Financial Rights Legal Centre
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Financial Rights Legal Centre has a strong involvement in policy and law reform in the area of consumer credit, debt and banking. Our advice and casework services inform the Centre’s policy priorities.

We promote reforms in regulation, policy and industry practices that will help create a fairer marketplace for consumers of financial services, particularly disadvantaged consumers. In addition, we make submissions to government and industry, participate in working groups, comment on draft legislation, undertake research, refer unfair practices and systematic issues to regulators and/or industry groups for investigation, and raise awareness through the media.

While successfully advocating for a number of individual clients, we have effectively harnessed the knowledge obtained in this process to lobby for systemic protection from problematic practices. We regularly communicate with regulators such as the OFT, ASIC and the ACCC in a combination of formal meetings (such as the Consumer Credit Code Working Party), written submissions to government initiated reviews, publishing reports on our own initiative and other ad hoc consultation.

Joint consumer submission to Treasury re: Making insurance claims handling a financial service. Implementation Royal Commission Recommendation 4.8

From a consumer perspective, claims handling is the most critical part of the insurance process, and one of the most problematic. Placing an obligation on insurers to ensure that the process is efficient, honest and fair will ensure that consumers can expect the same standard from insurers handling claims as they can expect from other financial service providers.

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ASIC Product intervention: The sale of add-on financial products through caryard intermediaries

In this joint submission – Consumer Action and Financial Rights strongly support many elements of ASIC’s proposed intervention. A deferred sales model for add-on insurance, along with complementary obligations and a ban on certain mechanical risk products will dramatically reduce the ongoing significant consumer detriment.

We are, however, strongly opposed to ASIC’s proposal that the deferral period begins by the consumer merely making an application for finance. Our primary recommendation is, therefore, that the deferral period start after the car is purchased, finance approved, and most importantly, delivery of the car. Without this change, pressure sales will remain – defeating the very purpose of this intervention.

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ACCC consultation on Australian Banking Association application for authorisation AA10000441 – joint consumer response to ACCC and ABA

As stated in our previous submission in response to the draft determination, we strongly supported the ACCC initial proposed conditions for authorisation, which we think would marry the Code revisions more closely with the spirit of the Banking Royal Commission recommendations on basic bank accounts. Having read the ABA submission in response to the draft determination and further correspondence from the ACCC, we remain supportive of the revised ACCC proposed conditions

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APRA Consultation on remuneration requirements for all APRA-regulated entities

This joint consumer submission welcomes APRA’s proposed changes to remuneration requirements. These reforms are an important step forward. It is time to make markets work properly and restore the missing link between the pursuit of profit and good consumer outcomes. As a start, APRA should be looking to set direction on remuneration which will ensure staff are properly focused on the drivers of mutually beneficial profit. APRA must calibrate remuneration to ensure that the products and services firms are well-designed, suitable and fit for purpose.

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Treasury Removal of the exemption for funeral expenses policies– Exposure draft legislation

Consumer advocates have held long standing concerns over the inadequate regulatory framework for funeral expenses products. The case for action is irrefutable and we strongly support the Government’s attempts to remove some of the loopholes that currently exist under the laws relating to funeral expenses only products. However, we have some concerns about the Draft Bill and Draft Regulations as they currently stand. Our concerns are set out in this submission.

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Consumer Data Right Privacy Impact Assessment

We believe that this draft PIA has made a series of sensible recommendations within the remit and scope that they have before them and we support Treasury, government and the regulators of the CDR acting swiftly to implement them to ensure that consumers are provided with further protections before the launch of open banking. We make the case for the PIA to make further recommendations which we believe should be included.

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Treasury Exposure draft consultation: Corporations Amendment (Design and Distribution Obligations) Regulations 2019

We strongly support DADOs applying to financial products as defined in the Australian Securities and Investments Commission Act 2001, which includes regulated and unregulated credit. We support the proposed extension of the DADOs to basic bank accounts. However, we consider that some of the proposed exclusions are unwarranted, particularly those related to small business credit and pawnbroking.

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ACCC Draft Determination AA1000441 – ABA Application for authorisation of certain amendments to the 2019 Banking Code

We strongly support the proposed conditions for authorisation. These conditions and proposed data reporting requirements will lead to transparency and improved access to basic bank accounts for people who would benefit from them. The conditions will also help ensure Code revisions align more closely to the intent of the Banking Royal Commission recommendations1 on basic bank accounts.

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Customer Owned Banking Code of Practice Independent Review – Report Two

We support a number of the recommendations made in the Review Report and are pleased to see that a large proportion of the recommendations made by the Joint Consumer Submission have been taken up and integrated into the Review Report, initial drafting and recommendations.
Many of these bring the COBA Code in line with the commitments made by the ABA Code.
Some recommendations would move the COBA Code beyond the ABA Code – these are important recommendations and we would commend COBA to take these up.
However some of the recommendations and drafting do not meet the current commitments of the ABA and keep COBA behind the ABA Code. These include: recommendations regarding commitments to Aboriginal and Torres Strait Islanders, basic bank accounts, financial difficulty, property insurance and proactive data analysis.

We also note that the Review Report has failed to address some specific concerns that we raised in our initial submission Joint Consumer Submission

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ASIC Enforcement Review Taskforce – exposure draft legislation

Consumer Action Law Centre and Financial Rights Legal Centre generally supports the exposure draft legislation but make comment in this submission on the following:
• ASIC’s power to ban individuals;
• Strengthening ASIC’s licensing powers;
• ASIC’s investigative tools – telephone interception and search warrants.

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ASIC CP 322: Product intervention: OTC binary options and CFDs

We commend ASIC’s decision to intervene in
the market for binary options and Contracts For Difference (CFD) in the manner proposed in the draft
instruments. Over The Counter (OTC) binary options and CFDs are designed to lose consumers
money. They are precisely the kind of poor value financial products that should be the subject to market
wide product interventions.
The consultation paper provides a solid evidence base of escalating consumer detriment. That the
detriment remains ongoing, despite the use of multiple other regulatory levers, is clear grounds for use
of the new product intervention power.

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Treasury Reforms to the sale of add-on insurance products – Proposal Paper

We support the Government’s commitment to implement Recommendation 4.3 of the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

While we broadly support the intent of the proposed model and the Government’s swift implementation, we hold serious concerns about elements of the model. Our primary concerns relate to:

  • The trigger for the deferral period being a ‘financial commitment’
  • The one-day ‘customer initiated’ completion of sale
  • The duration of the deferral period
  • Exemptions
  • Tiered design

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ACCC Digital Platforms Inquiry Final Report

Financial Rights has worked extensively on the impact on consumers of the digital economy – particularly in the financial services sector.

We strongly support recommendations 16 through to 21 as critical regulatory infrastructure for a modern digital based economy – infrastructure that places the consumer interest at the heart of the digital bargain and baking in consumer protections to prevent harm and exploitation, increase transparency, and empower consumers.
The recommendations need to be implemented in full to ensure that Australian consumers do not end up lagging behind the rest of the world but also to ensure Australian based businesses do not end up fundamentally disadvantaged in the international digital marketplace.

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Northern Australia Insurance Inquiry, Second Update Report

We strongly support all 28 recommendations that the ACCC has now made to governments and industry. We echo the ACCC’s call for governments and industry to act quickly on all 28 recommendations that have now been made as a part of this inquiry.

As for the additional ACCC inquiries Financial Rights only supports direct government intervention measures that are going to be sustainable and can be applied nationally. We believe mitigation measures (both pubic and private) are the most likely measures to improve affordability and availability of insurance that will be sustainable in the long term. We also submit that contestability of insurance premiums and independent assessment mechanisms are critical for mitigation measures to work properly.

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National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2019 (joint submission)

This is a joint submission by:

  • Australian Privacy Foundation
  • Consumer Action Law Centre
  • Consumer Credit Legal Service (WA)
  • Financial Counselling Australia (FCA) and
  • Financial Rights Legal Centre.

Consumer representatives still have broad concerns about Comprehensive Credit Reporting (CCR) which we have expressed in several previous consultations. The consumer credit liability information that will appear on credit reports will now display previously undisclosed liabilities. This means that repayment history information will provide very little additional value for responsible lending purposes. Additionally, including financial hardship information in credit reports will lead to fewer consumers proactively talking to credit providers to obtain hardship assistance. This will undermine a decade of hard work and success in cementing good hardship practices.

The remainder of this submission addresses the following:

  • Policy concerns:
    • Reducing retention time for financial hardship information;
    • Reducing accessibility of financial hardship information; and
    • The need for public disclosure of information security risks.
  • Drafting concerns
    • Problems with the definition of “financial hardship indicator”; and
    • The need for a robust independent statutory review.
    • Amendments to external dispute resolution requirements.

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Extending unfair contract terms laws to insurance contracts – Exposure draft legislation (joint submission)

Consumer Action Law Centre, Financial Rights Legal Centre, and WEstjustice welcome the opportunity to comment on the proposed extension of unfair contract terms laws to insurance contracts.

There is a big ‘fairness’ problem in insurance. People often make insurance claims when they are at a low ebb, and can face shocking outcomes and no recourse under current laws when insurers rely on unfair terms. For too long, insurers have had special treatment under the law.

Unlike virtually every other industry operating in consumer markets, insurers are not subject to unfair contract terms (UCT) regime in the Australian Securities and Investments Commission Act 2001 (Cth). Insurers continue to rely on unfair contract terms to maintain their profitability and have consistently pushed back against reform.

The case for action is irrefutable, with ongoing stories of harm and endless enquires recommending the extension of UCT laws to insurance.

We strongly support the Government’s move to implement the important and long overdue extension of UCT laws to insurance. In particular, we support the Government’s commitment to implement the specific recommendation of Commissioner Hayne in the Financial Services Royal Commission (Royal Commission) Final Report on the definition of ‘main subject matter’.

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ASIC Consultation Paper 317: Unsolicited telephone sales of direct life insurance and consumer credit insurance, July 2019

Financial Rights welcomes the opportunity to comment on the Australian Securities and Investments Commission’s (ASIC’s) plan to ban unsolicited telephone sales of direct life insurance and consumer credit insurance.

Financial Rights and Consumer Action Law Centre (Consumer Action) strongly support this proposal. Consumer Representatives have advocated for a ban on unsolicited sales of these types of insurance products in multiple consultations including:

• Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) – Insurance Hearings (2018);
• Parliamentary Joint Committee on Corporations and Financial Services: Inquiry into the Life Insurance Industry (2016); and
• Senate Economics References Committee: Scrutiny of Financial Advice Inquiry: Additional terms of reference on the life insurance industry (2016).

Financial Rights has also advocated repeatedly for greater regulation around the sale of all add-on, Consumer Credit Insurance (CCI), accidental death and injury and funeral insurance products.
Unsolicited selling is an outdated and abusive practice with a significant risk of mis-selling people products they don’t want, need or understand.

We strongly support ASIC’s proposed use of its modification powers and support ASIC making the best use of its full regulatory tool box in order to protect consumers from harmful sales practices.

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Customer Owned Banking Code of Practice Independent Review – Report One (joint submission).

Financial Rights welcomes the opportunity to comment on Report One of Cameron Ralph Khoury’s independent review of the Customer Owned Banking Code of Practice (COBA Code). The Customer Owned Banking Association (COBA) agreed to resource a joint consumer submission to the current review with the Consumer Federation of Australia to consult with consumer representatives to prepare this submission.

This submission has been endorsed by:
• Financial Rights Legal Centre
• Consumer Action Law Centre
• Consumer Credit Legal Service (WA)
• Financial Counselling Australia
• Financial & Consumer Rights Council Inc.

Consumer Representatives are supportive of the overall approach to this review and the recommendations regarding style, structure and language. We have a few comments and recommendations which are set out in this submission.

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Internal dispute resolution: Update to RG 165, May 2019

The Financial Rights Legal Centre is broadly supportive of the proposed updates to RG 165 and has made a number of key recommendations based on data collected, individual case studies and systemic issues identified from our casework in this 36 page submission.

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ASIC Consultation: Product Intervention Power (CP 313) – joint submission

Financial Rights welcomes the introduction of the product intervention power (PIP) and looks forward to ASIC using the power to target businesses that cause consumer detriment by engaging in predatory conduct or fail to meet standards that the wider community expects of financial and credit products.

The intention of the PIP is to give ASIC the capability to make timely and targeted intervention in the financial services sector when products are causing significant consumer detriment. The legislative intent also makes clear that the PIP should be used to pursue ‘fairness’. Additionally, the community expects regulators to take a more proactive approach to consumer protection. ASIC should be empowered to use the new power boldly.

This submission is made on behalf of the following organisations:
• Australian Shareholders Association
• Consumer Action Law Centre
• Consumer Credit Law Centre SA
• Consumer Credit Legal Service (WA)
• Consumers’ Federation of Australia
• Financial Counselling Australia
• Financial Rights Legal Centre

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ASIC Consultation Paper 316: Using the product intervention power: Short term credit

The Financial Rights Legal Centre (Financial Rights) and Consumer Action Law Centre (Consumer Action) welcome ASIC’s planned intervention in the short term credit market and in particular the business models of Cigno Pty Ltd (Cigno) and Gold-Silver Standard Finance Pty Ltd (GSSF).

We strongly support ASIC intervening by way of legislative intervention. We support ASIC prohibiting short term credit providers and their associates from providing short term credit and collateral services, except in accordance with a condition which limits the total fees that can be changed in line with subsection 6(1) of the National Credit Code (NCC). Such an intervention will address the significant detriment identified by ASIC in the current model and address the fact that regulation 50A in the National Consumer Credit Protection Regulations 2010 (the Regulations) are not capturing the Cigno model.

The following information is submitted to assist ASIC in determining appropriate regulatory action as proposed.

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AFCA: The Approach to responsible lending: legal principles, industry codes and good industry practice

Financial Rights details our response to draft AFCA Responsible Lending Approach documents, highlighting where we believe consumers can and should be better served on many issues, including through the use of several case studies.

We believe that more work is required to restructure and add to these documents to ensure that they both capture all of the substantive issues and scenarios that need to be included – many of which were not addressed in prior FOS Approach documents. More work is also required to ensure that the information is presented in a more accessible form.

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Senate inquiry: Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019.

We strongly support the objective of preventing unnecessary and high insurance premiums from eroding superannuation account balances, particularly for young members.

This submission focuses on the interests of people who are on low incomes or have low superannuation balances. Our key consideration in assessing these reforms is ensuring that people who are financially vulnerable continue to be assisted by insurance in their superannuation, which can have a life-changing effect for families struck by injury, illness or death, while not having their superannuation balance eroded by insurance premiums.

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Artificial Intelligence, Australia’s Ethical Framework – A Discussion Paper

This submission is based upon our casework experience with people experiencing financial hardship and what we have started to witness with respect to the increased use of new AI technologies.
Here Financial Rights provides further details of the increasing use of AI technologies in the financial services sector and their current and expected impact on consumers.

We argue that AI’s use in financial services reveals further ethical issues that need to be considered by the Department of Industry, Innovation and Science in developing its AI Ethics Framework – namely that the department needs to take into account the ability for AI to automate the profiling of consumers for profit and the embedding of unfair and exclusionary price discrimination models into financial services both of which have the strong potential to lead to increased economic inequality and financial exclusion.

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Consultation Paper 309 Update to ASIC Regulatory Guide 209 – Credit licensing: Responsible lending conduct.

Financial Rights agrees that it is timely to review this guidance. In our advice and casework we continue to see many examples of lending that causes substantial hardship and is arguably in breach of the responsible lending laws.

This submission lays out the particular hot spots we are aware of from our work (we believe the guidance should be comprehensive and targeted to ensure it addresses these known issues and hot spots) the nature of the problems we see, and it details our views on proposed changes.

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Submission in Response to Treasury Issues Paper on Universal Terms for Insurance within MySuper

Superannuation is a product that people regularly place as the most difficult purchasing decision to engage with, yet it is one of the most important decisions they will make in their life. Given this importance, consumer protections need to be of a very high standard to prevent harm. Standardising key terms, definitions and exclusions will lead to clear and measurable gains to efficiency and equity. The benefits of standardisation outweigh any perceived costs of providing reasonable cover.

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Submission to the ACCC re: the Northern Australia Insurance Inquiry, First interim report

Financial Rights supports many of the recommendations made by the ACCC’s Interim Report and provides comment on draft regulations.

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Submission to AFCA re: Rules Change Consultation

On 19 February 2019, the Government changed the authorisation conditions for AFCA requiring AFCA to deal with complaints about conduct by financial firms dating back to 1 January 2008. Financial Right believes that the proposed changes satisfy the requirements of the new authorisation conditions however address a series of issues that arise from the rule change.

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Submission to Treasury re: Enforceability of financial services industry codes – Taking action on recommendation 1.15 of the Banking, Superannuation and Financial Services Royal Commission, Consultation Paper

Financial Rights supports making financial services industry codes of practice enforceable. The easiest and most effective way to ensure that industry codes of practice are enforceable by a consumer is to mandate that codes of practice be incorporated into individual contracts between the consumer and the financial service provider.
ASIC approved codes in their entirety should also be made enforceable by the regulator in respect of which a contravention will constitute a breach of the law.

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Independent Review of the Customer Owned Banking Code of Practice January 2019 (Joint consumer submission) – March 2019.

The 2019 Independent Review of the Customer Owned Banking Code of Practice comes five years after the introduction of the 2014 Customer Owned Banking Code of Practice. The review is also being conducted in the immediate aftermath of the Royal Commission into Financial Services, which has illustrated widespread misconduct in the financial services industry and further lowered trust and confidence in the sector.

The banking, finance and insurance industries continue to be perceived to be the least ethical sectors of Australia’s economy according to the ethics index survey conducted by the Governance Institute of Australia. While customer-owned banks have avoided much of the public criticism, we believe that their ‘customer owned’ status doesn’t always translate into the fair treatment of customers. In fact, this sector is at risk of complacency, and failing to recognise the need for adequate regulation including a strong code.

Customer-Owned Banking Association (COBA) agreed to resource a joint consumer submission to the current review with the Consumer Federation of Australia to consult with consumer representatives to prepare this submission.

This submission has been endorsed by:
• Financial Rights Legal Centre
• Consumer Action Law Centre
• Financial Counselling Australia
• Financial & Consumer Rights Council Inc.

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Department of Social services: Review of the coordination and funding of financial counselling services across Australia – March 2019.

This submission details our responses to the questions posed in the Department’s Issues Paper outlining the consultation process and context for the 2019 Review.

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Insurance Claims Handling: Action on recommendation 4.8 of the Financial Services Royal Commission (Consultation paper) – March 2019.

Financial Rights supports the removal of Regulation 7.1.33 of the Corporation Regulations 2001 and using existing legislative powers to define the activity of handling or settling an insurance claim as a ‘financial service’ for the purposes of the Corporations Act 2001.

Financial Rights believes increased training requirements on insurers and claims handling is justified. Increased obligations to train claims managers is not a burden it is one of the key points of the exercise.

If there are any requirements that are fundamentally irrelevant to claims managers in the training standards set by ASIC or other regulators, these can and should be adjusted to ensure that claims managers are trained appropriately with respect to the extent that their roles involves any personal or general advice.

Also, we do not accept that the cost of compliance should fall on consumers. Insurers’ and their shareholders profits have been propped up by a system that has provided significant advantage to them against the interests of their customers.

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Disclosure in General Insurance: Improving Consumer Understanding, Discussion Paper, January 2019

Financial Rights believes that reform of insurance disclosure is well over due and it is time for the government to intervene to end the ‘confusopoly’ that is clearly is failing consumers.

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Inquiry into Treasury Laws Amendment (Consumer Data Right) Bill 2018

Financial Rights has made a series of submissions to the Productivity Commission’s Data Availability and Use Report, Open Banking Review, Treasury’s Consumer Data Right legislative development, the ACCC CDR Rules and Treasury’ Privacy Impact Assessment outlining our concerns.

The current Consumer Data Right (CDR) legislation addresses few of these concerns and those concerns that is does seek to deal with, it fails to address in any comprehensive manner.

Consequently, Financial Rights believes that the draft CDR legislation (and approach) is flawed in a significant number of ways. We outline those here.

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Submission to Treasury’s Consumer Data Right, Privacy Impact Assessment, January 2019

Financial Rights notea that the Treasury have decided not to outsource the development of the PIA to external consultants. We remain disappointed in this decision.
While we acknowledge there is no strict requirement for Treasury to have undertaken an independent assessment, we believe that the approach taken to undertake the PIA is flawed, conflicted in nature and not in keeping with the recommendations of the OAIC in its Privacy Impact Assessment guidelines.

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Australian Competition and Consumer Commission’s Digital Platforms Inquiry Preliminary Report

Financial Rights’ interest in the Digital Platform Inquiry is centred on the need for a strengthened privacy regime arising out of the data use and collection practices as identified in the Preliminary report. This is an important finding that has broader implications for the digital economy and, more specifically, the implementation of the Consumer Data Right (CDR) and its first application in open banking.

Financial Rights has raised significant concerns with the development of the CDR and its impact upon the safety and privacy of financial services consumers. We have been vocal advocates for the need to review the Privacy Act and the Australian Privacy Principles in order to mitigate a number of the risks identified in the design of the CDR regime.

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Joint submission: Review of Early Release of Superannuation Benefits further consultation and draft proposals (November 2018)

Financial Rights has drafted this submission. CHOICE and the Superannuation Consumers’ Centre have endorsed it and concur with the concerns raised.

Many of the issues raised by the concept of releasing one’s superannuation early are difficult, complex and have real impacts upon people’s lives. Financial Rights hears regularly from people experiencing severe financial hardship or disadvantage who simply do not understand why they cannot access retirement funds that they see as their own. Each case is unique and the application of compassion or assistance in each situation will lead to the early release in some situations, and in others require denying such early release. There are many grey areas. Establishing strict hard and fast rules is necessary but early release requires some flexibility, such as the residual discretion on the part of the Regulator.

Financial Rights is concerned with the emergence of third parties, both in independent businesses and as in-house staff for instance at medical and dental practices, specialising in and profiting from assisting people to access their superannuation early. This practice can be exploitative and harmful, can undermine the principles underpinning early release of superannuation, and can threaten consumers’ physical and financial health. Consideration should be given as to ways in which to minimise this practice.

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Joint submission re: Life Insurance Code of Practice, Consultation Draft

Financial Rights, Financial Counselling Australia and Redfern Legal Centre generally support the attempt by the FSC to add consumer protections to the Life Code as going some way to addressing the concerns of consumers, regulators and government. The FSC needs to strengthen commitments with respect to the sale of funeral insurance, sales practices, and the treatment of people with a mental illness. We have identified a large number of recommendations made by the Parliamentary Joint Committee on Corporations and Financial Services (PJC) Inquiry into the Life Insurance Industry Report or ASIC Report 587 on the sale of direct life insurance that have failed to be addressed. We have also identified a large number of clauses that have been drafted or re-drafted in a manner that seems to solely benefit the life insurer. A number of issues arising out of the first iteration of the Life Code have failed to be adequately addressed by the FSC or addressed at all. We also express our concerns with the consultation process undertaken by the FSC.

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Submission to the Emergency Services Levy Insurance Monitor Price Differences: New vs Existing customer, Discussion paper

Financial Rights strongly support for the work of the NSW Emergency Services Levy Monitor and the development of this discussion paper. The ability for the Monitor to collect and analyse pricing data is vital work to ensure that there is no serious consumer harm arising out of pricing practices and potential exploitation. This paper raises legitimate questions that insurers should answer. The findings that in the NSW general insurance market there may be:
• significant price discrimination leading to an identifiable “loyalty tax”;
• over-insurance borne of possible inappropriate increases to the sum-insured; and
• potentially opportunistic increases in prices of base premiums coinciding with the reduction in the ESL rates
should be of serious concern for NSW consumers.

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Joint Consumer Submission to Senate Standing Committees on Economics re: Design and Distribution Obligations and Product Intervention Powers

While Consumer Representatives continue to support the DADO and PIP reforms, we are concerned that the legislation is significantly narrower in scope than the regime that was proposed by the FSI. We consider that significant amendments are required to ensure the legislation meets the needs of Australian consumers. Ensuring the legislation is fit for purpose is more pertinent than ever in an environment of declining confidence in financial services providers and the extensive misconduct being revealed by the Royal Commission.

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Joint supplementary submission: Credit and Financial Services targeted at Australians at risk of Financial Hardship – National Debt Helpline

Financial Rights Legal Centre and Consumer Action Law Centre have each provided separate submissions to this inquiry, but now wish to provide this joint supplementary submission.

This submission is particularly in response to the term of reference relating to the capacity and capability of the financial counselling sector, and relates to the National Debt Helpline (NDH).

In particular, this submission identifies significant negative implications that arise as a result of a recent tender process for the NDH by the Department of Social Services (DSS) which will impact the capacity of the financial counselling sector, and the effectiveness of the NDH in the future.

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Submission to Senate Standing Committee on Economics re: Credit and Financial Services Targeted at Australians at Risk of Financial Hardship, October 2018

Financial Rights recommends that currently unregulated financial services such as: ‘buy now, pay later’ services and debt management firms (including budgeting services and credit repairers) be licensed and brought into line with mainstream regulation. We are also calling for the National Consumer Protection Amendment (Small Amount Credit and Consumer Lease Reforms) Bill 2018 to be enacted as soon as possible to bring payday lenders and consumer lease providers in line with community standards.

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Royal Commission into Misconduct in the Banking, Super and Financial Services Industry – Interim Report

Our submission puts forward our views as to what changes are required to the regulatory regime to prevent the conduct identified by the Royal Commission in first four hearings from happening again. In so doing we have noted and sought to address many of the questions posed by the Commissioner in Volume 1 of the Interim Report. Where we answer a question directly we have indicated this via reference.

The Royal Commission has brought to the public’s attention conduct that has not only failed to meet basic community standards of ethical and moral behaviour but also potentially illegal, even criminal behaviour. It is clear that the administration and enforcement of the law has left a lot to be desired and will need to be addressed. Supervision of the financial services sector and enforcement of the laws need to be reformed to empower and embolden the regulators to take stronger action to become the “tough cop on the beat” that the community expects.

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Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – Insurance Hearings

Financial Rights Legal Centre welcomes the opportunity to provide written submissions addressing issues raised during the Insurance hearings of the Commission, noting that this is an area we specialise in, via the work of our Insurance Law Service, in our legal casework and via our policy team. Financial Rights believes it is time for wholesale changes across the insurance industry, with particular regards to:

  • An inadequate current regulatory regime, from a consumer protection perspective
  • Conflicted remuneration and misaligned incentives
  • The sale of multiple unsuitable insurance products, including: consumer credit insurance (CCI), add-on, funeral insurance, accidental death and accidental injury products
  • ASIC’s inability to respond to emerging issues and apply Product Intervention Powers to ban some classes of products
  • Application of and enforceability of current Codes of practice with regards to all insurers and superannuation trustees
  • Ineffective standard/minimum cover regimes
  • Inappropriate standard definitions for all key terms and phrases in general and life insurance
  • Convoluted and inconsistent Product Disclosure Statements (PDSs) and Key Fact Sheets (KFSs) on insurer websites
  • The inappropriate nature of outbound direct sales calls
  • Inappropriate pressure sales tactics


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Treasury Laws Amendment (Consumer Data Right) Bill 2018: Provisions for further consultation.

Financial Rights’ submission predominantly addresses Proposal 2: Interaction of the Privacy Safeguards with the Privacy Act.  We have significant concerns with the complexity and weakness of the proposed new privacy framework, especially:

• the overarching confusing, convoluted and piecemeal nature of the CDR;
• the treatment of many data recipients as data holders; and
• the exemption of data holders from the Consumer Data Right (CDR) Privacy Safeguards.

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Consumer Data Right (CDR) Rules Framework, Sept. 2018

Financial Rights continues to hold the view that the Consumer Data Right (CDR), as materialised in the Treasury Laws Amendment (Consumer Data Right) Bill 2018, is fundamentally misconceived and is:

• limited in scope and misleads consumers;
• piecemeal and entrenches Australia falling behind the rest of the world;
• establishes multiple privacy standards, confusing consumers and placing them at risk;
• facilitates the leakage of sensitive financial data to entities that provide lower privacy protections;
• establishes flawed and incomplete privacy safeguards; and
• cements in place two different FinTech sectors.

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Design and Distribution Obligations and Product Intervention Powers Bill 2018

While we support these important and fundamental reforms, we are concerned that the legislation is narrower in scope than the regime proposed by the Financial System Inquiry. We believe significant amendments are required to ensure the legislation meets the needs of Australian consumers. Ensuring the legislation is fit for purpose is more pertinent than ever in an environment of declining confidence in financial services providers and the extensive misconduct revealed by the Royal Commission.

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Submission to the Australian Human Rights Commission’s (AHRC’s) Human Rights and Technology Issues Paper, 2018

Financial Rights’ interest in the issues being raised by the Australian Human Rights Commission in this paper is focused on the implications of technology on financially vulnerable consumers and their human rights.

This submission is based upon our casework experience with people experiencing financial hardship and what we have started to witness with respect to the increased use of new computing technologies in the financial services sector and their subsequent and expected impact.

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Submission to the Treasury Laws Amendment (Consumer Data Right) Bill 2018

Financial Rights believes that the draft CDR legislation (and approach) is misconceived and fundamentally flawed in a significant number of ways:

  • The CDR is limited in scope and misleads consumers
  • The CDR is piecemeal and expedites Australia falling behind the rest of the world
  • The CDR establishes multiple privacy standards, confusing consumers and placing them at risk
  • The CDR facilitates the leakage of sensitive financial data to entities that provide lower privacy protections
  • The CDR establishes flawed and incomplete privacy safeguards
  • The CDR institutes two very different FinTech sectors



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Joint Submission to Treasury’s Extending Unfair Contract Terms Protections to Insurance Contracts, Proposals Paper

Financial Rights Legal Centre and Redfern Legal Centre have advocated for the removal of the exemption of unfair contract term protections in the Insurance Contracts Act 1984 since the inception of the unfair contract terms regime 2010. Removing this unjustified anomaly from the law is well overdue. We therefore strongly support the Government’s commitment to removing the exemption and strongly support the grand majority of proposals put forward in the Proposals Paper. These are sensible and effective reforms and Treasury deserve congratulations for its work.

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Joint Consumer Submission to Treasury re: Design and Distribution Obligations and Product Intervention Powers

We reiterate recommendations outlined in our previous submissions on the proposed DADOs and PIP to the extent that they have not been addressed in the revised Bill. We note that the revised Bill has weakened the regime in several key respects, which risks undermining the policy intent behind the regime.

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Submission to the Communications Alliance re: Draft Telecommunications Consumer Protections Code

Financial Rights addresses significant issues with parts of the Telecommunications Consumer Protection Code of Practice including billing fees, selling practices, credit assessment, the financial hardship, the definition of small business consumer, customer access to records and debt management.

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Submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry General Insurance Background Paper 14

Our submission is confined to providing a small number of key additional pieces of information or context on general insurance laws, regulations and practice that have either not been highlighted or mentioned in the background paper.

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Joint Consumer Submission by the to the Attorney-General’s Department Review of financial hardship arrangements

Consumer advocates strongly oppose any extension of the Privacy Act to allow Hardship flags or any other additional indicator of hardship to be shared because we think there are strong public interest arguments against sharing this type of information that outweigh the arguments in favour of incorporating hardship flags into credit reports.

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Joint submission to the Senate Economics Legislation Committee re: Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018

The Financial Rights Legal Centre (Financial Rights) and the Consumer Action Law Centre (Consumer Action) strongly support the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (the Bill). For too long, the design of the superannuation regime has led to a proliferation of accounts and serious erosion of people’s retirement savings. The Bill takes important steps to address the issues and represents a significant improvement on the status quo. We note that the Bill has not changed very much from the Exposure Draft consultation run by Treasury last month. For that reason we refer to our original submission and recommendations to the Treasury for the Senate Economics Legislation Committee for consider and review.

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Joint Consumer Submission to the AFCA Consultation on Proposed Australian Financial Complaints Authority Rules

We note and commend AFCA on the many improvements in these Rules by comparison to existing jurisdictional documents, particularly in the short timeframes necessitated by the start date of 1 November 2018. This submission is broadly supportive of the Rules but recommends several important changes to ensure that AFCA Rules are consistent with the design principles. This submission also identifies areas where we consider plain English language could be used or improved.

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Joint submission on the Exposure Draft of the Treasury Laws Amendment (Protecting Superannuation) Bill 2018

Super account balance erosion due to insurance premiums ‘can be excessive and highly regressive—having a disproportionate impact on members with low income, intermittent labour force attachment and/or multiple accounts with insurance.’ Insurance cover can also provide significant financial protection to vulnerable people. Given this, while we support much of the reform package proposed by the Exposure Draft, we consider that a sophisticated approach is needed to understand the demographics of superannuation members and their insurance requirements.

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Joint submission to the Emergency Services Levy Insurance Monitor re: Standard profile quotations: Mid-term review, Discussion paper, April 2018

Consumer representatives note the significant complications and difficulties that the Insurance Monitor is currently experiencing in settling on an easily comparable quote for a premium across all insurers.
Attempting to formulate standard specification for a property scenario is one issue. Applying this scenario to the vast array of complexities relating to insurance product and the multitude of factors used to develop a price is another and is in short, a very difficult process.

This Survey discussion paper demonstrates the incredible complexities and difficulties that consumers face every day, and at the same time is a materialisation of these difficulties.

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Joint consumer submission to the PJC inquiry into options for greater involvement by private sector life insurers in worker rehabilitation

Our organisations are acutely aware of the importance of assisting people to return to work after illness or injury. Appropriate funding for rehabilitation is critical.

Financial Rights have heard from many callers on the Insurance Law Service line who inquire about why their insurer cannot assist them in reimbursing their rehabilitation program or return to work costs, or assist in covering the gap between Medicare or their health insurance and their life insurance. However, on balance we are not convinced the industry proposal will lead to better consumer outcomes.

There are significant issues that would come into play if life insurers were to play a larger role in rehabilitation – particularly the obvious conflicts of interest that arise with life insurers having a financial interest in encouraging rehabilitation even where it may not be appropriate, in order to decrease or cease ongoing IP or TPD payments. The protection, support and best interests of incredibly vulnerable consumers must be front and centre of any proposed reform in this area.

As a first priority the committee should consider the adequacy of government support for rehabilitation programs and Medicare programs. The risk of disability and its impact on employment can impact anyone; likewise the solutions to these problems need to be universal. The piecemeal approach to policy in this space has clearly created gaps and inadequate access to rehabilitation services. The solution is not to add another layer of complication, but to address the lack of universality in the existing response.

To that end, an industry led response will never be capable of providing a universal solution, as it relies on people purchasing individual cover. Consumers and taxpayers will be better served by different approaches that keep life insurers out of the rehabilitation space.

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Joint submission to ASIC re: Oversight of the Australian Financial Complaints Authority: Update to RG139

We support ASIC’s approach to the three issues directly raised in the Consultation Paper: referring matters to relevant authorities, the role of the Independent Assessor, and EDR disclosure obligations. We strongly recommend that ASIC signal in RG139 an expectation that AFCA adopt best practice, pro-consumer features from across the schemes. Otherwise, there will be consumers left in a worse position as a result of this reform.

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Joint submission to the Productivity Commission Inquiry into Competition in the Australian Financial System – Draft Report

Consumer Action, Financial Counselling Australia and Financial Rights welcome many of the draft findings and recommendations of the Productivity Commission. We are particularly supportive of findings relating to mortgage brokers, add-on insurance and competition in the payments system. However, we are concerned about the approach taken in relation to reducing barriers to entry and increasing access to data. In our experience, the ‘innovation’ touted by new entrants rarely puts downward pressure on prices or genuinely benefits consumers, but rather takes advantage of regulatory loopholes. Our submission has therefore reiterated the pro-competitive benefits of effective regulation and appropriate barriers to entry, and the risks to consumers when necessary safeguards are absent.

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Joint consumer submission on the Open Banking: customers, choice, convenience, confidence Final Report

This submission has been written at a moment in time where data privacy and security issues are on the world’s front pages and consumer awareness over the collection, use and potential abuse of personal data is growing exponentially.
For the past two decades, consumers have experienced the innumerable benefits of new technology, innovation and data with the commensurate positive impact on their private, social, financial and working lives. The speed of these changes has been bewildering, so it is only now that consumer understanding of the full impact of these changes is dawning on them with a growing awareness of the true down-side of digital innovation. From world-wide data breaches and increased direct marketing and targeting, to the rise of price discrimination, the segmentation of populations and even the potential undermining of the political process, consumers are beginning to more fully understand the implications of what they have signed up for.
Consumers are therefore entering into the Open Banking regime with a mix of expectation and wariness.

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Joint Submission on the Debt Agreement Reform – Exposure Draft Legislation

Consumer advocates welcome the comprehensive reform of the debt agreement regime under Part IX of the Bankruptcy Act 1966 (Cth). Although these are positive developments, further reforms are essential to improve the integrity of the debt agreement regime.

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Submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

Financial Rights has in its work with people experiencing financial hardship identified both misconduct and conduct, practices, behaviours and business activities that fall below community standards and expectations. From the design of low value products and bad sales and marketing practices to poor customer service standards and claims handling, we have seen a vast array of poor conduct across the life cycle of a consumer’s relationship with a financial services provider.

We have grouped together the worst of the practices we’ve seen and divided them into those that can be considered misconduct (illegal or otherwise) and those practices that fall below community standards and expectations. The areas we address are: (1) Problematic sales and marketing practices; (2) Conduct undermining financial hardship provisions; (3) Fee charging practices (4) Poor Customer service standards and practices (5) The development and design of poor value financial products

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Joint consumer submission to Treasury regarding the Design and Distribution Obligations and Product Intervention Powers Bill

We strongly support the integrated package of reforms proposed in the Bill, which we believe would significantly improve consumer outcomes and improve trust and confidence in the financial system. The design and distribution obligations should help to achieve a cultural shift within financial firms away from simply ‘selling’ financial products towards designing and distributing suitable products that meet customer needs. Further, equipping the Australian Securities and Investments Commission with the product intervention powers would allow the regulator to intervene before consumer harm occurs and deter misconduct by financial firms. We recommend that the new DADOs and product intervention powers apply to ‘financial products’ as defined in the Australian Securities and Investments Commission Act 2001 (Cth). This would ensure that a broader range of financial products is captured by the reforms, including regulated and unregulated consumer credit.

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Submission to Treasury on the Treasury Early Release of Superannuation Benefits – Consultation Paper

Financial Rights supports the proposed principles as a guide for determining the rules for early release of superannuation under compassionate and financial hardship grounds, with the foremost principles being preservation and last resort. The principles do not, and Financial Rights does not, support the release of superannuation to satisfy victims compensation orders.


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Joint Consumer Submission to the Legal and Constitutional Affairs Legislation Committee re: Bankruptcy Amendment (Enterprise Incentives) Bill 2017

Consumer Representatives support reducing the default period for bankruptcy from 3 years to 1 year under Section 149 of the Bankruptcy Act 1966 (Cth) (Act).

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Joint Consumer Submission to the Insurance Council of Australia’s General Insurance Code of Practice 2017 Review: Interim Report

Consumer Representatives commend the ICA for the breadth and range of issues that have been raised and sought to be addressed in its Interim Report. Consumer Representatives support the vast majority of the priority proposals and discussion point proposals. We have identified a number of areas that the eight priority proposals (and complaints, disputes, pressure selling and claims proposals) do not address. We put forward a significant number of recommendations to improve upon these. There are a small number of proposals that cause Consumer Representatives some concern and we recommend that the ICA and general insurers reconsider these

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Submission to Treasury Consultation and Paper Billing

Financial Rights believes for the sake of simplicity, consistency, fairness and ensuring that the most disadvantaged Australians are no longer penalised, that there should be a prohibition on paper billing fees. Billing fees are regressive in nature and punitive, with those who can least afford to pay left with “the bill”. We strongly believe that on principle, people should not have to pay a fee in order to receive a bill – a bill that is detailing how much money a business is charging a person for goods and services provided.

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Submission to the ACCC’s Northern Australia Insurance Inquiry

In this Submission we drew on our extensive consumer-advice experience from operating the Insurance Law Service and focused our comments on the following:

  • The need for greater transparency in premium pricing;
  • The need for better information disclosure from insurers;
  • Encouraging mitigation efforts;
  • Removing the exemption of insurance from unfair contract terms laws; and
  • Consumer access to personal data.

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Comments on National Hardship Register Review

Although we often help vulnerable debtors who are seeking debt waivers we have not used the NHR since its inception. We agree with the purpose of the initiative (creating an efficient and cost-effective mechanism for financial counsellors and industry to avoid futile debt collection activity for people in severe financial hardship), but we believe the Register suffers from several design flaws which prevent us from wanting to use it for our clients:

  • three years of uncertainty is a long time when waivers can often be obtained immediately for clients who would qualify. The NHR provides no guarantee of eventual waiver;
  • there is a lack of clarity about future implications;
  • there is a lack of clarity about the credit reporting implications;
  • there is a lack of clarity about statute of limitations effect (Does the NHR count as an acknowledgement of debt? Could the limitations time be extended because of the collections break?)
  • bankruptcy could often result in discharge in 3 years, so does that make the NHR redundant?; and
  • we have concern that greater use or expansion of the NHR might mean that creditors would stop giving waivers and refer to debtors to the NHR instead (this has happened for one of our clients).

In practice we have found that none of our clients have had the right combination of creditors for the NHR to be useful. Usually only one or maximum of two creditors are participating with the NHR and often several others are not. In these circumstances our financial counsellors and solicitors decide that applying for the NHR will not provide the benefits to outweigh the risks and uncertainty of putting our client on the NHR. We have always decided that it would be better to apply separately for waivers from each creditor.

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Joint Consumer Submission on Establishment of AFCA

Consumer advocates are very supportive of the move to a new one-stop shop external dispute resolution (EDR) scheme that implements the considered recommendations of the Review of the Financial System External Dispute Resolution and Complaints Framework (Ramsay Review). The proposed Australian Financial Complaints Authority (AFCA) can build on the success of the existing EDR framework, and extend the benefits of EDR to superannuation customers for the first time. It is essential to get AFCA’s terms of reference right, and ensure it incorporates and builds on the beneficial features of the Credit and Investments Ombudsman (CIO) and Financial Ombudsman 2 Service (FOS) that have resulted from years of continuous improvement and consumer advocacy. This submission identifies some of the most important features of an effective and accessible external dispute resolution scheme.

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Consultation into Strengthening Penalties for Corporate and Financial Sector Misconduct

We shared the Taskforce’s concerns that the penalties in the legislation administered by ASIC are not currently effective and they do not reflect community perceptions as to the seriousness of engaging in certain forms of misconduct. In order for ASIC to effectively carry out its regulatory role it needs to have broad and effective enforcement tools. We strongly supports most of the proposed penalty increases. The current penalty regime is clearly not acting as a sufficient deterrent for financial service providers that are engaging in misconduct. It appears that many major players have simply made a business calculation that continued misconduct and contravention of the consumer protections outlined in the Corporations, NCCP and ASIC Acts is more profitable even with the risk of ASIC enforcement. This is why in addition to supporting increased civil penalties we strongly support ASIC being able to seek disgorgement remedies in civil penalty proceedings. In fact, we agree with ASIC that disgorgement should be available not only in civil penalty proceedings but in other civil proceedings brought by ASIC for contraventions of the legislation it administers (Position 10). The proposed penalty increases are quite significant, and we believe are completely justified in light of the types of financial services misconduct Australia has witnessed in recent years. Financial Rights is particularly supportive of extending civil penalty consequences to insurers that contravene certain obligations under the Insurance Contracts Act (Position 14).

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Submission on National Financial Literacy Strategy 2017

Financial Rights put in a short submission supporting:

  • the phrase financial capability as it connotes a more empowered, active consumer with the ability to implement learned skills and knowledge
  • including three new core behaviours: managing money day-to-day; planning for the future; and making informed decisions

We also recommended that two new cohorts be added to the list of “priority audiences”

  1. Recipients of lump sum compensation or redress payments, and
  2. Australians who are receiving social security payments

Finally, Financial Rights supported the inclusion of “social isolation” as a key challenge for the 2018 National Strategy. We however believe that particular focus needs to be placed on the growth of “digital isolation” as a problem in and of itself, brought on by a mix of digital ubiquity, the rise of FinTechs and the retreat of individual consumers into private, hidden, digital spaces.

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Joint Consumer Submission on ASIC’s FinTech Sandbox

While consumer groups support the intent of encouraging competition to create new services for consumers we are extremely concerned about the risks that this approach involves. The legislation would allow, for example, unlicensed financial advice on superannuation products, insurance and long-term investments. These services are too complex and too important to the long-term well-being of consumers to be offered without the adequate protections that the sandbox removes. Rather than watering down consumer protections, the financial industry needs much higher standards to prevent the scandals that have drained consumer savings and investments.

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Joint Consumer Submission on Payday Lending Legislation

This is a joint consumer submission strongly supporting the proposed reforms to small amount credit contracts (SACCs or payday loans) and consumer leases. Our organisations were actively involved in the consultation period of the Review, and some of our submissions were noted in the Review Final Report. We regard the proposed cap on costs for consumer leases, and the 10% protected earnings amount for consumer leases and payday loans as particularly critical reforms that would provide much needed protections for vulnerable borrowers. We would strongly oppose more lenient caps, which would entrench ongoing financial exclusion and fail to address the harm caused by these products.

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Submission to the Insurance in Superannuation Working Group – Insurance in Superannuation Code of Practice Consultation Paper

Financial Rights strongly supports the development of an Insurance in Superannuation Code of Practice to make best practice commitments to consumers that are beyond current legal and regulatory obligation; and to fills the gaps left by the Financial Services Council’s Life Insurance Code of Practice and address those issues specific to the relationship between the member and the Superannuation Trustee.

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Joint consumer supplementary submission to Treasury’s Open Banking Review – Issues Paper

In September 2017, Consumer Action Law Centre, Financial Rights Legal Centre and Financial Counselling Australia provided a submission to the Open Banking Review that outlined a number of the potential risks and costs that may face consumers in under an Open Banking regime. This submission supplements that work by making specific recommendations that we believe should be implemented from the start of any Open Banking regime to ensure consumers are adequately protected and able to realise the benefits increased data sharing.

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Joint consumer submission to ASIC’s Options to reform the sale of add-on insurance and warranties in car yards Consultation Paper

Financial Rights, along with the Consumer Action Law Centre, Consumer Credit Law Centre SA, CHOICE, and CCLSWA strongly support the Australian Securities and Investment Commission’s (ASIC’s) proposal to mandate a delayed sales model for add-on insurance and warranties sold through car yards, and to improve supervision of these sales. In our view, any reforms to car yard add-on sales should improve demand-side competition and protect people who are vulnerable.

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Joint consumer submission to the PwC Review of the Privacy (Credit Reporting) Code 2014

This is a joint consumer submission to the PwC Review of the Credit Reporting Code by the Financial Rights Legal Centre in consultation with the Australian Communications Consumer Action Network (ACCAN), the Australian Privacy Foundation (APF), the Consumer Action Law Centre (CALC), the Consumer Credit Legal Service (WA) (CCLSWA) and Financial Counselling Australia (FCA).

The submission addresses key issues of concern to consumers including: Repayment History Information and financial hardship; the need for independent code governance; the inclusion of credit scores on free credit reports; the ongoing problems with accessing free credit reports and marketing and a raft of other issues.

