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December 4, 2013

COSL 2013 Annual Report: complaint analysis

The Credit Ombudsman Service Limited (COSL) Annual Report on Operations 2012-2013 sets out the number of complaints that were made against named member financial services providers.

Member FSPs which received less than four complaints are not named in the report.

While the analysis sets out the products for which complaints were made it does not set out the issues covered.

But the report does identify systemic issues identified by COSL:

  • it was alleged that a mortgage broker promoted the sale of certain properties to consumers and then arranged unsuitable loans for the consumers to enable
    their purchase
  • authorised representatives of a licensee provided the consumers with inappropriate advice in relation to investments and the establishment of self-managed superannuation funds
  • a ‘group complaint’ made by a number of consumers (represented by a consumer legal service), involving a motor vehicle finance provider’s products and services
  • inappropriate disclosure and charging of a weekly “administration fee” under a standard form loan contract
  • the credit provider (through its mercantile agent) improperly repossessed vehicles which secure loans from the consumers’ homes
  • a debt collection agency had a practice of sending consumers letters addressed to ‘The Householder’, but with the details of the consumer and a request to contact the agency contained inside.

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Posted 4th December 2013 by David Jacobson in EDR

November 1, 2013

Retaining credit representatives records

ASIC Report 330 (at paragraphs 78 to 87) noted that credit licensees must keep a record of all material that forms the basis of an assessment of whether a credit contract will be unsuitable for a consumer, and provide a consumer with a copy of the preliminary assessment if requested to do so. This includes assessments by its authorised credit representatives.

The report recommends that:

  • Credit licensees should have appropriate practices and procedures in place to be able to directly provide consumers with a copy of the preliminary assessment, if requested to do so, within the timeframe prescribed by legislation.
  • Licensees can reduce the risk of not being able to provide a preliminary assessment in the required timeframe by having direct access to the preliminary assessment and all documents that form the basis of that assessment from the date the credit assistance is provided.

COSL has now reminded its members that under COSL's Rules, a person can make a complaint to it about a FSP up to six years from the day they first became aware (or should reasonably have become aware) of their loss. The six years does not start from the date the FSP provided the service or product to the person, it may start much later.

Once a person ceases to be a licensee's credit representative, it may be very difficult to recover assessment documents and file notes from them. COSL says that" if the documents or file notes are required by COSL to refute an allegation made by a complainant against the representative , the inability of the licensee to produce the documents or file notes may result in COSL having to draw an adverse inference against the licensee: that is, that the documents or file notes do not exist or if they do, do not refute the allegation".

COSL suggests that licensees should consider storing documents and file notes in a central repository that is accessible by the licensee.

For geographic diverse groups a cloud based system would be appropriate.

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Posted 1st November 2013 by David Jacobson in EDR, licensing

FOS comparative tables

FOS has released comparative tables together with its 2012-2013 annual review.

The tables allow users to compare 2 different FSPs for the likelihood of disputes across product types or to compare all FSPs in respect of a single product type for the chance of a dispute, the number of disputes and the average stage to which most disputes reach and outcomes.

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Posted 1st November 2013 by David Jacobson in EDR

October 2, 2013

Privacy and credit dispute resolution

Credit-related disputes usually involve privacy issues.

From 12 March 2014, under Part IIIA of the Privacy Act, a credit provider must be a member of an EDR scheme recognised under the Privacy Act to be able to participate in the credit reporting system.

A credit provider must also be a member of a recognised EDR scheme to be able to disclose information to credit reporting bodies.

Credit providers, as defined in s 6G of the Privacy Act, include entities from a range of industries including banks, utility providers and telecommunication service providers.

The Information Commissioner has published the conditions that must be met by EDR schemes to be recognised under the Privacy Act, its approach to existing EDR schemes and when it will allow the EDR scheme to deal with a privacy-related credit complaint rather than the OAIC.

Commercial lenders and businesses who are not already in a consumer credit EDR scheme will be required to join an EDR scheme.

The Information Commissioner has accepted that if a privacy complaint is being dealt with by a recognised EDR scheme or would be more effectively or appropriately dealt with by a recognised EDR scheme then the EDR scheme should manage it.

When the complaint relates to an individual’s request for access to, or correction of, their credit-related information. If an individual requests access to, or correction of, their credit-related information and the request is refused, the individual may make a complaint directly to a recognised EDR scheme of which the credit reporting body or credit provider is a member, or to the Information Commissioner.

The Information Commissioner is aware that many credit providers are already members of EDR schemes. In some instances, other regulatory regimes require those credit providers to be members of particular EDR schemes. The Information Commissioner is mindful of the burden that would be imposed on credit providers if they were required to join an additional EDR scheme for the purposes of participating in the credit reporting system. This outcome will be avoided where possible.

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Posted 2nd October 2013 by David Jacobson in EDR

July 24, 2013

Which EDR scheme for securitised loan disputes?

The Financial Ombudsman Service Limited (‘FOS’) and the Credit Ombudsman Service Limited (‘COSL’) have agreed on a process when one receives a complaint or dispute against financial service providers (‘FSP’) which may be more appropriately dealt with by the other scheme where the loan which is the subject of the complaint or dispute is part of a securitisation programme.

In a securitisation programme, the programme funder or servicer (also known variously as programme manager, fund manager, wholesale lender or wholesale funder) may be a member of one scheme while the securitisation trustee may be a member of the other scheme.

A complaint or dispute about a credit facility which has as its lender of record a securitisation trustee (‘securitised loan’) should, as a general rule, be directed by the scheme which receives the complaint or dispute to whichever scheme the programme funder or servicer (‘counter-party’) (or ‘white label’ lender) belongs to.

The complaint or dispute will be referred back to the scheme to which the trustee is a member if the counterparty is unable or unwilling for any reason to deal with a complaint or dispute which involves an application to vary or set aside a credit contract on grounds of financial hardship, an application to postpone enforcement proceedings, an allegation that that the loan or the fees are unjust or unconscionable or an allegation that the credit contract is ‘unsuitable’.

Special rules apply to a complaint or dispute received by it about a securitised loan under a PUMA programme funded by Macquarie Bank.

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Posted 24th July 2013 by David Jacobson in EDR

July 17, 2013

Proactive credit dispute resolution

COSL's July 2013 news contains some interesting statistics:

According to COSL 74% of all complaints closed by it in the past 12 months (which were within its jurisdiction) resulted in favourable outcomes for consumers. These include payment variations on grounds of financial hardship, fee reductions and refunds, monetary compensation and non-monetary orders (such as amending or removing a credit listing or returning a security asset to the consumer’s possession).

How can you resolve complaints before they reach COSL?

COSL itself strongly encourage FSPs to promote their internal dispute resolution (IDR) complaint handling process to their clients by prominently referring to the IDR process and contact details in documents and other material that are sent to clients.

COSL says 50% of the phone calls it receives are from people who think they are calling their FSP. This is because the FSP's EDR contact details appear in the Credit Guide and in the Form 12A (Information about debtor‘s rights after default) as well as in bold caps at the end of documents such as the Form 5 Information Statement.

COSL encourages FSPs to review any of their template letters which mention COSL and ensure that their own IDR process is given prominence.

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Posted 17th July 2013 by David Jacobson in EDR

November 23, 2012

Hardship request process flowchart

As the new hardship provisions commence on 1 March 2013 it is important to start reviewing your procedures (Background).

Here's a flow chart of the steps and time frames. (Click on image to enlarge)

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Posted 23rd November 2012 by David Jacobson in EDR, legislation

October 22, 2012

No changes to ASIC EDR scheme jurisdiction over debt recovery legal proceedings complaints

In Report 308 Response to submissions on CP 172 Review of EDR jurisdiction (debt recovery legal proceedings) (REP 308) ASIC has released the findings of a review examining the jurisdiction of EDR schemes in relation to certain consumer complaints over debt recovery legal proceedings
(CP 172).

The Report reviews RG 139.77-RG 139.79 which require ASIC-approved EDR schemes to handle complaints under their Terms of Reference or Rules when members of the schemes commence legal proceedings to recover a debt from a consumer.

ASIC decided to make no changes although it will further review issues relating to small business lending.

ASIC concluded that the ASIC-approved EDR schemes and their debt recovery legal proceedings jurisdiction plays a useful role in assisting consumers and financial investors who may benefit by a hardship variation, need more time to sell their home, may have been granted loans in breach of responsible lending requirements or face debt collection issues (i.e. being pursued for statute-barred debts).

In response to industry submissions about EDR scheme delays when handling complaints under their debt recovery legal proceedings jurisdiction, ASIC decided against introducing maximum and specific timeframes within which a scheme must handle complaints involving debt recovery legal proceedings.

Types of complaints
In response to industry submissions that a stay on debt recovery legal proceedings under RG 139.77–RG 139.79 should only be permitted when a complaint at the EDR stage relates to hardship or enforcement action, not separate complaints about direct debit fees, penalty fees, interest or enforcement fees that have no direct correlation with hardship or enforcement action, ASIC decided against limiting the scope of RG 139.77– RG 139.79 to exclude those types of complaints from an EDR scheme’s debt recovery legal proceedings jurisdiction.

