The 23rd Annual Credit Law Conference was held on 2 October – 4 October 2013 and attended by over 200 delegates from the financial services industry. The Conference provided an informative overview of key changes that will impact the financial services industry in Australia and insights into how industry stakeholders are approaching upcoming changes to the regulatory regime. This legal insight details some of the key highlights and commentary from the Conference.
Andrea Beatty, a partner in our Consumer Financial Services team again presented her annual opening regulatory update session at this year's Conference. The focus of her global regulatory paper this year was an overview of the regulatory change affecting financial services industry within Australia, the U.S. and Europe.
The presentation was accompanied by a written paper summarising the changes and Australian Securities and Investments Commission (ASIC) enforcement between October 2012 and September 2013.
If you would like a copy of the written paper, or details on any of the upcoming changes mentioned below, please contact us.
On 12 March 2014, amendments to the Privacy Act commence. The financial services sector will be highly impacted by the move to a comprehensive credit reporting regime.
Throughout the Conference, four sessions discussed the implications that the Privacy reforms will have on the industry. The focus areas for many organisations’ privacy projects include credit reporting, direct marketing and offshoring. Many participants commented that their organisation will not be ready to engage in comprehensive credit reporting from 12 March 2014 and that the priority at this stage is to implement the changes that are necessary to comply with the amended Privacy Act and continue with negative credit reporting.
Senior legal counsel at the Conference noted that in organisations there were business managers who believed continuing with negative credit reporting required no changes. The new regime, however, does require significant changes to how information is processed including changes to IT systems, procedures and documents. An example includes changes to default notices provided under the National Credit Code. It is also widely recognised that adequate staff training will be a crucial part of any privacy project implementation.
Throughout 2013, ASIC has been noticeably more active in utilising its broad enforcement and investigative powers by undertaking compliance programs, actively monitoring advertisements and general enforcement activities in the financial services sphere.
At the Conference, ASIC representatives noted that recently the quality of information supplied in licensing applications has fallen which has led to ASIC, as a generalisation, making frequent requests for further information as part of the application process. ASIC has been reviewing the annual compliance certificates lodged by organisations, which has revealed some entities do not have a satisfactory conflicts of interest policy. ASIC intends to continue reviewing certificates to promote compliance at the highest level within organisations – ie the CEO who signs the certificate.
ASIC has advised that going forward, its focus will be on reviewing:
credit provider's compliance with responsible lending provisions, particularly low-doc loans. A report of this review is expected to be released shortly
responsible lending conduct in view of credit limit increases and sale practices in relation to consumer credit insurance
motor vehicle financing and the debt consolidation industry
licensees' supervision of representatives, including overseas call centres
advertising of credit products, including online advertisements
licensee’s debt collection practices and compliance with the various guidelines.
External Dispute Resolution
External dispute resolution (EDR) schemes continued to have a prominent presence at the Conference. The compulsory membership requirement has made it important for businesses to continually engage with the key EDR schemes for financial services – the Financial Ombudsman Scheme (FOS) and the Credit Ombudsman Scheme Limited (COSL).
Representatives from the FOS and the COSL commented that complaints to EDR cannot be avoided entirely as the decision to refer a complaint to EDR essentially lies with the customer. However, there are steps that an organisation can take to reduce the number of EDR complaints. These include:
dealing with an internal complaint well – this will allow the customer to be confident in dealing with the business directly and not see the need to complain to EDR
focusing on practical solutions rather than being right or wrong
maintaining a positive attitude and remaining open to resolutions – developing a reputation for commitment to seeking fair outcomes for consumers.
It is also important to mention that FOS has published a determination on responsible lending.
Past conferences have featured a presentation by the Treasury on upcoming reform agenda. However this year's Treasury speaker was unable to attend the Conference.
Presumably Treasury policy is in flux pending the expected 'Son of Wallis' Inquiry. We are awaiting the release of the terms of reference for the ‘Son of Wallis’ inquiry – that is, the proposed comprehensive ‘root and branch’ inquiry into the banking and financial services sector regulatory regime.
Recent heightened enforcement action around the world and in Australia has prompted increased focus on compliance. The majority of organisations have recognised the reputational damage that can be caused by adverse regulatory investigations. Many are undertaking compliance audits of their systems and processes to assess their regulatory risk exposure. Compliance audits not only identify high risk areas within the business, but also provide evidence that organisations have undertaken ‘reasonable steps’ to comply with the relevant law, which may be called upon by regulators.