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Joint consumer submission on AFCA Bill 2017

Consumer advocates are very supportive of the move to new one-­stop shop external dispute resolution (EDR) scheme that implements the considered recommendations of the Ramsay Review. The new Australian Financial Complaints Authority (AFCA) can build on the success of the existing system for EDR, and extend the benefits of EDR to superannuation customers for the first time. This submission is broadly supportive of the legislation establishing AFCA but recommends some minor technical amendments to the Bill, including to:

  • require an independent chair of the AFCA board;
  • require AFCA to monitor and address systemic issues, in addition to referring such matters to regulators;
  • require AFCA to refer certain matters to other relevant authorities or industry code monitoring committees;
  • give AFCA power to compel information or documents;
  • require membership for debt management firms including debt agreement administrators, and permit voluntary membership.

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Submission to Treasury on Open Banking

While Open Banking offers opportunities to consumers, it also poses significant risks. Robust legal frameworks and regulatory oversight will be required to ensure that consumers are adequately protected and able to benefit from the Open Banking regime. Data sharing, competition and innovation in the financial system should be considered a means to deliver benefits to consumers, but not an end itself. We urge the Review to consider the potential costs and risks to consumers, and the regulation needed to mitigate these, in much further detail.

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Submission to the Productivity Commission re: Competition in Financial Services

This joint submission with Consumer Action Law Centre and Financial Counsellors Australia made the broad point that for competition in the financial system to improve consumer outcomes, policy must be based on an understanding of how consumers actually make decisions. Consumers depend on the availability of safe products and fair sales practices to guide their decision-making. Effective regulation that empowers consumers to select appropriate products supports healthy competition, and ensures a level playing field amongst competitors.

In our submission we have provided examples of markets within the financial system where we believe competition has failed. This has led to poor consumer outcomes, particularly for vulnerable and disadvantaged Australians. Problematic sectors we have identified include insurance, credit cards, payday loans, consumer leases, mortgage broking, debt management advice and comprehensive credit reporting. We have argued that strong consumer protections and regulatory powers are necessary to ensure that consumers can benefit from increased competition in these markets.

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Submission to Treasury re: Credit Cards: Improving Consumer Outcomes and Enhancing Competition – Exposure Draft

Financial Rights has long argued the need for these reforms to a regime that has led to significant over-commitment for many credit card users. Financial Rights therefore strongly supports the introduction and passing of the bills to tighten responsible lending obligations for credit card contracts, prohibit unsolicited credit limit offers, simplify interest charge calculations and reducing credit limits and empowering consumers to terminate credit card contracts including by online means.

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Submission to APRA re: Towards a transparent public reporting regime for life insurance claims information, Discussion Paper

Financial Rights has long argued the need for greater transparency of insurance data and we welcome the introduction of a collection and publishing regime.

Greater transparency and more consistent data in life insurance claims relating to claims, claims outcomes, claims handling and disputes across all policy types is an important step that will not only help Australian Securities and Investments Commission and Australian Prudential Regulation Authority to monitor claims trends and identify any potential issues of concern from changes in data, but will also go some way to address problems of information asymmetry that face consumers, if appropriately published.

It is critical that as much data and analysis is made available to the public in an accessible, easy to read manner that has been designed with consumers in mind.

In an era where big data is having a huge impact upon the insurance industry, largely favouring the insurance industry to sell more through increased targeting of products and advertising, as well as improving risk models and increasing risk segmentation and price discrimination – the data collection and publication being considered here provides an important opportunity to rebalance the impact of datasets in favour of the consumer.

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Submission to ASIC Enforcement Review Position and Consultation Paper 4: Industry Codes in the Financial Sector

The Financial Rights Legal Centre has long argued the need for a stronger Industry Code regime and we strongly support the development of a co-regulatory scheme.

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Submission to ASIC Enforcement Review Position and Consultation Paper 3: Strengthening ASIC’s Licensing Powers

The Financial Rights Legal Centre has long argued that regulators in Australia need a full toolkit of regulatory powers in order to do their job properly.  ASIC should be sufficiently empowered to protect people who use financial services without having to keep going back to the Government for additional controls to fill loopholes and address new forms of misleading or dangerous conduct.

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Joint submission to the ASIC Review of Mortgage Broker Remuneration

Consumers use brokers as guides for what is often their life’s most significant financial decision – buying a home. Getting a poor loan, even if customers can afford to pay it, can have significant financial consequences, with consumers paying tens of thousands or even hundreds of thousands of dollars more over the life of a mortgage. In some instances, mortgage brokers appear to be targeting customers in clearly vulnerable situations and recommending harmful borrowing strategies that leave the broker with a sizable commission but the customer with debt they can’t afford to repay. The high-level solutions to these problems are two-fold. First, conflicted remuneration that drives poor consumer outcomes must be addressed through an industry-wide solution with strong enforcement arrangements and sanctions for non-compliance. Second, mortgage brokers must be held to higher standards to protect consumers from harmful advice

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Joint submission to Treasury re: Review of the financial system external dispute resolution framework – Supplementary Issues Paper

Arising out of the Ramsay Review into the External Dispute Resolution Framework the Government is investigating the establishment of a last resort compensation scheme. This joint consumer submission argues that a compensation scheme of last resort is well over due and must be established to prevent the well-documented harm caused by uncompensated losses, and to rebuild trust and confidence in Australia’s financial system. A last resort compensation scheme is the missing piece of our financial services regulatory architecture.

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Submission to ASIC’s Consultation Paper 282 – Remaking ASIC class orders on financial counselling licensing relief

Financial Rights Legal Centre strongly supports ASIC’s proposals to continue the current licensing relief with the proposed new legislative instruments.

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Joint consumer submission regarding Treasury Laws Amendment (External Dispute Resolution) Bill and Regulations 2017 exposure draft

Following the the Ramsay Review into the External Dispute Resolution and Complaints Framework, the Government has agreed to all 11 recommendations including the establishment of the Australian Financial Complaints Authority. Financial Rights has joined with other consumer organisations to support the draft Bill to implement the Australian Financial Complaints Authority and recommend a series of amendments.

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Submission to the Insurance in Superannuation Working Group re: Member communication and engagement

Financial Rights submission on the Insurance in Superannuation Working Group’s third discussion paper on member communication and engagement argues the need for the Working Group take a step back and focus on general communications and engagement principles.

Financial Rights recommends the Working Group develop overarching communications and engagement principles that should both improve the Code and the consumer/superannuation fund relationship and be key promises or objectives under the Code. The Working Group should then systematically identify every step of the consumer/superannuation fund relationship to identify what commitments can and should be made to improve the relationship with consumers, build trust and confidence and ensure that fewer disputes and issues arise in the future.

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Submission to the Victorian Department of Health and Human Services re: Addressing non-insurance and underinsurance for emergencies in Victoria

Financial Rights has made a submission to the he Victorian Department of Health and Human Services regarding Addressing non-insurance and underinsurance for emergencies in Victoria. The submission argues the need for increased suitability requirements, standard cover, encouraging mitigation and producing better information for consumers.

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Submission to the Emergency Services Levy Monitor’s Public Inquiry Issues Paper

While the Emergency Services Levy Monitor’s Issues Paper is largely directed at eliciting information from relevant insurance companies regarding the processes and actions they are taking with respect to the implementation of the Emergency Service Levy, nevertheless Financial Rights has made the following contribution to the inquiry with respect to issues around communications, transparency and disclosure.

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Submission to the Insurance in Superannuation Working Group re: Claims Handling

Financial Rights submission on the Insurance in Superannuation Working Group’s second discussion paper on claims handling focuses on the need for the industry to introduce basic claims handling practices. This includes providing PDSs to members, committing to actual time frames for the claims handling processes and not gather evidence from members in a piecemeal fashion.

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Submission to the Insurance Council of Australia General Insurance Code of Practice Review

Financial Rights believes that the general insurance industry is at least 20 years behind the banking sector in terms of addressing basic consumer issues be it in claims handling, mis-selling, unfair contract terms, disclosure problems and the creation of problem products and business models. Financial Rights strongly believes that that there needs to be a fundamental shift in the general insurance sector to one based upon the concepts of suitability (the insurance equivalent of responsible lending in the banking and credit sector) and the standard cover model.

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Submission to the Insurance in Superannuation Working Group re: Account balance erosion due to insurance premiums

The Insurance in Superannuation Working Group was formed in 2016 to assist the development of a Code of Practice applying to superannuation funds – extending the current Life Insurance Code of Practice. Financial Rights has provided input into this first of a series of discussion papers on account balance erosion.

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Joint supplementary submission re: Design & Distribution Obligations and Product Intervention Power Proposals Paper

This supplementary submission follows the release of Report 516: Review of mortgage broker remuneration and addresses the fact that governance and oversight arrangements by lenders, aggregators and brokers should be improved.

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Joint consumer submission to Treasury regarding the Design and Distribution Obligations and Product Intervention Power – Proposals Paper

Financial Rights joined with other consumer advocates to commend the Treasury Paper’s focus on improving the existing regulatory framework to ensure consumers receive fair treatment from product issuers and distributors. We believe the integrated package of reforms proposed in the Proposals Paper will significantly improve consumer outcomes in the financial system.

We believe the Proposals Paper needs strengthening in two important areas. Firstly, the range of products and services covered by the proposed design and distribution obligation and product intervention power should be extended, particularly in regards to credit. Secondly, the Australian Securities and Investments Commission (ASIC) should be empowered to make a broader range of product interventions, particularly in relation to remuneration.

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Submission to the Senate Inquiry into Consumer Protections in the Banking, Insurance and Financial Sector

Financial Rights believes that a number of regulatory reforms in the financial services sector in the past decade – including the introduction of compulsory external dispute resolution and the responsible lending – have greatly improved and strengthened the consumer protection framework and are generally serving Australian consumers well. There are however a great number of problems, gaps and failures with the current consumer protection regime that have tremendous consequences upon those experiencing financial stress and hardship. The raft of scandals that have beset the financial services sector recently are indicative of these problems but Financial Rights works daily with financially vulnerable Australians caught out and frustrated by the plethora of minor and major loopholes and regulatory gaps, as well as poor service resulting from a profit driven culture.

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Submission to the ACCC draft decision regarding Aioi Nissay Dowa Insurance Company Australia Pty Ltd & Ors – Authorisation – A91556 & A91557

Financial Rights welcomes the draft decision to deny the Aioi Nissay Dowa Insurance Company Australia Pty Ltd & Ors – Authorisation request. Financial Rights agrees that a commission cap of 20 per cent will not redress the well-documented, long standing problems with these products and sales and distribution methods, and will not provide any significant public benefit.

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Joint consumer submission to the Review into Dispute Resolution and Complaints Framework Interim Report

Following the release of the Ramsay Review into the External Dispute Resolution and Complaints Framework, Financial Rights joined with other consumer organisations to commend the Panel’s focus on enhancing the existing external dispute resolution (EDR) framework and for extending the benefits of EDR to superannuation customers. It is our view that integrated package of reforms proposed in the Interim Report will significantly improve dispute resolution in the financial system.

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Civil Justice in NSW

Financial Rights made 15 recommendations to the NSW consultation on civil justice. We supported the use of new smart technologies and online programs to help people in NSW resolve disputes early and get access to justice. However we warned that any new self-help programs should be developed by actual legal caseworkers who have practical experience resolving disputes. We also made recommendations around the timing of providing legal resources to people, the creation of a new Retail Ombudsman, the need for pawnbrokers to be in EDR and the creation of a national justice fund.

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Senate Inquiry into the General Insurance Industry

The Financial Rights has extensive advice and casework experience dealing with consumers of general insurance in Australia. Based on that experience we have made many recommendations to the Senate Economics References Committee regarding the following broad problems facing consumers of insurance:

  • Reasons behind and solutions to increasing insurance costs;
  • The lack of transparency and contestability in insurance pricing;
  • Problems surrounding price comparison websites;
  • The need for Unfair Terms protections in insurance contracts;
  • Standard cover and product suitability; and
  • Big data and the future of insurance.

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Submission to the Communications Security Branch Attorney-General’s Department regarding the Access to Telecommunications Data in Civil Proceedings Review

Financial Rights strongly opposes any exceptions to the prohibition in section 280(1B) for civil proceedings. The data retention regime was introduced for the purposes of national security and criminal law enforcement. The use of metadata for civil proceedings does not meet the original objective in any respect. There is no evidence that the current civil justice system needs access to this data.

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Joint Submission in response to Consultation Paper 272 – Remaking ASIC class orders on time-sharing schemes

In response to ASIC’s Consultation paper on remaking its class orders on time-sharing schemes, Financial Rights has joined with Consumer Action in putting forward the following views on time-sharing:

  • an opt-in regime should apply to timeshares rather than a cooling-off period;
  • consumers should be able to more easily terminate their timeshare arrangement and any associated finance arrangement if they determine that it is unsuitable;
  • the term of timeshare agreements should be more limited; and
  • an increase in the volume of information provided to consumers is unlikely to be of any significant benefit, but there are some areas where more accurate disclosure may assist more sophisticated consumers in making their decisions.

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Joint submission to the Australian Consumer Law Reviewre: Door-to-door sales in Indigenous Communities

A coalition of consumer rights organisations have made a stand alone submission on the issue of door-to-door sales practices in Indigenous communities. We believe the existing ACL provisions governing unsolicited sales fail to address systematic exploitative conduct targeting Indigenous consumers. The most straight-forward way to prevent ongoing misconduct and evident consumer detriment through this review process would be to introduce a ban on unsolicited sales. However, if unsolicited sales are not banned, the review should pursue measures that will benefit those currently most harmed by unscrupulous sales practices.

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Submission to the ACCC re: ANZ Banking Group Ltd application for authorisation N99426

Financial Rights contends that the proposed authorisation request from ANZ would not deliver a net public benefit and would deliver a detriment because it would be continuing to finance single premium insurance policies when ASIC has identified this conduct to be detrimental for consumers; and the authorisation fails to acknowledge the availability to pay insurance premiums by installments.

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Submission to the Australian Consumer Law Review Interim Report, October 2016

Financial Rights has focused it’s response to the ACL Interim Report on unfair terms in insurance contacts, the need for a retail ombudsman and unsolicited consumer agreements.

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Submission to the Productivity Commission’s Draft Data Availability and Use Report

Financial Rights believes that the key recommendations of the Productivity Commission’s Draft Report on Data Availability are fundamentally flawed and should be abandoned. We believe several basic privacy protections continuing to be missing including:

  • Compensation for data breaches and re-identification and a tort for serious invasions of privacy;
  • Easy and free access to justice for breaches including an external dispute resolution scheme that can making binding determinations and investigate systemic issues;
  • An appropriately resourced and empowered regulator.

Without these basic protections, individuals will continue to not have trust and confidence with the access to justice regime when it comes to a privacy breach.

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Submission to the Inquiry into the Life Insurance Industry

The Parliamentary Joint Committee on Corporations and Financial Services established an Inquiry into the Life Insurance Industry to examine the need for further reform and oversight. Financial Rights details the key concerns of life insurance consumers arising from the new Life Insurance Code of Practice, ASIC’s recent report into the sector and the need for legislative reform and regulatory intervention.

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Joint submission to the Financial Services Council regarding Minimum Standard Medical Definitions

The FSC has released draft minimum standard medical definitions for trauma/critical illness insurance products for public consultation. Financial Rights and the Consumer Action Law Centre have submitted that the life insurance sector needs to ensure the definitions are reviewed by independent medical specialists rather than their own conflicted specialist.

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Submission to the Treasury regarding the Insolvency Practice Rules 2016

To give full effect to the new Insolvency Law Reform Act 2016 the government have developed a number of legislative instruments to sit alongside it including the Insolvency Practice Rules. Our submission focuses on ensuring those in financial difficulty are not further burdened by inflexible insolvency rules.

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Submission to the ACCC re: Aioi Nissay Dowa Insurance Company Australia Ltd & Ors applications for authorisation A91556-A91557

The ACCC sought input on an application by insurers for authorisation to cap commissions on add-on insurance sold through motor vehicle dealerships at 20% of premiums. Financial Rights’ recommends that the authorisation be denied unless it is enhanced by:

  1. it includes a ban on single premium policies;
  2. it unbundles the sale of add-on insurances from the sale of loans;
  3. includes a ban on the sale of life (trauma) insurance in dealerships;
  4. limits commissions to a lower level (say 10 per cent).

