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May 23, 2012

COSL independent review released

The Credit Ombudsman Service Limited (COSL) has released an independent review of its operations against benchmarks prescribed by the Australian Securities and Investments Commission (ASIC) for EDR Schemes.

The review concludes that COSL meets most of the industry benchmarks and the requirements of ASIC’s RG.139 with a couple of areas where it did not think that the standard was quite met.

The review made 47 recommendations.

It concluded that COSL is not yet fully achieving the Fairness Benchmark. It noted that "Provided that COSL dedicates the necessary resources, it seems to us, however, that the Fairness issues that we have identified are capable of being quite readily addressed."

In this area it recommended that "COSL should develop more written guidance for its case managers to help them deal with common complaint scenarios, for example, allegations of excessive early termination fees or failure to provide accurate disclosure or to fulfil commitments about fees, interest rates or other matters etc. When undertaking this work, COSL should research other EDR scheme approaches and attempt to achieve a harmonised approach with FOS. Any differences in approach should be capable of clear explanation to consumers."

The review also commented on the question of competition as between the two remaining EDR schemes in the Australian financial sector, COSL and FOS:

"there is now substantial overlap with FOS and emerging contrasts between the approaches taken..... The scheme is less than one-tenth the scale of its competitor and has significantly less complaints experience. It will inevitably struggle to achieve the same level of in-house expertise, infrastructure, management professionalism, economies of scale, etc. This struggle will be much exacerbated if COSL is to accept members from all sectors of the financial industry."

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Posted 23rd May 2012 by David Jacobson in EDR

Langes Responsible Managers Seminars August 2012

Langes are pleased to announce that our next Responsible Manager seminars will be held in August 2012.

Our February seminars were well received. In response to feedback we will add an extra interactive session in addition to our case study.

These seminars for Australian Credit Licencees cover current hot topics and a general update on things you must get right.

Topics are selected for their relevance for Responsible Managers: the August seminars will specifically discuss preparing for an ASIC compliance audit.

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: $385 (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 21 August 2012
Sydney: Wednesday 22 August 2012
Melbourne: Tuesday 28 August 2012
Adelaide: Wednesday 29 August 2012

Register your interest

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Posted 23rd May 2012 by David Jacobson in seminar

May 16, 2012

Bank exception fees class action update

The High Court has agreed that the appeal from the Federal Court decision in Andrews v ANZ Bank be removed to it and not be dealt with by the Federal Court Full Court. (Background)

This will speed up a decision on the characterisation of fees as a penalty.

Apart from ANZ Bank, class actions have also been issued against Citibank, Commonwealth Bank, NAB, Westpac, St George, BankSA and BankWest.

The four other banks against which proceedings are proposed to be issued are Bank of Queensland, Bendigo Bank, HSBC, and Suncorp.

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Posted 16th May 2012 by David Jacobson in responsible lending

FOS and COSL representation

ASIC is still reviewing its position on EDR schemes jurisdiction over complaints when credit providers have commenced debt recovery proceedings.

It is important that disputes that are referred to FOS or COSL be dealt with properly at an early stage to avoid drawn out proceedings.

Langes offers assistance in 2 key areas, firstly drafting a comprehensive response by credit providers to borrowers' claims and secondly in representing credit providers at conciliation conferences.

Contact Shannon Adams.

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Posted 16th May 2012 by David Jacobson in EDR

April 26, 2012

Credit enhancements deferred

The draft amendments to the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 contain the following commencement date changes relating to the consumer credit provisions:

  • The provisions relating to hardship, unfair or dishonest conduct of credit providers, representations about unsuitability assessments, new provisions for giving authorisation for deductions by employers of debtors and other "enhancements" will commence on 1 March 2013, instead of 1 July 2012.
  • The provisions relating to reverse mortgages will mainly commence on 1 March 2013.
  • The provisions relating to small amount credit contracts will commence on 1 March 2013.
  • The provisions relating to caps on costs and interest rates on other contracts will still commence on 1 July 2013.
  • The provisions relating to consumer leases will commence on 1 March 2013.


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Posted 26th April 2012 by David Jacobson in legislation

Westpac withdraws unsolicited credit card limit increase invitations

ASIC has announced that Westpac has withdrawn unsolicited credit card limit increase invitations in response to ASIC's concerns they were misleading.

Between February 2012 and March 2012 via email, credit card statements and its website, Westpac notified customers about changes to the law regarding credit limit increase invitations and requested that customers provide their consent to continue to receive credit limit increase invitations. Approximately 3700 customers provided their consent as a result of these messages.

ASIC formed the view that the messages were misleading as they:

  • suggested that if they did not consent, customers could miss out on accessing additional funds, and
  • created the impression that customers needed to act urgently, which may have led customers to respond without properly considering their options.

Westpac also obtained some customer consents through messages that ASIC did not consider to be misleading and these consents remain unaffected.

ASIC’s action against Westpac follows the Commonwealth Bank entering into a enforceable undertaking earlier this year following ASIC concerns over a message sent to its internet banking customers.

The new credit card rules commence on 1 July 2012.

