The Government has announced that changes to credit reporting laws will be included in its first stage of responses to the ALRC Privacy Report.

It says that dealing with them at an early stage is consistent with COAG’s current agenda on consumer credit reform.

The ALRC recommends that the existing credit reporting provisions of the Privacy Act be repealed. Instead, credit reporting should be regulated under the general provisions of the Act and new credit reporting regulations, incorporating significant recommended changes to the current rules.

In response to the credit industry’s request for access to more information about borrowers, the ALRC recommends that there should be some expansion of the categories of personal information that can be included in credit reporting information held by credit reporting agencies.

The ALRC says the four additional items should be:
• the type of each current credit account opened (eg, mortgage, credit card, personal loan);
• the date on which each current credit account was opened;
• the credit limit of each current account; and
• the date on which each credit account was closed.

Legislation is expected within 12 to 18 months.

The UK Financial Services Authority is aggressively penalising financial service providers for regulatory breaches relating to dealings with customers.

Here are some recent examples:

• Hastings Insurance Services Ltd (Hastings) fined £735,000 for failing to treat its customers fairly in relation to cancelling around 4,550 incorrectly priced car insurance policies.
• Liverpool Victoria Banking Services Limited (LVBS)  fined £840,000 for serious failings in the sale of single premium Payment Protection Insurance (PPI).
• PMSG Insurance Services Ltd fined £35,000 for failing to ensure advice given to customers was suitable and for not organising its business responsibly and to properly manage risk.

APRA has released the final package relating to the authorisation and prudential oversight of providers of First Home Saver Accounts (FHSAs).

The package comprises a prudential standard relating to superannuation licensees (known as RSE licensees), an authorisation form, a notification of intention to offer FHSAs form and a reporting standard. The standards will be effective from 1 October.

Life companies or ADIs that wish to provide FHSAs need to notify APRA of their intention to do so prior to providing, or offering to provide, a FHSA. APRA prudential standards that already apply to the operations of life companies and ADIs are adequate for the provision of FHSAs.

According to APRA Victoria Teachers Credit Union has already given notice of its intention to offer FHSA’s.

Sex Discrimination Commissioner Elizabeth Broderick has launched a new report on gender equality.

Interestingly one of the priorities is gender equality in retirement savings.

What does your credit union do to improve financial literacy in women?

When credit unions merge APRA co-ordinates comments from other regulators including the ACCC.

But the competition issues for credit union mergers shouldn’t be ignored and it’s worth looking at the Westpac-St.George process including how ACCC analyses and defines financial markets, distribution and market structure.

The ACCC has issued a Statement of Issues on the proposed acquisition of St George Bank Limited by Westpac Banking Corporation.

The ACCC’s preliminary view is that there are no causes for concern in respect of retail banking, corporate banking, wealth management and insurance.

The Statement of Issues seeks further information on certain competition issues which have arisen from the ACCC’s market inquiries to date.

The ACCC invites further submissions from the market by 6 August 2008. To allow for submissions in response to the Statement of Issues, the ACCC’s final decision date will be deferred until 20 August 2008.

UPDATE 13 August 2008: The ACCC has concluded that the proposed acquisition of St George by Westpac is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974 in the markets in which they compete and therefore the ACCC will not oppose the acquisition.

In a previous post (Do you really want to know what your members think?) I discussed marketing as a 2 way communication channel for credit unions and mutuals. What’s that got to do with legal compliance?

Your relationship with all your customers is covered by your Code of Conduct.

When you market financial services (such as deposits, insurance, advice) then you need to comply with ASIC’s FSR policies and Part 7.9 of the Corporations Act and the ASIC Act (the financial services equivalent of the Trade Practices Act).

If you market securities and shares you must comply with Chapter 6 Corporations Act.

If you market loans to consumers you need to comply with the Consumer Credit Code.

Online account transactions must comply with the EFT Code.

Financial services marketing compliance needs to address laws specific to products and services offered as well as laws which relate to the lifecycle of a financial service or product: advertising, applications, creating a contract (and its form) and how the product is maintained (including payments, statements and notices, debt collection) through to eventual account termination. In addition, credit unions need to consider their corporate governance and prudential obligations as well as their general community public relations.

Marketing is not just advertising a specific product: whether it is a deposit, a loan, a credit card, financial advice or insurance.

It involves your organisation’s “brand”, your relationship with your members and how you develop a financial product.

The experts all say that advertising on its own without the necessary preparation is a waste of time and is even counter-productive.

Here’s an example (from the USA) of a what a dissatisfied credit union customer can say: Dear credit union – why don’t you love me anymore?

BONUS: CU on the blogs from USA National Association of Federal Credit Unions

You have developed a new product or are launching a new campaign. So what’s involved in “clearing” an ad?

You need to check the content carefully: something that seems funny may be offensive or discriminatory.

Check that you haven’t infringed someone else’s copyright or trademark (eg by using a photo or expression belonging to someone else).

Make sure you have registered your own trade marks and domain names.

Avoid comparative advertising unless you are truly comparing "like for like".

Leaving out an important condition may be misleading. If there are conditions, highlight them. Keep your message simple and clear.

Do you have the resources to do what you offer? If you are offering prizes for a competition, check the conditions carefully. Remember the Pepsico Points case.

Does your pricing model take into account different scenarios?

Have you considered tax issues?

Have you done full “specifications” of the product?

What are the pros and cons? Costs/benefits?

What are your most important objectives?

Can compromises be made?

Is there any ambiguity? Have you conducted usability testing to see that an outsider understands what you are saying?

Are the product terms and advertising goals fully documented?

Have you considered the effect of the ad in different media? How will it look and sound on TV, the radio or internet as opposed to print? Is the ad legible, the voiceover clear?

And of course check for Credit Code and FSR compliance, as applicable.

If you haven’t properly planned your advertising and it does not achieve the intended effect, you may have to withdraw the new product.

Although UK credit unions are different from their Australian counterparts, the UK Financial Services Authority has published a report on its review on AML/CTF compliance by 32 UK credit unions which is of interest.

Some key points:

• staff were not clear about who was responsible for what AML issues;
• staff often relied on trust and personal knowledge rather than formal policies and procedures;
• In some cases the credit unions used formal money laundering reporting forms to update the MLRO, others used informal notes;
• some credit unions still rely on personal knowledge of new members and do not make adequate identity checks. Checks on junior savers were inadequate in a number of cases. Some credit unions did not perform any checks at all on juniors;
• training in all aspects of anti money laundering controls and financial crime
  prevention was weak;
• data security varied: "For example, paper files should be locked in secured cabinets with the keys locked in a safe or other secure place; we did see instances where keys were simply left on top of the cabinet…We saw examples during visits where passwords were shared..Some credit unions visited did not know what levels of access had been agreed for third parties needing to interrogate customer records, be it paper or IT based. ..In some instances credit unions had not considered the secure disposal of electronic data and the need to review systems regularly to dispose of records that are no longer relevant."

The FSA also has examples of good and poor AML practice.