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Joint submission on the Expansion of the Financial Ombudsman Service’s Small Business Jurisdiction

Financial Rights and Consumer Action are supportive of FOS’s proposed expansion of its small business jurisdiction.

The jurisdictional limits and compensation caps for consumer disputes must be reviewed and raised significantly at the same time. It would be sensible and fair for the same limits to apply to consumer and small business disputes. This would also simplify FOS’s jurisdiction and avoid further confusion for consumers.

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Letter to the Prime Minister: Dispute resolution and complaint handling in the financial services sector

Consumer groups have written to the Prime Minister to expression our concerned about the creation of a new banking tribunal, as we fear it may in fact deliver worse outcomes for consumers. We encourage the Government to ensure that the type of dispute resolution forum that is ultimately decided upon builds upon the existing success of EDR schemes and is one that delivers for Australian consumers.

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Joint consumer submission to the Review into Dispute Resolution and Complaints Framework

In May 2016 the Federal Government announced the establishment of an independent expert panel to lead the review into the financial system’s external dispute resolution and complaints framework. Our joint consumer submission strongly supports mandatory external dispute resolution. We believe the final dispute resolution framework in the financial system should empower a single industry-funded external dispute resolution scheme.

We are opposed to the establishment of a new banking tribunal. The consumer experience of tribunals has not been positive and are very concerned that a new tribunal may in fact deliver worse outcomes for consumers.

While there is certainly room for improvement, the existing EDR schemes are world class and an extremely important alternative to the court system. A robust, well-resourced single ombudsman scheme with appropriate scope and design, together with a well-funded regulator and a statutory scheme of last resort, will provide a free, fair, accessible and effective dispute resolution framework in the banking and financial sector.

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Joint Consumer Submission to the ABA Independent Review of the Code of Banking Practice

The Australian Banker’s Association agreed to resource a joint consumer submission to the current review with the Financial Rights Legal Centre engaged by the Consumer Federation of Australia to consult with consumer representatives to prepare this submission. Eighteen consumer organisations have endorsed the submission.

Trust and confidence in the financial services sector, particularly the banking sector remains low. While Consumer Representatives do acknowledge that the banking sector has been working in many areas to improve the way they engage with consumers, there remains a number of areas where banks can work harder to improve their relationship with consumers, particularly with those in financial hardship and other vulnerable Australians.

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Joint submission to the ABA’s Independent Review of Product Sales Commissions and Production Based Payments

From the consumer impacts we observe that poorly constructed incentives have played a part, (and we suspect, have driven), inappropriate sales practices. Financial Rights, Consumer Action and Good Shepherd Microfinance take the view that product sales commissions and product based payments inevitably distort sales-staff behaviour, placing the imperative to make a sale above considerations of appropriateness for the consumer. We are sufficiently convinced of the negative outcomes of commission driven sales to contest the value of retaining such incentives, and believe that a major cultural shift in banking practice is necessary for the public good.

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Joint submission to the Financial Services Council on the Draft Life Insurance Code of Practice – Second Public Consultation

The drafting of a Life Insurance Code of Practice follows the industry-commissioned Trowbridge report on retail life insurance advice, which recommended a life insurance code of practice be developed. We are pleased that the FSC has committed to instituting a Code of Practice and believe that this will be of great benefit to both consumers and the industry. Benefits to consumers arising out of the current draft of the Code include commitments moving beyond the law, relating to investigations, surveillance, product suitability, the review of medical definitions and financial hardship. However, we hold significant ongoing concerns with numerous elements of the Code as it stands including time frames, enforceability, group insurance, sales practices and problem products and medical definitions.

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Submission on the Emergency Services Levy Insurance Monitor Act 2016 (NSW) Draft Guidelines

The NSW Government has established the Emergency Services Levy Insurance Monitor to oversee the transition from an insurance-based levy to a property-based levy. Financial Rights has made a submission supporting the process being developed by the Emergency Services Levy Insurance Monitor and the guidelines proposed to address issues relating to price exploitation and false or misleading conduct. The Monitor’s role in ensuring consumer interests are protected is a vital one throughout the transition process.

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Submission to the Productivity Commission regarding the Data Availability and Use Issues Paper

The Productivity Commission is currently looking into the benefits and costs of options for improving availability and use of public and private sector data. Financial Rights has made a submission on matters relating to Australia’s consumer credit reporting regime, insurance reporting and privacy protections. The submission argues that we have grave concerns about unintended consequences in making credit reporting mandatory and we believe an overhaul of the insurance reporting regime is necessary.

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Joint submission on the Credit Cards: Improving Consumer Outcomes and Enhancing Competition Reform Paper

The Federal Government is proposing a set of reforms that are aimed at improving competition and consumer outcomes in the credit card market including tightening responsible lending obligations, prohibiting issuers from making unsolicited credit limit increase offers and requiring issuers to provide consumers with online options to initiate card cancellation. In a joint submission with the Consumer Action Law Centre we are broadly supportive of the proposed reforms and pleased that the Government is tackling issues that have long been of concern to consumers.

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Submission on the Improving Bankruptcy and Insolvency Law Proposal Paper April 2016

Financial Rights supports the central proposal to reduce the default period for bankruptcy to 1 year from 3 years. This strikes an appropriate balance between the interests of creditors, and ensuring that bankruptcy enables a fresh start for debtors, and is not needlessly punitive. Reducing the bankruptcy period will significantly improve the bankrupt’s opportunities for early financial rehabilitation and participation in economic activity.

Intuitively it would seem that debt agreements would drop in popularity because debtors would clearly opt for one year of bankruptcy over 3-5 years or more of a debt agreement. However, Financial Rights has no confidence this will occur because people entering debt agreements are not getting proper independent, conflict free advice. Financial Rights is therefore strongly of the view that Part IX of the Bankruptcy Act should be repealed because it serves the interest of debt agreement administrators and associated entities far more than the debtors and creditors it was created to assist.

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Submission to the Australian Consumer Law Review: Issues Paper 2016

Financial Rights has argued that, as it currently stands, the Australian Consumer Law does not make it easy for consumers both individually and collectively to assert or defend their rights and that regulators need to be empowered and resourced to deal with systemic issues more proactively. We recommend consideration of a general unfair trading provision that would enable regulators to before harm occurs; the application of unfair terms laws to insurance contracts, and support for an independent Consumer Advocacy Trust.

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Submission to NSW Fair Trading on the Draft Strata Schemes Management Regulation 2016

Financial Rights has made a number of submissions on the new NSW Strata Schemes Management legislation and with this submission on the draft regulations we reiterate our concerns with respect to the new payment plans. While introducing payment plans is an important and positive step, they remain voluntary and heavily weighted towards the interests of owners corporations.

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Submission to the Review of the small amount credit contract laws: Final Report

The Financial Rights Legal Centre continues to believe that that the simplest approach to dealing with the dangers of small amount credit contracts and consumers leases is to ensure that they are all subject to a 48 per cent Annualised Percentage Rate (APR) cap. However, Financial Rights welcomes this Final Report, supports most of its recommendation and seeks implementation of these recommendations as soon as possible to limit the ongoing damage to financially vulnerable consumers wrought by the pay day loan and consumer lease sector.

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Submission to the Review of the NSW Local Government Rating System

Councils are litigious – so much so they are in the top ten issuers of statements of claim in the NSW Local Court system. This not only clogs the system and increases costs to government but exacerbates problems for ratepayers who are already experiencing financial hardship. Financial Rights recommends that a detailed procedure is required before litigation can be commenced by a local council that is consistent with model litigation best practice and best practice hardship policies. Financial Rights also recommends legislating a right to apply for financial hardship in the Local Government Act 1993 among other recommendations to ensure those suffering from financial hardship do not experience a worsening of their situation through their interactions with local councils.

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Additional submission to the Australian Energy Regulator regarding the draft Sustainable Payment Plans Framework

The Australian Energy Regulator sought additional input from stakeholders on the issue of publicly publishing a list of retailers who have signed up to the Framework and how retailers should begin conversations with those in financial hardship. Financial Rights strongly supports the publishing of retailer names who sign up the Framework and made a number of suggestions regarding questions to ask of consumers.

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Joint consumer submission to the Senate Scrutiny of Financial Advice Inquiry

Our joint submission with CHOICE and the Consumer Action Law Centre addresses problems with the sale of life insurance, with the claims and investigations process and with the level of funding and powers the financial regulator needs to properly regulate the life insurance sector. Our organisations have raised concerns about life insurance for decades. There are ongoing issues with the industry that mean consumers are sold complex, expensive and, far too often, dud products. Consumers face delays and difficulties when claiming on policies and the regulator responsible for keeping the industry accountable, the Australian Securities and Investment Commission (ASIC), is underfunded and needs additional powers.

Our joint submission makes a series of recommendations to address these problems including, amongst others:

  • the removal of all commissions in life insurance advice;
  • applying unfair contract terms to life insurance products
  • developing a fair standard definition for common terms for use in all life insurance policies; and
  • establishing an effective and registered Life Insurance Code is established as soon as possible.

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Submission to the Australian Energy Regulator regarding the draft Sustainable Payment Plans Framework

Financial Rights strongly supports the development of this draft Framework. It is important that retailers are guided to develop a practical model to analyse their customer’s capacity to pay. Financial Rights’ submission addresses some of the outstanding concerns with the drafting to ensure that the Framework that it applies to inactive account customers, is appropriately publicised and evaluated and that the Framework is effective in improving outcomes for consumers.

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Submission to the Review of the Residential Tenancies Act

We put in a very short email submission to Fair Trading NSW supporting the Tenants’ Union of NSW and Tenancy Advice and Advocacy Services as the only place for tenants to get free and independent advice.  Those services should be well funded as they are a critical and irreplaceable part of early dispute resolution services for tenants in NSW.

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Submission to Credit Repair Australia Code of Conduct

Credit Repair Australia is developing its own Code of Conduct. We wrote a submission to O’Shea Lawyers who are developing the code with the following comments and recommendations:

  • We strongly believe that debt management firms should instead belong to an industry-wide and enforceable Code of Practice. Individual Codes of Conduct like the one drafted by CRA will only create inconsistent consumer protections for customers and will not be universally enforceable.
  • Codes of conduct in the financial services sector should be modelled on ASIC’s Regulatory Guide 183. Unfortunately in its currently drafted form the CRA Code of Conduct does not come close to addressing the criteria listed in RG183. We are particularly concerned about the Draft Code’s failure to  address consumer concerns; demonstrate enforceability; outline any remedies for breaches and commit to a 3-year independent review.
  • We also made many specific recommendations regarding the provisions in the draft code.

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Submission to Life Insurance Code of Practice

The Financial Services Commission has written a Draft Code of Practice for the Life Insurance industry. Consumer advocates have written a joint submission in response which argues that the Life Insurance Code of Practice (LICOP) as currently drafted is not a best practice standard and has not fulfilled the expectations and obligations set by Government. The current draft does not require life insurers to meet any standard that is not already required of them by the law. It does not meet the minimum standards of enforceability set by ASIC. The draft Code includes a number of sections dictating how consumers should be behave rather than self-regulating the industry’s own conduct addressing consumer issues, concerns and problems with industry practice. The current draft also makes no attempt to address the problems with churn and poor sales practices, issues that initiated the process that ultimately led to the development of this draft LICOP. Unless substantial changes and additions are made, consumers will have minimal confidence in the Code and our organisations will not be able to support it. The final Code should also set enforceable, best practice standards for advisers and licensees.

We believe that life insurers should make the following specific commitments to improve consumer confidence in the industry (additional recommendations are in our submission):

  1. Life insurers should address consumer concerns about someone selling or distributing life insurance products.
  2. Life insurers should commit to provide to policyholders:
    • projections of likely costs of the premium
    • information and contact details of the subscriber’s internal dispute resolution and complaints process;
    • in the case of replacement policies, information on what a consumer may potentially be losing and specific information on pre-existing conditions
  3. Contact via a letter, email or text message should be sent on the same day that a cancellation occurs. The Code should also require life insurers to offer financial hardship assistance if a customer misses a payment, and be prepared to offer reasonable assistance if it is requested.
  4. The life insurance industry should:
    • commit to improving the prominence of warnings and the risks and consequences of replacing a policy
    • commit signatories to investigate reported or suspected mis-selling of replacement policies
    • report where they uncover wrongdoing; and
    • ensure any customers who have suffered a loss are compensated.
  5. The Code should include directions to the IDR and Complaints process on making a decision. For those policyholders experiencing financial difficulty whilst an investigation is taking place life insurers should commit to paying a portion of the income protection payments.
  6. Life insurers need to commit to training staff on how to engage appropriately with vulnerable consumers.
  7. The Code needs to include a commitment to fully inform consumers of the tax and legal implications of a lump sum payment.
  8. The Code should commit life insurers to using only licensed investigators and more specific standards be set for investigators to address our concerns with respect to investigations including poor communication practices, aggressive or unethical investigator behaviour and unreasonable requests for documentation.
  9. The Code should commit insurers to addressing the high lapse rate of funeral insurance products; immediately stop sales of funeral cover for people under 18 years old; stop allowing CCI to be sold through the ‘add-on’ sales technique; and not allow products to be sold through pressure sales techniques.

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Submission to the SACC Interim Report

We wrote a  submission responding to the interim observations and options put forward by the Small Amount Credit Contracts Review Panel (Payday Lending Laws Review). We supported almost all of the options put forward by the Interim Report as they all increase the effective regulation of payday loans and consumer leases.  Specifically we recommended:

  • Additional responsible lending obligations be required in relation to SACCS. The presumptions have not succeeded in addressing the harm as intended and are poorly complied with. ASIC enforcement should be a priority.
  • Consumer leases should be subject to the same level of protection as all other regulated products.
  • A cap of 48% per annum on the maximum amount a lessor can charge should be introduced for all leases, consistent with other regulated loans.
  • A 48% cap should apply to all types of consumer leases, not only low-value household and electronic goods.
  • There should be a limit imposed on the maximum length of leases to balance the benefits of lower repayments against the additional cost of credit incurred by longer term contracts. This could be set by reference to a number of years, or by limiting the total amount payable to a multiple of the cash price.
  • The cash price and accurate description of the goods must be disclosed on the consumer lease contract. A comparable interest rate should also be disclosed.
  • Include the cost of add on features under the cap whether paid for by cash or financed under the lease. If delivery charges are not included under the cap, they should be separately disclosed and capped and should not be permitted to be financed (incur interest payments).
  • There should be a 5% cap on the percentage of net income that can be committed to repayments, which includes the total amount of repayments made towards any SACC, Consumer lease or Centrelink advance.
  • Termination fee should be the lesser of: 1) The lessor’s reasonable costs incurred by reason of the termination or 2) Two months rental under the contract.

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Submission to ePayments Code

Financial Rights put in a short submission to ASIC regarding a modification they are making to Clause 21 of the ePayments Code. This modification makes it easier for financial service providers to disclose information electronically as a default without consumer consent. Our submission warned that not all consumers have reliable access to email, and they should be given a genuine choice as to how they prefer to receive disclosure documents. We also specifically recommended that any electronic disclosure should be accessible on all types of devices, and if a consumer wants a paper copy of their disclosure documents these must be provided free of cost.

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Submission to the AER’s Sustainable Payment Plans Framework

Financial Rights put in a submission and attended a stakeholder workshop regarding the Australian Energy Regulator’s (AER) new Sustainable Payment Plans Framework for energy retailers doing capacity to pay assessments with customers.  Our submission focused on ensuring that the framework applies to inactive accounts; retailers should not increase payments without a new assessment; and retailers should ask additional probing questions of customers to more accurately assess which payments are actually affordable.

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Submission to Elder Abuse Inquiry in NSW

As a specialist community legal centre the majority of calls we receive regarding elder abuse relate to financial exploitation or manipulation. In the 2014-2015 financial year Financial Rights gave legal advice or financial counselling to 3,383 callers who were over 50 years old. This makes up over 25% of the total advice calls we receive from consumers of financial services.

Financial Rights can provide advice in relation to elder abuse where there is a Financial Service Provider or product involved, such as a bank, bank account or credit card. Unfortunately there are a number of situations that would constitute elder abuse when we cannot give legal advice or financial counselling primarily because our funding is not sufficient. Our submission makes several recommendations regarding the lack of funded services for older Australians with questions about their finances, investments or super.

Our submission also draws attention to several financial products that we believe are inherently risky or even abusively unsuitable for older Australians including reverse mortgages, funeral insurance, payday loans and pawnbroking.  We also recommend that financial institutions should take on more responsibility to try to prevent elder financial abuse whenever possible.

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Submission to SACC Review

Financial Rights Legal Centre submits that the SACC regime under the National Consumer Credit Protection Act 2009 (“The Credit Act”) has failed to protect consumers from the harm inherent in pay day lending and other high cost short term contracts. While there has been some containment of costs, it has been insufficient to stop extensive financial damage to vulnerable consumers. Worse, harmful repeat borrowing has increased significantly against the stated intention of the amendments which came into force in 2013. This form of financially detrimental lending is also spreading into wider demographics, effectively undermining extensive efforts at increasing financial literacy by normalising borrowing for consumption purposes. We recommend to the Review that strong action must be taken to address these issues.
Based on our extensive casework experience with the payday lending industry we believe these loans should be banned. The payday lending industry has repeated and systemically demonstrated that:

  • it has a culture of avoidance of the law
  • it relies on repeat borrowing
  • there is systemic non-compliance with the responsible lending laws

We have no confidence that the industry will ever comply with the law in any meaningful way so consumers are adequately protected.
In these circumstances, the only effective way to protect consumers is to ban the industry through an interest rate cap (as has been enacted in a number of countries and states in the USA). This would be achieved by applying an all-inclusive cost cap of 48% or less and enacting adequate avoidance provisions.

Major Recommendations

  • All credit facilities in Australia should be capped at an interest rate of 48% (or less) with no establishment fee allowed (and default fees limited to the reasonable cost of recovery). This would negate the need for the complicated SACC regime.
  • ASIC must be provided with more adequate and more stable funding than it receives now.
  • There should be an automatic remedy of a refund of all fees and charges for any substantive breach of the Act.

As an alternative to the first recommendation above:

  • There should be a hard limit of only two permissible SACCs per 12 month period.
  • The Henderson Poverty Index (HPI) plus a minimum margin should be required as the universal benchmark for all SACC providers.
  • There should also be a ban on concurrent SACCs, refinancing a SACC, and increasing the limit on a SACC.
  • The costs cap should be further reduced to 10% establishment fee and 2% monthly fee.
  • The protection for consumers who receive 50 per cent or more of their income under the Social Security Act 1991 should be changed to a cap at 5% of a Centrelink recipient’s gross income.
  • The Credit Act should include a broad anti-avoidance provision, including the ability to take preventative steps rather than only react after harm has occurred.
  • SACCs providers must be required to disclose an APR comparison rate in advertising and contractual disclosure.
  • That ASIC either ban the advertising of payday loans or, at the very least, introduce strict and specific regulations established for payday loan advertising on television, radio, social media and online.
  • SACCs providers should be prohibited from directly marketing to their customer base because of the high risk of dependency on these types of loans.

In relation to consumer leases:

  • All consumer leases the meet the definition of ‘finance lease’ should be considered comparable with credit contracts and there should be greater consistency in the regulatory requirements. All finance leases and be subject to a 48% interest cap. Otherwise, as a second best option, a specific SACC regime for comparable leases should be enacted with effectively similar protections, with the 48% cap applying to all other contracts, similar to the credit regime.
  • There should be additional disclosure requirements for all consumer leases including the purchase price of the leased good, the amount the consumer will pay in excess of the purchase price, the APR, and the cost of other services financed through the rental payments.

There are other recommendations contained throughout the submission.

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Financial Rights submission to the Northern Australia Insurance Premiums Taskforce, Interim Report 2015

The Australian Government established the northern Australia Insurance Premiums Taskforce following concerns over rising insurance premiums in parts of northern Australia due to tropical cyclones. The Taskforce is charged with examining the feasibility of options to reduce home, contents and strata insurance premiums. These options include the creation of a mutual insurer that offers consumers insurance to cover losses caused by cyclones and a reinsurance pool that would offer reinsurance to all insurers covering their losses caused by cyclones. Financial Rights has made a submission to the Taskforce arguing that whichever model is recommended by the Taskforce, mitigation strategies, greater transparency and increased contestability of pricing must be at its heart and centre of any plan in order to ensure long term positive outcomes for homeowners and communities, value for money for Australian taxpayers and a healthier insurance market.

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Joint Consumer Submission to AFSA on debt agreement marketing (IGPG 1)

This was a joint submission with Consumer Action Law Centre and Financial Counselling Australia.

There have been a number of positive amendments to the Guideline, particularly in relation to
third parties. However, we have suggested a number of amendments to further strengthen the
Guideline below, including recommendations to:

  • ensure the proposed amendments are expressed in plain English;
  • provide further guidance on what specifically amounts to an ‘unsuitable debtor’;
  • provide additional practical examples;
  • clarify that telephone conversations are a form of ‘advertising and marketing’;
  • specify that the term ‘alternative to bankruptcy’ is likely to be misleading;
  • address the appropriateness of targeting consumers who have recently have default
    judgments entered against them.

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Financial Rights Submission on Matters relating to credit card interest rates

The Consumer Action Law Centre (Consumer Action) and the Financial Rights Legal Centre (Financial Rights) welcome the opportunity to provide a submission to the inquiry into credit card interest rates.

Overall, we are concerned by the increasing levels of credit card debt in Australia, and the impact this indebtedness is having on consumers. Briefly, our submission address the following:

  • levels of credit card debt;
  • the impact of credit card indebtedness;
  • the impact of previous credit card reform;
  • barriers to switching credit cards;
  • credit card marketing;
  • credit card disclosure;
  • responsible lending;
  • minimum monthly repayments;
  • value of loyalty programs; and
  • credit card transaction costs.

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Financial Rights submission to the Draft Strata Schemes Management Bill 2015

The NSW Government is introducing a bill to reform NSW strata laws – first major reform since 1973. Financial Rights has long argued the need for amendments to the strata laws to ensure that those owners who find themselves in financial hardship and are overdue in their strata contributions have access to a payment plan process and an internal dispute resolution mechanism. The current draft of the Bill takes some steps towards this goal but in Financial Rights’ view does not go far enough. The Bill provides owners corporations with the choice to voluntarily enter into payment plans but does not make this a right for struggling owners. Similarly, owners corporations are given the choice to voluntarily establish an internal dispute resolution mechanism. Financial Rights believes that both the option for a payment plan and internal dispute resolution process should be made mandatory. Financial Rights also argues that the power for a court to order an owner to pay the expenses of the owners corporation incurred in recovering any contributions not paid should be limited to those expenses that are reasonable in the circumstances.

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Pawn Wars: Financial Rights submission to the NSW Government’s Draft Pawnbrokers and Second-hand Dealers Regulation 2015

Financial Rights’ is disappointed with the NSW Government’s proposed draft Pawnbroking Regulation as it is a missed opportunity to adequately protect consumers. The primary objectives of the proposed regulation relate to preventing the sale of stolen goods. While  this is important there is almost no attention given to preventing other unscrupulous business practices towards consumers that have pawned, and hope to reclaim their own goods.

Only two consumer protection issues that would relate to our consumer clientele were raised and neither one has been accompanied by adequate changes to the Regulation.The most significant element missing from the current regulations is access to an external dispute resolution (EDR) mechanism. Pawnbrokers’ customers are most often the most vulnerable consumers, without resources, capacity or will to commence action in a court or tribunal. Without access to an EDR scheme, low income and/or disadvantaged consumers are for all practical purposes deprived of the opportunity to pursue a valid complaint. The lack of compulsory membership of an EDR scheme is a significant omission in the pawnbroking licensing requirements and should be rectified as a matter of urgency.

Further Financial Rights is concerned that consumers do not understand the true cost of the credit they are obtaining. Pawn agreements brought to Financial Rights by clients most often do not clearly explain the fees and charges payable. Most contain brief, fine print, poorly set out, jumbled together and difficult to understand. There is no clear tabular form to explain the true cost of the credit. Adding some disclosures in tabular form within each actual pawn agreement and extending agreement would make things a whole lot clearer for consumers.

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Submission to the OAIC on its Guide to Complaint Handling Procedures

Financial Rights made a submission to the Office of the Australian Information Commissioner on Consultation draft: Chapter 2 — Privacy complaint handling process.  The OAIC was seeking public comment on its draft Guide to privacy regulatory action (Guide).

This was a joint submission with the Consumer Action Law Centre and it addressed three overarching issues raised by the exposure draft:

  • Complaints handling and enforcement are related but separate regulatory activities and should have separate regulatory actions.
  • The Guide should have more explicit procedural timeframes.
  • Issues of confidentiality of complaints in practice do not match the relevant statements in the Guide.

 We used our experience making a representative complaint under the Privacy Act to inform our comments.

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Submission to the Treasury’s Re:Think Tax Discussion Paper

The Financial Rights Legal Centre’s submission to the Treasury’s Re:Think Tax Discussion Paper argues that Government phase out taxes and levies on domestic consumer insurance products.  We are of the view that these taxes and levies increase the cost of insurance to consumers and contribute to underinsurance.

Financial Rights also recommends that the Government empower a regulator to ensure insurers genuinely pass on tax savings on domestic consumer insurance products to policy-holders.

Finally the submission argues that in the circumstance that a change to the current tax concession regime for not-for-profits is contemplated, guaranteed equivalent funding would need to be provided to compensate for the loss and support the current services of the Financial Rights Legal Centre, other community legal centres and the not-for-profit sector more generally

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Submission to Senate Economics Committee on a Last Resort Compensation Scheme

Australia’s leading consumer groups have made a joint submission to the Senate Economics Committee’s Scrutiny of Financial Advice Inquiry calling for a last resort compensation scheme for consumers with otherwise uncompensated losses as a result of poor financial advice and other financial misconduct. These losses can severely impact affected consumers and their families, the community generally and the reputation of the financial services and credit industries.

The submission argues that a last resort compensation scheme is the missing piece of the financial services regulatory architecture.

Reports of significant uncompensated loss incurred by investors show that existing compensation mechanisms have failed. The Financial Ombudsman Service (FOS) recently reported that there is $21.3 million compensation arising from its determinations in favour of consumers that has not been paid. Consumer groups are deeply concerned that 24.47% of all compensation awarded by FOS to consumers in relation to investments, life insurance and superannuation is unpaid.

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Submission to RBA regarding Review of Card Payments Regulation

The Consumer Action Law Centre (Consumer Action) and Financial Rights Legal Centre (Financial Rights) welcomed the opportunity to comment on the Review of Card Payments Regulation Issues Paper (the Issues Paper) published by the Reserve Bank of Australia (RBA).

In reviewing its card payments regulation, we urged the RBA to explicitly consider the impact of its regulatory actions on disadvantaged and vulnerable consumers. With these considerations in mind, our submission argued (among other things) that card payments regulation should:

  • increase transparency of interchange fees and surcharging;
  • promote competitive neutrality;
  • lower interchange caps;
  • replace weighted interchange caps with hard caps;
  • appoint a regulator responsible for enforcement of payment surcharging rules;
  • ban surcharging for low-cost payment methods; and
  • ensure automatic routing of contactless transactions does not impair consumer choice.

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Submission to ACCC about registration of ARCA’s Principles of Reciprocity and Data Exchange

Financial Rights put in a joint submission with Consumer Action Law Centre and Financial Counselling Australia to the ACCC regarding the registration of ARCA’s Principles of Reciprocity and Data Exchange (PRDE).

Our organisations have for many years expressed concerns about the impact of comprehensive credit reporting (CCR) on consumers. However, the legislature by enacting CCR has indicated that it considers such a regime beneficial despite these concerns. In our view, it seems that the CCR regime cannot be effective unless there is an element of reciprocity, as demonstrated by the lack of industry participation in CCR to date. We acknowledge that there are some benefits of the PRDE. At the very least it is a positive step towards having a single source of free credit reports for consumers, and it is likely to improve consistency in data reporting and competition amongst credit reporting bodies (CRBs). However, we wish to provide some alternate views on a number of the other public benefits articulated in ARCA’s application. In our view, CCR may be detrimental to consumers, particularly those who are financially excluded and marginalised, meaning transparency and enforceability of any reciprocity arrangement is imperative.

Our key concerns are that the PRDE does not resolve the critical problem of consistency in treatment of hardship variations on credit reports, and that the proposed PRDE may interfere with legitimate settlement negotiations that relate to the listing of credit defaults. Briefly, this submission also argues that:

  • the PRDE may result in increased lending, thereby increasing the overall number of consumers in default;
  • while the PRDE is likely to reduce costs for some consumers, this will unlikely be the result for Australia’s most vulnerable and marginalised consumers and may exacerbate financial exclusion;
  • licensed credit providers (CPs) cannot rely on a comprehensive credit report to comply with their responsible lending obligations, nor can the financial regulator rely on a report to enforce these obligations;
  • lower credit default rates are more a function of lender‟s risk appetite rather than a reflection on the quality of information provided to lenders;
  • the PRDE will only be effective if the vast majority of CPs sign up to it;
  • we are not convinced the monitoring, reporting and compliance process in the PRDE is sufficiently independent and transparent; and
  • a comprehensive review process is needed to ensure that the PRDE is actually in the public interest.

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Submission to Treasury about the Financial System Inquiry Recommendations

The Financial System Inquiry (FSI) Final Report was released in December 2014. Financial Rights has made a submission to the Treasury as part of consultation on the final report.

We did not comment on all 44 recommendations made by the FSI Panel, but we did support (with detailed commentary) the following recommendations:

16 Clearer graduated payments regulation

18 Crowdfunding

19 Data access and use

21 Strengthen product issuer and distributor accountability

22 Introduce product intervention power

23 Facilitate innovative disclosure

24 Align the interests of financial firms and consumers

25 Raise the competency of advisers

26 Improve guidance and disclosure in general insurance

28 Execution of mandate

29 Strengthening the Australian Securities and Investments Commission’s funding and powers

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Submission to LIAWG re life insurance advice and remuneration

The Consumer Action Law Centre, Financial Rights Legal Centre, Choice and Maurice Blackburn Lawyers jointly commented on the Interim report from the Life Insurance Advice Working Group about adviser remuneration and quality of advice.  The LIAWG Interim Report responds to a report by ASIC released in late 2014 which blames upfront commissions for the poor quality of advice that ASIC found when reviewing the industry.

Summary of our remarks:

  • We welcome the interim report’s recommendation to remove full upfront commissions and comments that the life insurance industry takes the problems with commission-based selling seriously.
  • However, we do not think the report has taken the problem of commission sales seriously enough, and we are disappointed that all remuneration options considered are commission based.
  • We do not agree that commissions are necessarily required to sell life insurance advice. The challenge of moving away from commissions is a problem with the culture of advisers, not necessarily a problem with consumers.
  • We recommend that the final report consider non-commission based remuneration options in more detail.
  • We strongly support the development of an industry code of practice that is approved by either ASIC or the ACCC.
  • A well designed ‘standard cover’ regime will offer part of a solution to the concerns about quality of advice raised in ASIC Report 413.
  • We are concerned that Approved Product Lists will tend to limit effective competition and mislead consumers.
  • We support the adoption of ASIC’s Life Insurance and Advice Checklist by the life insurance advice industry.

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Submission to ASIC on Facilitating Electronic Financial Services Disclosures

Financial Rights responded to ASIC’s Consultation Paper regarding electronic disclosures by overall supporting the its proposals. Our submission outlined several specific concerns and made one over-arching proviso: that the overall result of any changes is to improve consumer understanding of the benefits and limitations of the financial products and services they are in investing in.