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Posted 26th April 2012 by admin in legislation

April 24, 2012

Draft Credit Enhancement Bill amendments

Treasury has released for public consultation draft legislation to amend the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 (the Enhancements Bill).

The Enhancements Bill was introduced into Parliament on 21 September 2010.

These amendments to the Enhancements Bill respond to recommendations contained in committee reports, and to other issues raised in consultations with stakeholders. (Background)

The amendments propose changes to:

  • the regulation of reverse mortgages;
  • hardship applications under the National Credit Code;
  • arrangements regarding the caps on the maximum cost payable in respect of both small amount credit contracts and all other credit contracts;
  • the prohibition on licensees using terms such as ‘pre-approved’; and
  • changes to allow for the introduction of disclosure requirements in relation to the use of employer payment authorisations.

The Bill is scheduled to be debated in Parliament in the Winter 2012 sittings.

Separately, Treasury has released a Discussion Paper setting out a range of possible measures aimed at reducing the dependency of consumers on high-cost short-term small amount loans ("payday loans"), including by:

  • minimising the use of these loans where other solutions to a consumer’s financial needs are available (for example, by negotiating directly with their utility provider, where the credit would otherwise be used to pay an electricity bill);
  • encouraging the use of existing alternative forms of credit (such as no interest or low interest loan schemes); and
  • promoting the availability of financial counselling services that can provide constructive and long-term solutions.

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Posted 24th April 2012 by David Jacobson in legislation, Phase 2

ASIC continues credit advertising surveillance: objects to “guaranteed” finance

ASIC is continuing its financial services advertising surveillance. It has announced that Brisbane's Cheapest Commodores has agreed to amend the advertising of "guaranteed finance" for its car finance offers in response to concerns raised by it.

ASIC says that Peter Barratt Pty Ltd, which has six BCC car yards across Brisbane, promised ‘Guaranteed Finance’ via its website and other promotional material. ASIC was concerned that this claim was either:

  • misleading because the company did not in fact guarantee to provide finance regardless of the customer’s financial circumstances, or
  • if the company did provide such a guarantee, that it was in breach of the responsible lending obligations under the National Consumer Credit Protection (NCCP) Act.

The reference to "guaranteed finance" will be removed.

Langes+ provides a financial services advertising legal sign-off service. Contact one of our offices for more information.

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Posted 24th April 2012 by David Jacobson in legislation, licensing, responsible lending

April 20, 2012

Application of new credit card rules

The credit card provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 commence on 1 July 2012.

Do they apply to debit cards with attached overdrafts or lines of credit?

Whilst the debit card functions are not affected, when the card is used to obtain credit under a continuing credit contract the new rules may apply.

Section 133BA(1) defines "credit card contract":
"(1) A credit card contract is a continuing credit contract under which credit is ordinarily obtained only by the use of a credit card."

Section 133BA(2) defines "credit card":
"(2) A credit card is:
(a) a card of a kind commonly known as a credit card; or
(b) a card of a kind that persons carrying on business commonly issue to their customers, or prospective customers, for use in obtaining goods or services from those persons on credit; or
(c) anything else that may be used as a card referred to in paragraph (a) or (b). "

Section 133BA(5) says:
(5) If a credit card can also be used in other ways (for example, as a debit card, or to access other accounts):
(a) the article is a credit card (despite the fact that it can also be used in those other ways); but
(b) the provisions of this Act that are expressed to apply in relation to credit cards do not apply to the article in so far as it can be used in those other ways.”

In other words it is a credit card if it can be used to obtain credit (and that is ordinarily the only way the overdraft or line of credit is accessed) but if it can be used for other things (such as to debit a savings account) those other uses are not affected.

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Posted 20th April 2012 by David Jacobson in legislation, Phase 2

April 19, 2012

HSBC changes home loan discount advertising

ASIC has announced that HSBC Bank Australia has changed the advertising for its current "Let's Bankercise" campaign, in response to ASIC concerns that ads featuring a headline claim that consumers could receive ‘Up to 0.95% p.a. off a HSBC Home Smart Loan’ were potentially misleading.

The fine print disclosed that only loans of $1,500,000 or larger were eligible for the full 0.95% discount, with smaller loan amounts starting from $250,000 receiving smaller discounts.

HSBC has agreed to change the wording to more clearly disclose the discounts on offer.

Words and phrases that are used every day (such as "up to") may be misunderstood by ordinary consumers. If consumers take a different meaning to the one that is intended, they may be misled. To avoid misunderstandings, advertisers must make adequate disclosure of special conditions.

Other words that need to be used with caution include "free", "new" and "discount".

ASIC Regulatory Guide 234 gives guidance with respect to the use of ‘independent’, ‘impartial’ or ‘unbiased’.

RG 234.45 and 46 state:

the more that a qualification is required to balance the information contained in the headline claim, the more prominently placed the qualification should be. The headline claim must not itself be misleading....

If warnings, disclaimers and qualifications are required, they should not be inconsistent with other content in the advertisement, including any headline claims. They should also have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing of the advertisement.

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Posted 19th April 2012 by David Jacobson in legislation, licensing
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