Small business lending complaints
In response to concerns that there has been unintended ‘jurisdictional creep’ as FOS’s and COSL’s debt recovery legal proceedings jurisdiction extends to non-National Credit Code regulated commercial loans, ASIC believes there is merit in considering further whether an EDR scheme’s jurisdiction should exclude certain types of small business lending complaints because they would be more appropriately dealt with in another forum (i.e. court). Hoowever ASIC believes that all small business borrowers should not be totally excluded from accessing this jurisdiction. This is because:
• Phase II credit reforms may extend the credit laws to cover small business lending; and
• it would be inconsistent with current banking practice—for example, the ABACUS Mutuals Banking Code of Practice (clause 24) and ABA’s Code of Banking Practice (clause 25.2) currently commit to assisting small business complainants in hardship.

ASIC is consulting in Consultation Paper 190 Small business lending complaints: Update to RG 139 (CP 190) on how small business lending complaints may be legitimately excluded. ASIC does not consider that excluding small business lending complaints based on the value of the security would be practically workable, given that the value of the security may change during the life of the loan and this may create disputes about whether the EDR scheme has jurisdiction to handle the complaint. ASIC suggests it may be more practically workable to exclude small business lending complaints based on the value of the loan granted.

Currently FOS accepts claims from a Small Business, which is defined in FOS’s Terms of Reference as:
“a business that, at the time of the act or omission by the Financial Services Provider that gave rise to the Dispute:
(a) if the business is or includes the manufacture of goods: had less than 100 employees; or
(b) otherwise: had less than 20 employees.”

FOS may consider a dispute where the value of the applicant’s claim does not exceed $500,000, and can award compensation up to $280,000.

Improving IDR
ASIC is encouraging AFS licensees and credit licensees to:
• consider ways to more proactively assist consumers to recognise that they are in financial hardship at earlier stages when they experience hardship;
• better resource and train their frontline and collections staff to properly identify and consider hardship issues; and
• better resource their complaints handling teams so they can respond to complaints at EDR in a timely manner (and, in FOS’s case, so that a complaint under its debt recovery legal proceedings jurisdiction can continue to be expedited).

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Posted 22nd October 2012 by David Jacobson in EDR

September 21, 2012

FOS systemic issues update – April-June 2012

FOS has published its systemic issues update for April-June 2012 as reported to ASIC.

The credit related issues included:

  • Several disputes were referred for systemic issue review that involved a financial service provider’s (FSP’s) practices for making default listings and serious credit infringement listings. FOS was concerned that applicants may have been deprived of their opportunity to remedy defaults before they were listed and that the listings may have breached the Privacy Act 1988 (Cth) as they dealt with amounts less than 60 days overdue.
  • Another dispute relating to listings and serious credit infringement listings, revealed that the FSP’s standard default notices were not compliant with the relevant legislation.
  • FSP procedures which did not ensure collections and enforcement action were suspended after FOS notified the FSP of the disputes. A review of these disputes indicated that in a number of cases, default notices were dispatched to customers after FOS had notified the FSP of the disputes. In another case, security property was repossessed after FOS notified the FSP of the dispute.
  • In another case , legal proceedings against an applicant were initiated one week following FOS’s notification of the dispute. Similarly, the circumstances of a similar dispute showed that the FSP appeared unable to ensure that telephone contact from its collections team ceased during FOS’s investigation of the dispute.

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Posted 21st September 2012 by admin in EDR

June 20, 2012

FOS acts to reduce dispute resolution delays

FOS has announced that it has adopted a new Workflow Assessment Process which will be used for disputes that remain unresolved after they have been through internal dispute resolution and after the financial services provider (FSP) has provided their initial response about the dispute to it.

The following types of disputes may now be referred directly for decision (or conciliation for financial difficulty disputes) without first trying to resolve these disputes using negotiation, conciliation or assessment:

  • EFT or unauthorised withdrawal disputes with claims greater than $10,000
  • Allegations of forgery with claims greater than $10,000
  • Disputed liability under a guarantee
  • Clearout listings on consumer credit files
  • Claims of maladministration in lending for secured debts relating to home loans, reverse mortgages and business lending (lodged by borrower or guarantor) where the Applicant claims they did not understand the agreement or were misled in relation to the lending, they could not afford the credit facility, they did not receive the benefit of the funds lent, or the credit facility was unsuitable at the time of lending (where the Responsible Lending provisions of the National Consumer Credit Protection Act apply)
  • Claims of misconduct by FSP as mortgagee in possession
  • Retrospective claims for financial difficulty in relation to secured loans where there are no current arrears
  • Disputes where the applicant is experiencing financial difficulty, accepts liability for the debt and there are significant arrears (over $100,000) on a secured facility, and the parties’ proposals for repayment are vastly different, cross-securitised multiple facilities with significant outstanding balances (over $1 million), or secured debts where there are also Family Court proceedings, bankruptcy or company liquidation.

Langes provides EDR services.

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Posted 20th June 2012 by David Jacobson in EDR
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