Recent ASIC research has shown that a majority of consumers of insurance do not read their product disclosure statements, or if they do, they do not understand all important information being disclosed.  Our submission to ASIC emphasised that if ASIC is going to allow financial services providers to use a greater range of electronic methods to deliver disclosure information, those method needs to be tested to ensure that they are enhancing consumer understanding, not making it worse.

The proposals within this Discussion Paper have the potential to save industry significant sums in printing and postage of disclosure documents. We submit that some of the resources freed up in this way must be redirected to improving consumer understanding of the products they are purchasing. Financial Service Providers must take some responsibility for testing whether their customers receive and comprehend vital disclosure information.

Specific Concerns:

  • We opposed changing the default setting to electronic disclosure. Consumers should be given a choice about their preferred method of communication.
    • Consumers should not be sent all important notices and disclosures electronically simply because they gave the FSP their email at some point, they should be asked to give specific consent to receive notices electronically.
    • There are privacy and reliability problems with email disclosure. o Too many disadvantaged groups still don’t have reliable access to email.
  • Consumers should not be charged for opting to receive paper copies of legally mandated disclosure.
  • Critical notices like direct debit failures or insurance renewals should require a response if sent electronically, and if no response is received, alternate methods of communication should be attempted (postal notice, phone call, SMS)
  • We are strongly opposed to any marketing material being included with or linked to mandated disclosure material.

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Submission to Interim report on Retail Life Insurance Advice

Consumer Action, Financial Rights Legal Centre, Choice and Maurice Blackburn Lawyers have provided comment on the Interim report on Retail Life Insurance Advice. In brief, the submission argues:


  • We welcome the interim report’s recommendation to remove full upfront commissions and comments that the life insurance industry takes the problems with commission-based selling seriously.
  • However, we do not think the report has taken the problem of commission sales seriously enough, and we are disappointed that all remuneration options considered are commission based.
  • We do not agree that commissions are necessarily required to sell life insurance advice. The challenge of moving away from commissions is a problem with the culture of advisers, not necessarily a problem with consumers.
  • We acknowledge that the remuneration options must be considered in the context of improving the underinsurance problem in Australia.
  • We recommend that the final report consider non-commission based remuneration options in more detail.

Code of practice

  • We strongly support the development of an industry code of practice that is approved by either ASIC or the ACCC.
  • A code should be developed in compliance with the guidance in ASIC Regulatory Guide 183, and through an open, consultative process.
  • A code should set standards for the entire industry (including insurers, licensees and advisers, with additional tailored standards for licensees and advisers).

Quality of Advice: We are concerned that Approved Product Lists will tend to limit effective competition and mislead consumers. We are especially concerned about the continuing practice of vertically integrated advice whereby advisers recommend investment products of entities to which they are associated to the exclusion of better performing non-affiliated products.

Disclosure: The over-elaboration of compliance requirements has resulted in economic risk shifting from the providers of financial products to consumers. There has been no consumer testing of whether current Statements of Advice (SOA) are effective, and significant risks are not adequately explained to consumers.

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Submission to the Treasury on the Insolvency Law Reform Bill

As a community legal service providing both legal advice and financial counselling to the public, we receive many calls about personal bankruptcy and other insolvency options under the Bankruptcy Act.  We generally support any provisions which will make Trustees more accountable. However, we note that the commentary in the Explanatory Memorandum is almost exclusively about the rights of creditors, and accountability to creditors. In our Submission we note that debtors and bankrupts are fundamentally affected by insolvency laws, and their perspective should be balanced with the needs of creditors.

We support the creation of a Register of Trustees as described in the Explanatory Memorandum. We also support the more prescriptive requirements of Trustees seeking registration or renewal and the changes to the disciplinary powers of the Inspector General.

The main points in this submission were:

  1. To make observations about the difficulties encountered by debtors in challenging Trustee’s remuneration and other expenses and make recommendations for improvement.
  2. To outline some deficiencies in the obligations placed on trustees in relation to Part X Agreements.

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Response to Draft Report of the Productivity Commissions Natural Disaster Funding Inquiry

Financial Rights Legal Centre submitted a response to the Productivity Commission’s Draft Report on Natural Disaster Funding Arrangements.  The submission focused on encouraging better transparency of insurance premiums and creating a mechanism of review for consumer’s in relation to insurance premium pricing. Insurers should not be able to hide behind vague reasons and unsubstantiated assertions about how premiums are priced. They should have to substantiate premium pricing across all forms of insurance.  In the home and contents space it is essential.

In our view, the failure of industry to have any mechanism of review of the accuracy of premium calculations is of significant detriment to consumers. This failure also provides no guarantee that any household mitigation strategies or idiosyncratic household conditions are taken into account when determining premiums. Consequently, premium prices cannot be said to be “accurate” signaling of risk as there is no contestability or transparency in their calculation.

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Response to Interim Report of the Financial System Inquiry

Financial Rights Legal Centre submitted a response to the Financial System Inquiry’s Interim Report with over 40 Recommendations for improving financial services in Australia.  The submission focused on consumer outcomes in the insurance sector, particularly improving disclosure regimes, increasing transparency in premium pricing, implementing the recommendations in the CHOICE and Trowbridge reports and creating suitability requirements for insurance products.

The submission also comments on competition in the payments and banking sectors, payday lending, industry self-regulation, consumer compensation schemes, increased powers for ASIC and Financial Difficulty Predator Businesses.

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Review of proposed changes to FOS’s Terms of Reference

Financial Rights and Consumer Action wrote a joint submission to the Financial Ombudsman Service commenting on the proposed changes to its Terms of Reference.

The submission supports the proposed new one-step lodgment process; new discretionary powers to kick out paid consumer agents; a new fast track ‘Adjudicator’ process for low value disputes; shorter objection time-frames for Outside Jurisdiction cases; increased limit for uninsured 3rd party accidents ($5000); and discretion to allow sale of asset. The submission rejects FOS’s proposal to limit its own jurisdiction for rating factors on premium/excess decisions.

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Natural Disaster Funding Arrangements: Submission to the Productivity Commission

The Financial Rights Legal Centre has provided a submission to the Productivity Commission on its Issues Paper, Natural Disaster Funding Arrangements.

The key points and recommendations made in this submission are:

  • Financial Rights submits that our Insurance Law Service is well-placed to act as a national insurance advice hotline and referral service in times of natural disaster.
  • Consumers must be able to assess and understand their insurance coverage. The disclosure process needs to be markedly improved with research and testing to ensure consumers understand their cover and exclusions
  • Independent and government funded comparison websites that compare both price and coverage are essential
  • Publicly available and extensive independent information on risk (through a website) is necessary
  • The NDIR review recommendations should be adopted in full, including the compulsory cover for all disaster events, premium discounting to avoid cross-subsidisation and government top ups in the event the reinsurance pool is insufficient.
  • Data needs to be obtained from the insurance industry on the extent of non -insurance with the data analysed and compared to risk of natural disaster
  • Consumers need disclosure about changes in pricing including compulsory disclosure of any reasons that would be relevant to a request pursuant to s. 75(1)(d) of the Insurance Contracts Act.

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Access to Justice (Response to Draft Report): Submission to the Productivity Commission

Some of the key points and recommendations made in this submission are:

  • Each State and Territory should fund a national referral service with a widely recognised single entry point for legal referral. However, the aim should be to evolve this national number into a multi-disciplinary team.
  • We support findings by the Commission that industry ombudsmen meet legal need in a way that is fast, effective and free of charge for consumers.
  • We broadly support the PC that the profile of ombudsman services should be raised, but targeting information so that it reaches people at the point they need it the most will be more effective than blanket exercises to raise awareness.
  • We support the proposal to consolidate industry ombudsman schemes in appropriate cases, as long as doing so does not leave consumers without another accessible option, or reduce the level of expertise in dispute resolution.
  • The PC should acknowledge that there are a broader range of scenarios in which legal representation will improve efficiency and access to justice in tribunals.
  • Costs awards in lower courts should have a standard basis that is clear to parties and their advisers at the outset of litigation.
  • Parties represented pro bono should be entitled to seek an award for costs. For the avoidance of any doubt it should be clarified at law that Community Legal Centres and their clients are similarly entitled to recover costs.
  • We believe the lawyer acting should be the beneficiary of any cost award.
  • Courts should grant protective costs orders in appropriate public interest cases, and that courts should formally outline the criteria for granting these orders. Protective costs orders should not just be available against government entities, but against private parties too.
  • While there may be opportunity in alternative not-for-profit legal assistance models, we caution against any argument that self-funded services are the solution to ‘the missing middle’, or that they can replace the need for government funded services.
  • We support the use of legal health checks as part of a multifaceted approach
  • We suggest co-location of services and systems (like Consumer Action and CCLC’s legal and financial counselling services, together with worker advice lines) are more effective than referrals between organisations
  • Emphasis in the Draft Report on the consistent application of eligibility criteria to ensure limited legal assistance funding is well targeted. However, eligibility criteria is only one part of effectively targeting services;
  • Better service delivery must be informed by needs analysis. However, we submit that this analysis is best done collaboratively with services and done in a way that ensure continuous ongoing reflection on what works well for a service and why and what needs to be improved;
  • We emphasise the value of strategic advocacy and law reform activities by CLCs and LACs. CLCs play a key role in identifying and acting on systemic issues and these activities are an efficient use of limited resources.

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Inquiry into Debt Recovery in NSW: Submission to the NSW Legislative Assembly

Consumer Credit Legal Centre has made many prior submissions to the NSW Attorney General department regarding debt collection.  We are disappointed that despite apparent support for many of our proposals, none of our recommendations were ultimately implemented.  NSW currently has the lowest protections for debtors, well below the equivalent statutory protections in other jurisdictions. Summary of Recommendations in this submission:

  1. Debtors should be provided with notice when a court judgment is entered, and prior to enforcement action taking effect
  2. The protected amount debtors can retain for essential living expenses should be increased from the current level of $458.40 per week
  3. Courts should exercise discretion in determining the appropriate proportion of wages to be garnisheed, taking into account an individual’s particular circumstances (such as number of dependents, living expenses and other financial commitments)
  4. The length of time a garnishee can operate should be limited to 6 months
  5. There should be legislative protection against a debtor losing their job as a result of a garnishee being issued
  6. There should be a minimum protected amount reserved for a debtor’s essential expenses that creditors cannot access, set in line with the minimum protected amount for wage garnishees
  7. Courts should be given discretion as to the appropriate amount to be garnisheed, considering the debtor’s whole circumstances
  8. There should be greater court oversight over the use of debt garnishees in an oppressive manner, or as a fishing expedition
  9. The categories of personal items not available for forced seizure and sale by the sheriff, should be aligned protections provided under the federal Bankruptcy Act 1966
  10. Sheriffs should have discretion to seize and sell property to balance the need to avoid delay and expense with minimising hardship to the debtor or other persons.

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Financial Systems Inquiry Submission

The financial system has the potential to create significant benefits for (or cause significant harm to) the community as a whole, or particular groups within it. As a service advising and assisting thousands of consumers every year, the CCLC is well placed to comment on both aspects of the system – where it is working well and where it is failing end users. Our submission strongly endorses the comments submitted by the Consumer Action Law Centre on 31 March 2014. Main recommendations in submission:

  • The availability of free, independent, ASIC approved EDR should remain a key component of the financial services landscape. Any issues with the process should be addressed through the regular independent reviews required to retain such approval.
  • The NCCP (Act) 2009 architecture should remain largely unchanged.
  • Unfair contract terms legislation should be extended to cover insurance.
  • Life insurance and TPD cover should be included as the default position in superannuation accounts (with greater regulation of life insurance).
  • Better tools for consumers to compare policies
  • Improved regulatory tools for preventing the systemic sale of poor value insurance products to vulnerable consumers
  • The pay day lending provisions should be retained unless they are replaced with even more stringent requirements aimed at reducing repeat borrowing.
  • There should be greater availability of safer, affordable small loan products.
  • ASIC’s role in identifying and making recommendations to government in relation to gaps in the law should be explicitly recognised and retained. Responsibility for the enforcement of credit reporting regulation should be transferred to ASIC.
  • All commercial entities involved in regulated credit advice, negotiations, credit reporting and personal budgeting/repayment services should be subject to licensing, EDR and specific tailored provisions to improve outcomes for consumers (and prevent the identified harm).

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Introduction of Personal Insolvency Fees: Submission to AFSA

We strongly oppose the introduction of Debtor’s Petition fee.  This new $120 fee will have very serious consequences for our clients, their creditors, and the wellbeing of their families and the health of the communities they live in. The majority of clients that we advise about filing for bankruptcy are on very low incomes, and by the time they are contemplating bankruptcy they are in severe financial hardship. Key points made in our submission:

  • A scan of our casework records (including both our legal advice and financial counselling services) reveals that we have on record at least 1600 calls from low income and vulnerable clients relating to bankruptcy per year. Of those callers 62% report they are living on an income of less than $26,000 per annum (with some reporting no income at all).
  • For this group of debtors a $120 fee to file for bankruptcy will be a significant financial burden.
  • One of the inevitable consequences of the new fee for lodging a Debtors Petition is that fewer debtors will file for bankruptcy.  This will be a terrible result for everyone from creditors, to the debtor’s family to the community at large.
  • Another consequence of introducing a fee for lodging a Debtor’s Petition is that debtors will be forced to incur more debt in order to come up with the $120 fee.
  • Charitable organisations will likely carry the burden
  • If a fee is introduced for lodging a Debtor’s Petition, there should be a waiver for low income debtors
  • The bankruptcy regime already imposes an income contribution requirement that is tied to income and number of dependents, and is recovered from post bankruptcy income rather than set up as a barrier to entering bankruptcy in the first place.
  • The Realisation Charge is a more appropriate way for AFSA to recover its personal insolvency costs

Since the submission of these comments to AFSA the proposed new fee has been disallowed in the senate and removed from the Debtor’s Petition Application.

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Motor Vehicle Repair Industry: Submission to the NSW Parliament

Key points made in our submission:

  • Overall, complaints to the ILS about quality of car repairs is an ongoing issue. The process for getting poor repairs fixed is difficult and may involve the cost to the consumer of getting independent assessors. Consumers often indicate they have little trust or confidence in the repair industry.
  • In our experience, the two biggest problems for consumers in this area are increased cost and hardship while awaiting repairs, and limited right of appeal of an assessor’s decision to write off or not write off a vehicle.
  • Where a third party is claiming against an insurer for damages it needs to be clearly disclosed to the consumer that the insurer can list the car as a total loss (write off) on the register
  • Consumers have little knowledge or awareness of their rights in relation to dealing with insurers and consequently their rights in relation to repairs carried out under a contract of insurance.
  • Issues commonly arise in relation to timeliness of repair, quality of repair and the transparency of the decisions in relation to the assessment of the claim. Insurance contracts will often limit an insurers liability in circumstances of delay.
  • Regulation and transparency of assessment in our view is key to ensure fair outcomes for consumers, whether products are vertically integrated or not.

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Debt Collection Guidelines: Submission to ASIC & ACCC

The Consumer Credit Legal Centre (CCLC) supports the regular revision and updating of the Debt Collection Guideline. It is important that the Guideline is updated on a regular basis to account for changes to the law, recent decisions and ongoing improvement in practices and industry standards. The revised draft Guideline is a significant improvement on the existing version, especially the recognition of the need for additional protections for low-income debtors.

CCLC notes that the Guideline is not law, and only represents guidance. In our view, consideration should be given to the Guideline being made into law. The debt collection industry is very large and pervasive, and unfortunately not all debtors subject to debt collection activity have access to EDR. CCLC has ongoing problems with a number of smaller debt collectors who continually breach the Guideline with no consequences. Some of the breaches are very serious, including threatening the consumer that s/he will be reported to the Police. We contend that legislation is required to ensure that all consumers have adequate consumer protection when dealing with debt collectors.

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Access to Justice Arrangements: Productivity Commission Submission

The Consumer Credit Legal Centre has provided a submission to the Productivity Commission on its Issues Paper, Access to Justice Arrangements.

