ASIC today released a report and updated regulatory guidance refining the rules for access to external dispute resolution (EDR) schemes for small business borrowers.
The report follows a detailed review of the existing EDR access arrangements in situations where the lender has already commenced legal proceedings.
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Key points:
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Deputy Chairman Peter Kell said, ‘It is important to get the balance right between access to EDR schemes, including small business access, and giving lenders certainty about their ability to pursue legal action in relation to larger commercial facilities’.
Report 348 Response to submissions on CP 190 Small business lending complaints: Update to RG 139 (REP 348) highlights key issues, and responses, that came out of a detailed consultation with small business representatives, lenders, consumer representatives and EDR schemes.
'The consultation highlighted that while the monetary limit should allow the majority of small business complainants to access EDR schemes, more complex and high value small business lending disputes are more appropriately addressed in court.
‘That is why we have introduced the exclusion of complaints where, at the time the complaint is lodged, legal proceedings have already commenced in relation to a small business credit contract of more than $2 million’, Mr Kell said.
ASIC intends to review the operation of this limit in two years time.
Other matters
At the same time, ASIC has updated guidance that will assist EDR schemes and industry to handle hardship complaints in a timely manner.
Additional updates have also been made to 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) to:
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remove outdated transitional references for consumer credit and traditional trustee company services, and
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update timeframes for handling complaints at internal dispute resolution to reflect legislative changes made to the hardship regime. These changes have been made to the National Credit Code by the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Enhancements Act), and the National Consumer Credit Protection Amendment Regulation 2013 No. 1 (which modifies the Enhancements Act for transitional arrangements).
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Background
An EDR scheme is a free, independent dispute resolution service that can help you if you have a complaint with one of its members (e.g. a lender or mortgage broker). Typical complaints relate to hardship or lenders seeking to enforce the loan to recover a debt (usually by repossessing the security, the home). The two approved schemes are the Financial Ombudsman Service and the Credit Ombudsman Service Limited.
For more information about the first stage of ASIC’s review, see: