media release

10-95AD Access to dispute resolution for consumers of credit and margin lending financial services

Published 7 May 2010

From 1 July 2010, Australian consumers will have much greater access to free, independent external dispute resolution services when they have a problem with their credit provider or broker following the release of updated regulatory guidance from ASIC.

To ensure that the dispute resolution system appropriately deals with consumer credit disputes, ASIC has today released updated regulatory guidance that will apply to registered persons, credit licensees, credit representatives and margin lending financial service providers.

The updated regulatory guidance is set out in:

Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165); and
Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139)

The new dispute resolution requirements for credit will deliver assistance to consumers who are in hardship or financial difficulty.

For example, a lender’s contact details for making a hardship application (i.e. telephone number, and where possible, a fax number, postal address and email address) will be posted and kept updated on an external dispute resolution (EDR) scheme’s website. This will assist consumers and their representatives to find where to direct a hardship application.

There will also be quick response times for the handling of urgent credit disputes at internal dispute resolution (IDR). That is a credit licensee’s in-house complaints handling process, usually the necessary first step in the dispute resolution process before, where it is necessary, a dispute progresses to external dispute resolution (EDR).

Instead of the current maximum 45 days for handling disputes at IDR under RG 165, lenders will have shortened timeframes for handling certain types of credit disputes. These shorter timeframes will apply to:

disputes involving default notices – a maximum 21 days; and
disputes involving hardship variations or postponement of enforcement proceedings – no further time beyond what the National Credit Code provides for the credit provider to determine an application for hardship variation or request for postponement of enforcement proceeding, and to document any agreement reached.

ASIC considers that the timeframes will allow industry sufficient time to address disputes at IDR while providing a quick response for consumers under significant emotional and financial stress.

Credit EDR schemes will also need to update their Terms of Reference or Rules to ensure a consistent approach to handling credit disputes.

From 1 July 2010, EDR schemes will be required to follow a priority system for disputes involving credit representatives.

Under the new national credit regime, credit representatives, unlike unauthorised representatives of AFS licensees, are required to be separate members of EDR schemes, in addition to their credit licensees. To reduce consumer confusion about where to complain when a dispute involves a credit representative who is a member of a different EDR scheme to their credit licensee, the EDR scheme of the credit licensee must be used as the EDR scheme of first instance. Where the credit licensee ceases to carry on business and the EDR scheme of the credit licensee does not exercise its jurisdiction to handle the dispute, the dispute may be handled by the EDR scheme of the credit representative.

This approach will help reduce consumer confusion about where to complain, streamline compensation arrangements and best align with current dispute resolution requirements for AFS licensees, particularly where a credit representative is also an authorised representative of an AFS licensee.

ASIC’s update of RG 165 and RG 139 for credit will also deliver other improvements to the dispute resolution system, including:

ensuring EDR schemes cover the vast majority of types of credit disputes, including where disputes involve responsible lending or the types of matters under s 199 of the National Consumer Credit Protection Act 2009 (small claims procedures) and the value of the contract or amount of compensation sought exceeds $40,000; and
refining the time limits for bringing a credit dispute to EDR to align with shorter time limits for bringing legal proceedings for certain types of credit matters under the National Consumer Credit Protection Act 2009.

As part of ASIC’s ongoing role and regulatory oversight of the dispute resolution system, ASIC will review the dispute resolution requirements once the new national credit regime has had a sufficient time in operation.

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