where it is clear that the consumer will be unable to meet their ongoing contractual obligations supporting a release for superannuation may not be appropriate as any release will only delay the inevitable. In certain situations it may be beneficial for the FSP to allow the consumer time to sell the security property which will preserve their superannuation and may offer some financial relief.

Failing to Meet Obligations
Where AFCA believe that the FSP has failed to meet their obligations AFCA may rule that the FSP has failed to meet financial difficulty obligations under the AFCA Rules. Where the consumer has suffered a financial loss AFCA may award compensation.
Where the FSP has supported an early release for superannuation that AFCA believe inappropriate they will generally not require the FSP to refund the superannuation monies or reimburse any tax paid as a result of the withdrawal of the funds as in most cases the consumer will have obtained the benefit of the funds and will have potentially saved on interest, fees and charges.

To learn more or to read this article in its entirety visit AFCA Approaches - Early Release of Super.

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relief on in any way.


AFCA Rules Consultation

Friday, March 29, 2019 - Posted by Michael McCulloch

In our February 2019 edition of Debt Collection News we reported that the Australian Financial Complaints Authority (AFCA) would be looking at accepting complaints dating back to January 2008. In a recent media release AFCA has now confirmed that they are seeking submissions on the proposed changes to their Rules.

AFCA has announced that the proposed change would see a new section added to their rules which solely pertains to legacy complaints and would only apply for the period 01/07/2019 to 30/06/2020 after which time the proposed new section would be removed from the AFCA Rules. A draft of the proposed new section, Section F, has been reproduced below:

F.1 Application of this Section

F.1.1 Legacy complaints will be dealt with under this section of the Rules as at 30 June 2019. All other complaints will be dealt with under the other sections of the Rules that apply as at the date the complaint was lodged.
F.1.2 Legacy complaints will not be subject to the time limits set out in B.4.
F.1.3 In all other respects, Sections A to E of the 30 June 2019 Rules will apply to legacy complaints unless modified by Section F. In the event of inconsistency between the other sections of the Rules and Section F, Section F prevails as it relates to legacy complaints.

F.2 Requirements for Legacy Complaints

F.2.1 AFCA will not consider a Legacy Complaint:
a) unless it is submitted to AFCA between 1 July 2019 and 30 June 2020.
b) about conduct that occurred and ended before 1 January 2008.
c) in relation to which a decision or determination has been made by a court or tribunal.
d) in relation to which a decision or determination about the merits of the complaint has been made by a Predecessor Scheme or AFCA.
e) that has previously been finally settled by the Complainant and the Financial Firm to whom the complaint relates (other than a complaint which can still be made under the Rules).
f) in relation to a superannuation death benefit.
g) that solely relates to a right or obligation arising under the Privacy Act.

You can learn more, read the consultation paper and provide feedback via their consultation page.

AFCA to Accept Complaints Dating Back To January 2008

Wednesday, February 27, 2019 - Posted by Michael McCulloch

Following the final report from the Royal Commission into Misconduct in Banking it has been revealed that the Government is proposing a change to the Australian Financial Complaints Authority (AFCA) Rules which will allow them to deal with disputes dating back to January 2008.

The proposed change would see AFCA being able to investigate disputes about misconduct that have not been dealt with previously by the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) or by the Courts. AFCA has indicated in a media release that consumers and small businesses will soon be provided with information as to the complaints procedure however confirmed that until such as time as the Rules are changed that they cannot consider such disputes.

In a statement to the media AFCA Chief Executive and Chief Ombudsman, David Locke, said, "The announcement from the Government today that AFCA will now be able to consider some of the legacy disputes excluded by the predecessor schemes going back to 1 January 2008, means that many more people will be able to get access to justice and have their matters properly considered. This is a really positive step for consumers and we will be issuing guidance shortly to assist people to bring these disputes to us."

AFCA has also publicly welcomed the Commissioner's recommendation in relation to s912A of the Corporations Act 2001 which will see AFSL holders being required to take reasonable steps to cooperate with AFCA to resolve disputes and release documents.



