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December 28, 2011

Revised ASIC home loan training requirements for credit providers

ASIC has released a revised version of Regulatory Guide 206 with a modified policy on representative training for credit providers that provide home loans.

The main change to RG 206 is to replace the term ‘mortgage broking services’ with the term ‘home loan credit assistance’, (which ASIC defines as credit assistance in relation to a credit product where the credit is secured by real property) and to permit a representative only providing credit assistance in relation to home loans offered by their own licensee (as opposed to representatives of intermediary mortgage brokers) to complete training in the form determined appropriate by the licensee, subject to certain qualifications.

The revised RG 206 make changes to the requirements for the qualifications of representatives, ongoing training for representatives, the type of training for representatives and the qualifications of responsible managers of credit licensees.

ASIC has not changed its policy regarding qualifications for responsible managers of independent mortgage brokers or representative training for the intermediary mortgage broking sector.

We will discuss the changes at our Responsible Managers seminars in February 2012.

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Posted 28th December 2011 by David Jacobson in licensing

December 21, 2011

ASIC relief for rural financial counselling services and money management services

ASIC has exempted rural financial counselling and money management service providers from licensing requirements for providing credit assistance under the National Credit Act: [CO 11/926].

Money management service providers who give financial advice about basic deposit products in the course of providing a money management service have also been granted limited relief [CO 11/927] from licensing requirements under the Corporations Act 2001 .

Rural financial counselling services are available to primary producers and rural small businesses in financial difficulty and are funded in whole, or in part, by the Commonwealth Government through the Department of Agriculture, Fisheries and Forestry (DAFF) or, in Queensland, through the Department of Employment, Economic Development and Innovation (DEEDI).

Money management services are provided predominantly to improve the financial knowledge and skills of consumers, principally Indigenous consumers in regional and remote Australia. These service providers are funded in whole, or in part, by the Commonwealth through the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).

ASIC’s exemptions are subject to important conditions, namely that:

  • the regulated service is provided to the consumer as part of a rural financial counselling or money management service;
  • no fees or charges are payable by the consumer for any aspect of the rural financial counselling service or money management service;
  • the service providers do not engage in any credit activity or financial services business beyond the scope of these exemptions, and take all reasonable steps to ensure that none of their employees do so; and
  • the service provider ensures its representatives have undertaken appropriate training to ensure that they have adequate skills, knowledge and experience to satisfactorily provide the services.

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Posted 21st December 2011 by David Jacobson in licensing

December 19, 2011

Penalty fees class action expands

The solicitors conducting the class action against ANZ have announced that actions will be commenced against the Commonwealth Bank, Westpac, National Australia Bank and Citibank in relation to credit card late payment fees.

The claims are on behalf of 45,000 customers of Commonwealth Bank, 30,000 customers of Westpac, 30,000 customers of NAB, and 10,000 customers of Citibank. Including 38,000 customers in the ANZ case, proceedings have now been issued for over 150,000 bank customers.

The value of the claims against the five banks totals $197 million including $50 million against the ANZ, $56 million against Commonwealth Bank, $38 million each for National Australia Bank and Westpac and $15 million for Citibank.

UPDATE: On 1 February 2012 the actions were expanded to include customers of St George Bank and BankSA.

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Posted 19th December 2011 by David Jacobson in legislation

December 14, 2011

Langes Responsible Manager seminars: February 2012.

Langes are pleased to announce our Responsible Manager seminars in February 2012.

These seminars for AFS and ACL licencees cover current hot topics and a general update on things you must get right. The seminars delve in depth into all the ‘must-know’ rules and traps for each topic.

Topics are selected for their relevance for Responsible Managers. All
topics contain practical case studies and examples.

It is a practical guide to the most recent changes and topical issues affecting financial services and credit licensees, including latest cases, legislation, regulatory developments and other tips on how to prove compliance.

Key Information

* Cost: $330 (incl GST) per person
* CPD points: 3 points
* Time: 9am – 12:30 noon (registration 8:30am)
* Location: Brisbane, Sydney, Melbourne Adelaide
* Designed for: Responsible Managers who wish to stay up to date with all the relevant finance industry regulatory news

When and where
Brisbane: Tuesday 7 February 2012
Sydney: Wednesday 8 February 2012
Melbourne: Tuesday 14 February 2012
Adelaide: Wednesday 15 February 2012

Register your interest

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Posted 14th December 2011 by admin in seminar

December 8, 2011

COSL Position Statement on responsible lending

The Credit Ombudsman Service Limited (COSL) has published a position statement giving guidance as to how it will deal with a complaint that a consumer was provided with an unsuitable credit product.

The 27 page document sets outs COSL's views on the law but emphasises that it is not a court but a dispute resolution scheme.

Its view on the enquiries that must be made regarding a consumer's capacity to repay a loan is summarised as follows:

5.5 We are of the view that the information required to form a view on a consumer's ability to repay a credit contract will be more than just a snapshot of their current financial position. It should include information that allows the person making the assessment to form a view on whether the consumer's financial position could change during the term of the loan (and if so, how).
5.6 We do not propose to provide a checklist of the inquiries that should be made.
5.7 The obligation should be approached on the basis that it is necessary to make as many inquiries as are necessary to adequately understand the consumer's financial position. It is valid to start with a checklist, but it is likely that other inquiries will also need to be made and these will vary from consumer to consumer; responses to initial inquiries may prompt further inquiries and so on until the person making the inquiries is satisfied that they have a full understanding of the consumer's financial position.
5.8 Although an application for credit may satisfy a credit provider's own policies for affordability, it does not necessarily mean that it meets the responsible lending standard in the legislation.

COSL also has regard to the complexity and risk of the product and the consumer's capacity to understand the product.

If COSL finds that there has been a contravention of the responsible lending obligations, it may require the following actions, among others, to be taken:
(a) waiver or refund of fees and charges by the credit provider in return for the repayment of the principal sum lent under the credit contract;
(b) refund of any fees paid to a credit assistance provider who assisted the consumer into the unsuitable credit contract;
(c) variation of the repayments required under the credit contract so as to make them possible for the consumer without hardship; or
(d) release of the consumer entirely from the credit contract including any mortgage or security (subject to unjust enrichment).

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Posted 8th December 2011 by admin in EDR, responsible lending

Senate Committee report on Consumer Credit Enhancements Bill

The Senate Economics Committee has published its Report on the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011.

With respect to small amount credit contracts (short term ("payday") loans) the Committee has recommended that:

"the government review the measures... This review must re-engage with stakeholders to:

  • carefully assess claims that the current provisions may have adverse consequences for consumers;
  • carefully assess the merit of alternative approaches to focus the provisions on borrowers with low incomes; and
  • review and publish modelling on the effect of the proposed 10 per cent, 2 per cent and 48 per cent caps on the commercial viability of the payday loan industry."

The Committee made other recommendations in relation to the Bill's provisions for hardship variations, reverse mortgages, remedies for
'unfair or dishonest conduct' and consumer leases.

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Posted 8th December 2011 by David Jacobson in legislation

December 5, 2011

Case note: ANZ fees class action preliminary decision

In Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 Justice Gordon of the Federal Court made preliminary decisions about which of ANZ Bank's exception fees for a range of banking products may be penalties.

Different fees were charged for different events and for different types of accounts: Retail Deposit Accounts, Consumer Credit Card Accounts, Commercial Credit Card Accounts and Business Classic Accounts.

Justice Gordon decided that the Late Payment Fees in respect of certain credit card accounts are capable of being characterised as a penalty. On the other hand she concluded that the Honour Fees, the Dishonour Fees, the Overlimit Fees and the Non-payment Fees were not penalties.

No decision was made in relation to the amounts of the fees.

Her reasons considered banker-customer law, the history of the law of penalties, the current state of the law of penalties in Australia, the regulatory framework relevant to the Exception Fees (including the Corporations Act, the UCCC and the Banking Code of Practice) and each of the Exception Fees and the distinctions between them.

UPDATE 28 December 2011: The customer plaintiffs have lodged an appeal in their class action against ANZ challenging the ruling that honour, dishonour and overlimit fees were not penalties.

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Posted 5th December 2011 by David Jacobson in legislation

Committee report on Consumer Credit Enhancement Bill

The Parliamentary Joint Committee on Corporations and Financial Services has delivered its report on its Inquiry into Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011.

The Committee has made 14 recommendations including:

  • extending the commencement date for the miscellaneous consumer credit enhancements (hardship variations, unfair or dishonest conduct, representations) from 1 July 2012 to 1 January 2013
  • requiring hardship applications to be made in writing
  • to not prescribe the method by which a credit provider must provide projections for reverse mortgages to potential borrowers
  • to amend the definition of reverse mortgages to clearly exclude other forms of credit arrangements that provide the option of interest only repayments.
  • that the Government revisit the measures proposed relating to small amount credit contracts and caps on costs :"Further consultation with stakeholders should be undertaken to address the concerns identified throughout the inquiry and to develop measures that will ensure cohesive and consistent national consumer credit legislation and an appropriate balance between consumer protection
    and industry viability."

The Bill is awaiting resumption of Parliament on 7 February 2012.

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Posted 5th December 2011 by David Jacobson in legislation, Phase 2

ASIC review of EDR jurisdiction

ASIC has released Consultation Paper 172: Review: EDR jurisdiction over complaints when members commence debt recovery proceedings (CP 172).

The review seeks feedback on whether ASIC should refine its policy settings in Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139) which require both EDR schemes - FOS and the Credit Ombudsman Service Limited (COSL) - to handle complaints under their Terms of Reference or Rules where members have commenced debt recovery legal proceedings. This must cover proceedings that are in their early stages, but need not cover those that have progressed beyond the complainant lodging a defence or defence and counterclaim.

There have been criticisms by Financial Service Providers that EDR schemes are taking too long to resolve consumer claims, especially those lodged after default notices and legal proceedings have issued, resulting in a postponement of enforcement proceedings.

Comments on the consultation paper are due by Monday 27 February 2012.

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Posted 5th December 2011 by David Jacobson in EDR