Social Media Complaints and IDR

Moves to Track IDR Within FSPs

Mirage News is reporting that the Australian Financial Complaints Authority (AFCA) has welcomed the news from the Australian Securities and Investments Commission (ASIC) that financial service providers will be required to supply standardised data on their internal processes for handling customer complaints.

The proposed standard, which is pending public consultation, will include new mandatory data reporting with FSPs required to meet new standards when a complaint goes through the Internal Dispute Resolution (IDR) process with a view to make complaints handling performance transparent. In making the announcement, ASIC Deputy Chair Karen Chester, said, "It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. The Ramsay Panel Review, recent ASIC research, case studies before the Financial Services Royal Commission (FSRC) and our own supervisory work have all identified shortcomings in consumer complaints handling. Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate. The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA. With the benefit of broad consultation, ASIC’s new standards will lift complaints handling performance of firms and ultimately consumer outcomes and fairness of the financial system. And transparently so. These standards will also apply in their entirety to all APRA regulated superannuation funds".

In response to the news, AFCA Chief Ombudsman and CEO David Locke said, "Increased transparency is good news. It will help firms to continuously improve, and that will be good for the firms and their customers alike. We also welcome the idea of requiring firms to provide a standard set of data – this will help companies know how they compare to their competitors and help to inform consumers about the companies they’re dealing with. In this digital age, the move by ASIC to require firms to include complaints made on social media platforms, is entirely appropriate".

ASIC has sought public input on the consultation documents by 9 August 2019 and aims to release the new standards in a new Regulatory Guide by the end of 2019. You can find out more and read the media release by ASIC at ASIC Media Release 19-115MR

ASIC Recommends Buy Now Pay Later Reform {Updated April 2019}

Legislation has been passed which gives the Australian Securities & Investments Commission (ASIC) new powers to regulate this emerging sector. The laws provides ASIC with the power to protect at-risk consumers with James Shipton, ASIC Chair, stating, "

The reforms will be phased in over a period of 2 years and will require companies to identify in advance if a product is appropriate for a consumer. Read the ASIC media release at 19-079MR ASIC Welcomes Approval of New Laws to Protect Financial Service Consumers

Consumer Action Law Cente - "It's Time to Hold Debt Vultures Accountable"

You may recall that in our June 2018 edition we published a blog ASIC Warns Consumers About Credit Repair Services. The article focused on a campaign being run by ASIC that was designed to inform consumers of the high level of fees charged by credit repair and debt relief firms. This month the Consumer Action Law Centre (CAL) has released an article, "Stop Debt Vultures", again highlighting the need for regulatory oversight of this industry.

As indicated in the article the credit repair and debt management firms operate outside of any regulatory licensing with no minimum requirements for competency, ethical standards or licensing. The reality of the situation is that anyone, regardless of their level of education, character or background, can start a credit repair business. In a statement to the media Gerard Brody, CEO of the CAL said, "The promise of fixing your debt worries and getting you back on track just doesn’t live up to reality in our experience. The fact is they can charge hidden and high fees, they can mislead about what it is they can do, and leave people in further debt."

With Australian household personal debt being one of the largest in the world, the CAL are asking that ASIC create a robust regulatory framework to ensure that credit repair and debt relief firms are held to a higher standard.

We will continue to monitor developments in this area.

Federal Court Fines Debt Collection Agency $750K

You may recall in our August 2018 edition of Debt Collection News that we reported that the Federal Court found against a debt collection company acting for Telstra after proceedings were commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities & Investments Commission (ASIC).

It has now been revealed by Yahoo! Finance that the Federal Court has ordered the debt collection agency involved to pay $750,000 in penalties for intimidation and harassment of the 2 customers who collectively owed $8,920.

The debt collection agency involved in the proceedings was ruled last year to have violated Australian Consumer Law after the ACCC commenced legal action in June 2016 where it was alleged that the agency had contacted a stroke victim on more than 40 occasions demanding payment including 20 demands made by letter despite the customer indicating to the agency that he had difficulty in speaking and could only utter single words like "stroke", "no" and "speech" in an attempt to indicate that he was disabled and unable to communicate.

ACCC Commissioner, Sarah Court, said in a statement, ".... continued harassment and intimidation of a care facility resident who had difficulty speaking after suffering multiple strokes is one of the worst cases of unconscionable conduct we have seen in the debt collection sector .... conduct towards another consumer who was in difficult financial circumstances, which included giving false information and making empty threats of court action, was also particularly egregious."

Commissioner Court went on to say, "Unconscionable conduct such as harassment, intimidation and coercion of consumers is unacceptable to not only the ACCC and the court, but the wider community."

A spokeperson for Telstra distanced the company from the proceedings stating, “collection activity is being conducted on behalf of the new owner, not on Telstra’s behalf” and that the telco sells debt to a third party only as a last resort."

ASIC Research Highlights Need for IDR Transparency

The Australian Securities & Investments Commission (ASIC), in conjunction with Nature Research, has recently compiled a report "The Consumer Journey Through the Internal Dispute Resolution Process of Financial Service Providers" which has looked at the consumer experience of the Internal Dispute Resolution (IDR) process.

The research found that:

• 17% of those surveyed considered making a complaint to a FSP in the last 12 months;
• only 8% went on to make an actual complaint;
• approximately 50% of those who did not make a complaint reported that "they did not think it would make a difference" or "it was not worth their time";
• 18% of complainants dropped or withdrew their complaint before it was concluded;
• only 45% of those that did proceed with a complaint received an unfavourable outcome with an explanation provided by the FSP; and
• 21% of those who complained and did not have their complaint resolved within the IDR guidelines set by ASIC knew they could escalate the complaint to External Dispute Resolution (EDR).

ASIC Recommends Buy Now Pay Later Reform {Update}

In our August 2018 edition of Debt Collection News we reported that ASIC were recommending reform to the "buy now, pay later" providers such as AfterPay and zipPay.

Following a report from the Australian Securities and Investments Commission (ASIC) it is being reported by Financial Review that the National Credit Code would not extend to the buy now, pay later sector however ASIC are indicating that there will still be close monitoring of those involved in providing the service to consumers.

The report from ASIC identified 3 key areas of focus:

- ASIC states that it will take regulatory action to address misconduct and monitor industry and risks to consumers;
- ASIC is "considering their legal position" of scenarios where a merchant inflates the cost of the underlying goods if a consumer uses a buy now pay later arrangement.
- ASIC is also 'monitoring' the issue of consumers becoming increasingly indebted due to the ability to access an alternate providers where they have missed payments. According to ASIC, each provider reviewed takes some steps to refuse some credit applications eg if a consumer misses a scheduled repayment, five of the six providers suspend that consumer’s ability to make additional purchases until they have remedied the missed payment.  However, only one out of six providers in the review examined the income and existing debts held by consumers before providing their services.  ASIC also received reports of instances where consumers were allowed to the service despite having limited or no income and substantial existing debt; and
- ASIC states that it expects providers to ensure that:
(a) consumers adequately understand the terms of their arrangement;
(b) a complaints process is visible and accessible for consumers;
(c) consumers understand that they can request financial hardship assistance from their provider; and
(d) merchants act consistently with guidelines supplied by the provider which limit how these arrangements may be promoted and provided to consumers.  ASIC writes that 'while we identified instances where providers could have done more, each provider demonstrated a readiness to work with ASIC by improving their practices in response to our recommendations' and that some have already implemented 'several improvements'.

A copy of the report released by ASIC can be read online at Report 600: Review of Buy Now Pay Later Arrangements November 2018.

ASIC Regulatory Guide 165 Internal and External Dispute Resolution [Reminder]

In our June 2018 edition of Debt Collection News we published our article ASIC Regulatory Guide 165 Internal and External Dispute Resolution.

Regulatory Guide 139 (RG139) now appears to be out of amended draft form and can be download here with ASIC reminding Creditors that RG139 is only in place until all current disputes with the Financial Ombudsman Service and the Credit and Investments Ombudsman have closed -

Note (20 June 2018): In the transition to the commencement of the new, single EDR scheme—the Australian Financial Complaints Authority (AFCA)—on 1 November 2018, complaints made to the FOS and CIO schemes will continue to be dealt with under the relevant scheme’s terms of reference and rules that applied when the complaint was made. 
This guide provides the framework for those versions of the terms of reference and rules. It will remain in force until all those complaints are closed. At that time, we will withdraw RG 139. Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) sets out how we will perform our oversight role in relation to the AFCA scheme.

As a reminder the Australian Financial Complaints Authority (AFCA) will start accepting complaints from 01/11/2018 with Creditors required to ensure that all final response letters and "delay" letters include reference to both relevant predecessor EDR schemes from 21/09/2018.

If you require clarification of the new requirements please contact Collection Law Partners on (02) 8923-1613.

Timeshare Lender Fined for Responsible Lending Failure

A timeshare lender, Future Holiday Finance Pty Ltd (FHF) has recently been pursued by the Australian Securities and Investments Commission (ASIC) for breaches of responsible lending practices.

FHF provides finance for the purchase of membership in ULTIQA Lifestyle which is described as a points-based timeshare arrangement with many consumers being approached by employees of FHF providing scratch cards that tells them that they've won a free holiday. After attending a seminar, which is charged at between $20 to $40, consumers were being given the chance to sign-up to a timeshare scheme to enjoy cut-rate prices at major hotels. To be eligble consumers had to agree to enter into a Contract, with what appears to be a cooling-off period of 14 days, and paying between $12,000 to over $25,000 to secure their points and pay an ongoing yearly subscription.

In the action commenced by ASIC it was found that FHF signed consumers up to loans without assessing affordability and a review of the documentation attached to the loan identified potential unfair contract terms.

FHF has been fined and paid a penalty of $135,000 in response to 3 infringement notices and has been ordered to pay up to $3 million in compensation. FHF will also review loans provided to consumers between 01/07/2012 and 30/08/2018 and will provide refunds to customers where the loan was unsuitable. The refund scheme will be overlooked by an indepdent expert who will also assess FHF's compliance with future responsible lending obligations.

In a statement released to the media, ASIC Deputy Chair, Peter Kell, said, "Timeshare finance operators must ensure that they comply with their responsible lending obligations. 'Consumers should always take the time to consider upfront and ongoing costs of timeshare, including finance, given they are a long-term commitment and can be difficult to sell."

Consumers can get more information about the refund scheme by visiting the MoneySmart website.

Source: ASIC Media Centre - August 2018

ASIC Recommends Buy Now Pay Later Reform

In our January 2018 edition of debt collection news we posted an article AfterPay and zipPay Post-Christmas Warning which indicated that Westpac was warning their brokers that these payment schemes must be assessed as a liability when assessing a persons capacity to service a mortgage.

This month the Australian Securties & Investments Commission (ASIC) has come out and released a report "Design and Distribution Obligations and Product Intervention Power"which recommends broadening their powers to cover the buy now, pay later sector which is not currently regulated by the National Credit Code. In the report ASIC noted:

• providers may carry out limited inquiries of the consumers' financial situation prior to providing credit (noting the responsibile lending obligations do not apply);
• some providers are funding high cost purchases (up to $30,000) over long repayment period;
• consumers may lack understanding of what fees and charges are payable and when; and
• vulnerable consumers may be using these products.