AFCA Warns FSPs of Bigger Compensation Bills

Wednesday, January 30, 2019 - Posted by Michael McCulloch

Newly appointed Chief Ombudsman, David Locke, has recently announced in an article in the Financial Review that Financial Service Providers (FSPs) that fail to respond quickly to matters brought to the attention of the Australian Financial Complaints Authority (AFCA) may face bigger compensation bills.

Since its inception in November 2018 AFCA claim to have received 11,500 complaints of which 4,000 have been about FSPs. By direct comparison the Financial Ombudsman Service, at its peak, received 2,100 complaints per month.

Mr Locke indicated that responsible lending and misleading sales were among the issues most frequently complained about by consumers and said in a statement, "The volumes of matters coming to us are very high. A lot of people have been treated very poorly by financial institutions over a number of years. The royal commission has shone a bright and forensic light on some issues but most people still feel they haven't been heard or had their matters addressed."

While Mr Locke was unable to provide an actual dollar figure for compensation ordered to date he did indicate that the AFCA cost model is structured so FSPs pay more the longer a dispute goes on so there is an incentive to resolve disputes as quickly as possible.

Of the 11,500 complaints since AFCA came into power 32% of cases have been resolved.


ASIC Research Highlights Need for IDR Transparency

Friday, December 28, 2018 - Posted by Michael McCulloch

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:

  • 17% of those surveyed considered making a complaint to a FSP in the last 12 months;
  • only 8% went on to make an actual complaint;
  • approximately 50% of those who did not make a complaint reported that "they did not think it would make a difference" or "it was not worth their time";
  • 18% of complainants dropped or withdrew their complaint before it was concluded;
  • only 45% of those that did proceed with a complaint received an unfavourable outcome with an explanation provided by the FSP; and
  • 21% of those who complained and did not have their complaint resolved within the IDR guidelines set by ASIC knew they could escalate the complaint to External Dispute Resolution (EDR).
Common obstacles encountered by Australians aged over 18 who took part in the research that directly affected their satisfaction and / or confidence in the IDR process include:

Structural Obstacles: 1 in 7 complainants found it difficult to find the FSP's contact details to make a complaint
Transparency Obstacles: Almost 25% of complainants did not have the IDR process explained well at first and 27% of complainants were unsure of how long they would need to wait for a decision; and
Customer Service Obstacles: 28% of complainants reported feeling that they had not been listened to or heard and 22% felt that they had been passed around too many people.

Following the release of this research ASIC has given an undertaking to raise financial services IDR standards and transparency including onsite monitoring and reviewing the current standards and guidance which are set out in Regulatory Guide 165 with a public review to commence from February 2019.


Misleading Debt Collection Tactics in New Zealand

Friday, December 28, 2018 - Posted by Michael McCulloch

stuff.co.nz is reporting that the New Zealand Commerce Commission has warned a debt collection agency for possibly breaching the Fair Trading Act.

The warning comes following a complaint by a consumer that if she wanted to dispute a debt that she should raise the dispute with them but pay the debt to them in the meantime.

A spokeperson for the Commerce Commission said in a statement that the debt collection agency was incorrect in this advice as the debt collection agency had in fact purchased the debt and that the dispute should be handled by them. The Commission went on to say that it has also warned the debt collection agency to take care in the future to avoid making statements to debtors which may give the impression that Court action was inevitable if the debtor did not make immediate payment.

Commissioner, Anna Rawlings, said, "While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not."

While there may be differences in the legislation surrounding debt collection practices in New Zealand and Australia this article should serve as a timely reminder of your obligations under the Debt Collection Guidelines: for Collectors and Creditors with a specific focus on s13 of the Guidelines regarding disputed liability and s19 of the Guidelines regarding Representations about the consequences of non-payment.


ASIC Regulatory Guide 165 Internal and External Dispute Resolution

Thursday, June 28, 2018 - Posted by Michael McCulloch

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:

Online: www.fos.org.au
Email: info@fos.org.au
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:

Online: www.afc.org.au
Email: info@afc.org.au
Phone: 1800 931 678
Mail: Australian Financial Complaints Authority
GPO Box 3
Melbourne VIC 3001

Download RG165 May 2018



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