ASIC has announced a doubling in breach of licence notifications by the financial services industry: in the first nine months of this financial year, ASIC received 690 breach notifications, or between 28 and 50 a fortnight, which is twice the number received before the October 2004 publication of ASIC’s guide to reporting breaches.

Australian financial services licensees are required to report any significant breaches, or likely breaches to ASIC, within five business days of becoming aware of the breach.

Since 1 July 2005, ASIC has received 690 notifications including:

• 258 breach notifications from the general insurance and superannuation sectors
• 35 breach notifications from deposit taking institutions
• 33 breach notifications from life insurers 
• 37 breach notifications from stockbrokers.

The most common types of notifications were breaches involving disclosure obligations, financial viability, incorrect fees and charges, statements of advice and unit pricing.

Of the breach notifications received since 1 July 2005:

• licensees ultimately addressed the causes and consequences of the breach in a manner acceptable to ASIC in 431 cases
• ASIC continues to monitor licensees’ progress in properly addressing the causes and consequences of the breach in a further 63 cases
• six licenses have been varied
• 30 licensees remain under surveillance
• formal investigations are underway in the case of 25 breaches.

Since December 2003, ASIC has received more than 1600 breach notifications from licensees.

When Citibank gave customers notice of its intention to introduce a new fee on its ReadyCredit facility, there was a swift reaction by customers. The introduction of the new fee prompted a number of
consumer complaints to ASIC, as well as to other agencies including the
Banking and Financial Services Ombudsman and the Banking Code
Monitoring Committee.

The new fee of $160 applied if account holders did not spend
$1,000 on purchases within 12 months. Many consumers opened a Citibank ReadyCredit account
in response to offers of low interest on balances transferred.

ASIC has announced that Citibank agreed to make some changes to its ReadyCredit card following concerns raised by ASIC. Citibank has agreed to allow
affected customers until 30 June 2006 to avoid the ‘failure to spend’
fee or close their accounts. Citibank has also confirmed that where the fee is incurred, it will attract interest at the rate applicable to the balance transferred, and not the higher rate that applies to purchases.

ASIC was concerned that previous promotional
material for the ReadyCredit card contained information that may have
encouraged consumers to believe that no or only minimal fees would be
incurred, regardless of what was charged to the card.

Ecommerce amendments
The Consumer Credit and Trade Measurement Amendment Bill 2006 was passed by Queensland Parliament on 21 April 2006. The Bill includes amendments to the Uniform Consumer Credit Code to provide for e-commerce and for the extension of the sunset date of mandatory comparison rates (see below).

The e-commerce amendments will commence on proclamation, which will occur in early July 2006.

Mandatory comparison rates
MCCA has agreed to extend the sunset date for comparison rates for a year until 1 July 2007. The amendment to the Code to extend comparison rates forms part of the Consumer Credit and Trade Measurement Amendment Bill 2006 which was passed by Queensland Parliament on 21 April 2006. The provision will take effect upon assent which is likely to occur in early May 2006. The amendment allows for the making of a regulation to bring forward the date on which comparison rates will sunset should a decision on the future of comparison rates be made before July 2007. Work on the Final Decision Making Preliminary Impact Statement is being finalised.

UPDATE 3 May: The Act was assented to on 2 May and the extension came into effect on that day.

Precontractual disclosure
The consultation has now closed with a large number of submissions being received. UCCCMC will consider the submissions with a view to finalising a position in the coming months.