 The key points and recommendations made in this submission are:

  • The service delivery model used by CCLC is a very effective and efficient method of addressing legal and related need and enhancing access to justice in relation to credit, debt and other financial services issues.
  • There is still considerable unmet need in relation to credit, debt and insurance law in Australia.
  • Credit legal services should be integrated with telephone financial counselling and referrals across Australia.
  • Community Legal Centres can use their resources to best effect when they use the intelligence gained from casework and service provision to advocate for systemic solutions. This should be explicitly recognised and incorporated into funding models, including reporting and evaluation.
  • Access to external dispute resolutions services like the Financial Ombudsman Service and Credit Ombudsman Service are vital to access to justice – and are arguably the greatest addition to consumer protection in Australia in many decades. Current problems with delays in such schemes are not insurmountable and in the process of being addressed.
  • The Insurance Law Service operated by CCLC is ideally placed to perform a central role in responding to national disasters but is underfunded to do so. A greater (but still modest) contribution from the Commonwealth and a per capita contribution from each State and territory could increase funding to necessary levels.
  • Filing fees and court procedures (or proposed changes to procedures) are creating barriers to pursuing public interest litigation in some cases.

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Financial Services Inquiry: Submission on the Draft Terms of Reference

Consumer Credit Legal Centre commented on the Draft Terms of Reference for the Financial System Inquiry. The Terms of Reference give broad scope to address a wide range of issues of concern to our organisation. (See Press Release from Treasury)

Our comments have been made in the interests of ensuring the inquiry, which is no doubt likely to be dominated by the concerns of financial service industry participants, keeps a firm eye on the end-users of the financial system. The financial system has the potential to create significant benefits for (or cause significant harm to) the community as a whole, or particular groups within it.

Summary of CCLC’s Recommendations

  1. The TOR should specifically mention access to the financial system or financial inclusion.
  2. TOR 2.1 should be amended to recognise that competition, efficiency and innovation are not objectives in themselves, but are only beneficial to the extent that they contribute to achieving optimal end-user outcomes.
  3. TOR 2.3 needs to include the benefits of regulation (to consumers, the market as a whole and the public interest) in addition to its costs and impositions; whether the objectives of the regulation are being met, and whether there are alternatives (including alternative regulation) that would meet the objectives more effectively.
  4. There should be a panel representative with experience and expertise in consumer policy and financial inclusion.

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Ban on Mortgage Exit Fees: Submission to the Treasury

Consumer Credit Legal Centre has contributed to the Post Implementation Review of the ban on mortgage exit fees. We continue to support the ban on exit fees as introduced through the National Consumer Credit Protection Amendment Regulations 2011 (No 2). The fees that these regulations prohibit are anti-competitive. Key points in our submission:

  • CCLC is of the view that termination fees, whether they be fees for early termination or deferred establishment has the effect of: Misleading consumers as to the cost of a loan; and Trapping borrowers in unsuitable loan products.
  • Consumers often reported being trapped in high interest loans, because they could not borrow enough to cover the exit fee upon refinancing. This left some borrowers in the position where they had to sell their homes even though they could have afforded a more competitive loan with lower repayments.
  • We contend that the bill has not had the anti-competitive effect that was forecasted by lenders.  The bill has been effective in enabling competition in the mortgage market whilst in turn enabling open, fair and transparent terms and conditions for borrowers in making choices and comparing products in the market place.  In our view, the ban has effectively removed one route for a lender to gouge a borrower without substantially affecting competition to the detriment of consumers. Rather, competition has become more transparent as consumers are able to more easily compare products and their associated costs. We also observe that a number of lenders advertise that there is a ban on mortgage exit fees to encourage shopping around for a better deal.

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Independent Review of FOS

Consumer Credit Legal Centre (NSW) and the Consumer Action Law Centre (Victoria) have coordinated and written a joint-consumer submission to the independent review of the Financial Ombudsman Service. The submission contains contributions from twelve other organisations, and received funding from the Financial Ombudsman Service.

Contributors broadly believe that, while there is room for improvement, the Financial Ombudsman Service is providing an essential service of a high standard and should be congratulated. This view was echoed in responses to the online survey of financial counsellors.

Case delays were by far the biggest concern for organisations who contributed to the submission and, while we acknowledge that Financial Ombudsman Service is making genuine efforts to reduce delay, we have provided a number of recommendations on this topic.

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Performance Review of ASIC

The Consumer Credit Legal Centre (NSW) has made a submission to the Senate Economics References Committee inquiry into the performance of the Australian Securities and Investments Commission (ASIC).

Summary of Submissions

• ASIC has been a very effective regulator in the consumer credit space. It has been very active in the first few years of taking over this role from the State governments in 2010 and has taken some well target activities to address areas of likely consumer detriment.

• ASIC could do more to keep the market aware of its focus and compliance activities. Industry players need to be reassured that wayward competitors are under scrutiny where appropriate so that competitive pressures do not place downward pressure on compliance standards.

• ASIC needs to respond to consumer complaints in a timely fashion and, where timeliness is not practical, keep consumers (and their advocates) informed in some appropriate way.

• ASIC needs some better regulatory tools so that it can react in a timely and effective manner to prevent consumer detriment.

• We encourage ASIC to continue to conduct and foster research, gather evidence from complaints and surveillance activity, and work with consumer advocates and industry to develop creative solutions to problems and inform government about regulatory gaps or weaknesses in their enforcement capacity.

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ILS comments on Access to Insurance for low-income Australians.

The Insurance Law Service has commented on a recent paper on Insurance Access released by Good Shepherd Microfinance.  ILS agrees with Good Shepherd that limited availability, access to, and understanding of, insurance are significant contributing factors in financial exclusion for many Australians. It is generally understood that insurance is vital for protecting assets and securing a resilient future. Without insurance, it is not possible to accumulate assets safely and confidently or use everyday essentials such as a motor vehicle. Non-insurance also places huge burdens on society.  Good Shepherd is working on a project to insure sustainably a large number of Australians who are currently excluded from insurance or are unsure why or how the product could be of benefit to them.

In our comments to Good Shepherd we pointed out a number of insurance products that we believe are high-risk to low income Australians:

a.         Funeral Insurance

b.         Consumer Credit Insurance

c.         Gap insurance

d.         Insurance Products with Rising Premiums

We also pointed out that there are other types of insurance that disadvantage low income Australians because of their rising premiums. When someone is on a fixed low income it gets more and more difficult to afford to make rising premium payments. ILS submits that in many cases had low-income consumers known that the premiums were going to become unaffordable they would not have signed-up for the insurance policies in the first place.

ILS believes that a key issue for low income Australians and insurance is determining whether the premiums will be affordable for the required term of the insurance product. Consumers currently are not given this vital information.

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Joint-consumer response to the Credit Reporting Code

The CCLC recently submitted a 43-page consumer response to the proposed Credit Reporting Code written by CCLC staff, Carolyn Bond (formerly of Consumer Action Legal Centre) and Nigel Waters of the Australian Privacy Foundation.  Several other consumer advocacy groups have signed on to the submission including: Consumer Action Legal Centre, Australian Privacy Foundation, Consumer Credit Legal Service WA, Financial Counsellors of Australia, and the Australian Communications Consumer Action Network.  We had many concerns regarding the proposed code including its accessibility and readability for consumers.  The Joint submission made many recommendations for changes to the proposed code.

Major Recommendations:

  1. The CR Code must make it clear that Repayment History Information (RHI) can only be reported by credit providers licensed under the National Consumer Credit Protection Act and mortgage insurers
  2. The CR Code should include a commitment to fairness.
  3. Default listings must be removed immediately once the debt has become statute barred.
  4. The OAIC/Government is strongly encouraged to consult with stakeholders on the ongoing problems with credit repair companies with a view to consider further regulation.
  5. The CR Code should specifically require that all existing listings under $150 are removed on commencement of the Privacy Act.
  6. The CR Code must specifically ban:
    • Multiple default listings in relation to one debt
    • Listing a default again after a debt is assigned
    • Updating the amount of the debt on the default listing
  7. The CR Code must clarify and acknowledge that CP’s are subject to a range of regulatory requirements, including other legislation and Codes of Practice/Industry Codes and these continue to apply including when they impose a higher standard than the CR Code on a particular issue. The CR Code will identify where the Privacy Act sets certain legislative time limits.
  8. If account numbers are going to be used this information can only be disclosed in specified circumstances, for example, to the relevant CP and to the individual but to no other party.
  9. Clause 5.1 of the CR Code needs to clarify what administrative information can be disclosed, including in respect of ‘identifiers’ and the Code should expressly discourage the standardisation of account numbers across the credit industry.
  10. The CR Code should state that the notice of an intention to list a default must be issued between 30 days and 14 days before the default is listed.
  11. The amount of the default as notified to the consumer must be the amount listed on the credit report.
  12. The code should provide that consumers have the right to fully complete the application process for a free report online.
  13. The CR Code should specifically state that ALL CPs must be a member of an approved dispute resolution scheme that is free for consumers.
  14. The grace period before default should be extended from 5 days to 14 days.
  15. The CR Code should be monitored by an independent CR Code Compliance Committee, not audited by CRBs, who will have a conflict of interest.

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Joint Consumer Submission in relation to the Changes to Disclosure Requirements under the NCCPA

CCLC and CALC have submitted a joint response to the Treasury’s Discussion Paper regarding proposed changes to the format, content and timing of disclosure requirements under the National Consumer Credit Protection Act 2009 on both credit providers and lessors.  The changes are largely based on empirical research into pre-contractual disclosure that was commissioned by the Senate.  The proposals are framed by the following policy objectives:

  1. Making changes that will improve consumer understanding.
  2. Highlighting key pricing information in a new Table called the Financial Summary Table.
  3. Repealing existing unnecessary disclosure requirements.

Our joint submission largely supported the proposed changes that were a reflection of the empirical research presented in the recently released Uniquest Report.

Our submission includes suggested amendments to each of the following product-specific disclosure requirements:

  1. Home Loans
  2. Lender’s Mortgage Insurance
  3. Credit Cards
  4. Personal Loans (including Car Loans)
  5. Reverse Mortgages
  6. Consumer Leases
  7. Small Amount Loans (ie Payday Loans)

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Federal Court Fee Increases

The Consumer Credit Legal Centre has made a submission to the Sanding Committee on Legal and Constitutional Affairs. The CCLC strongly believes that the dramatic increases in federal court fees since 2010 have a negative impact on low-income and vulnerable Australians and act as a barrier to accessing justice.  Courts provide an essential public service and as the cost of accessing justice goes up, it is the most vulnerable parties that will suffer the consequences.  The party with the least financial resources will always be the one that is the most disadvantaged in our legal system.

Our submission recommends:

  1. Limits overall fee increases for litigants who are persons and not companies
  2. Extends the General Exemption from paying Court Fees to include individuals who are represented by a Community Legal Centre (CLC) or pro bono.
  3. Abolishes Deferral Systems due to the administrative burden caused.
    1. In the alternative, if deferral systems are to be kept then the following procedure should be used:

i.    All fees must be deferred for a pro bono or CLC represented party until judgment has been given, and

ii.    After judgment, fees are not to be taken from a pro bono or CLC represented party if:

  1. Judgment is given against the party, or
  2. Damages are not awarded or nominal damages are awarded, and costs are not awarded in favour of the party.

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Independent Review of the Centrepay Scheme

The CCLC recently had the opportunity to comment on an Independent Review of the Centrepay Scheme.  Centrepay is a voluntary free bill paying service for Centrelink recipients.  The service helps people budget for essential living expenses like rent and utilities.  It is quite popular among Centrelink recipients, and there are currently over 13,000 participating organisations that accept payments through Centrepay.

The CCLC believes Centrepay is an invaluable service provided for social security recipients.  The financial counsellors as well as the solicitors in our Centre agree that Centrepay is an important financial self-management tool for disadvantaged consumers and we strongly support its continued operation.  However, in light of its independent review we submitted some comments and concerns about the current administration of the Centrepay scheme.

Primary Concerns

  1. Centrepay should revisit its founding policy objective of assisting Customer financial self-management by enabling the payment of living expenses, which should only include certain priority goods and services.
  2. Retail/Consumer Lease companies for consumer goods should be removed from the Centrepay scheme or in the alternative be treated by Centrepay with increased scrutiny both in the application phase and necessary review of existing Participants.
  3. Other problematic Participants such as solicitors and funeral homes should be treated by Centrepay with increased scrutiny during the initial application phase as well as during subsequent reviews.
  4. An itemised list of all Centrepay deductions should be included on every Centrelink Statement provided to Customers whether generated automatically or after a customer request.
  5. There should be a better complaint mechanism for Customers and consumer advocates who have a grievance against a Centrepay Participant organisation.
  6. The amount of funds able to be deducted through Centrepay should not be capped.
  7. Centrepay should allow the deduction of mortgage repayments in limited circumstances.

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National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012 (March 2013)

The CCLC has recently had the opportunity to make submissions in relation to Phase 2 of the National Consumer Credit legislative changes. As a whole the CCLC is extremely supportive of the Phase 2 Reforms. We were particularly supportive of the anti-avoidance and private lending reforms as these are areas where systemic avoidance of applicable credit legislation has been rife, causing considerable harm to vulnerable consumers.   We submitted that there were discrete changes to certain legislative language that  were still needed before this bill could be passed into law.

Primary Concerns

  1.  Anti-Avoidance provisions should be enacted as a priority, even if that means separating the other proposed sections and passing anti-avoidance legislation separately.
  2. We strongly support the drafting of the proposed Section 323A, although we made some minor recommendations for changes.
  3. We support the current amendments to Section 171 which remove the short term and indefinite lease exemptions currently in  Section 171 of the National Credit Act.
  4. We recommended changes to the current drafting of Section 171A(3) which classify ‘Rent to Own’ arrangements as indefinite leases and not as credit contracts.
  5. We support the extension of the National Credit Act to regulate private lending.
  6. We support the extension of the National Credit Act to investment lending but we are concerned that the provisions do not go far enough in relation to protecting borrowers with Regulated product (home-secured) investment credit contracts.

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Consumer Leases

The Consumer Credit Legal Centre has made a submission to the Commonwealth Treasury on regulation of consumer leases. The CCLC strongly agrees with the Treasury that the lease provisions in the Credit Act are now out of date in relation to the common use of leases. The decision in the original Consumer Credit Code to enact separate and less effective provisions for leases meant that the consumer lease industry developed business strategies to avoid the tougher protections for credit contracts. Currently, many consumers are in contracts that do not reflect the intention of the parties, with leases being sold as indistinguishable from loans but the consumer has no right to own the goods in the contract. Further, these contracts can be deceptively expensive.

Our submission recommends:

  • Enhanced disclosure for leases including :
    • Cash value of the goods
    • Amount payable under the contract relative to the cash value of the goods (as proposed)
    • A nominal interest rate for comparison purposes
    • Any ancillary services and products

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Point of Sale Retailer Exemptions

The Consumer Credit Legal Centre has made a submission to the Commonwealth Treasury in relation to the exemption of retailers from the National Consumer Credit Protection Act 2009 (Credit Act)The CCLC has not supported the exemption of Point of Sale (POS) retailers from the Credit Act at any time. The CCLC considers the exemption to be a large loophole in the current consumer protections under the Credit Act.We believe it is critical that the protections of the National Credit Act be extended to POS retailers that engage in credit activities in relation to the sale of goods and services, rather than allow this unsatisfactory gap in consumer protection to continue.

Our submission recommends:

  • ALL retailers (e.g. car dealerships, department stores that sell furniture and/or electrical goods) who engage in credit activities (arrange finance) should be regulated by the Credit Act, including:
    • Retailers who help arrange financing must either hold an Australian Credit License (ACL), or be appointed as a Credit Representative of someone who has an ACL
    • Retailers must join an External Dispute Resolution scheme
    • Retailers must meet Credit Act disclosure requirements and responsible lending obligations
    • Alternatively (as a second best option):
      • Car dealerships must either hold an ACL, or be appointed as a Credit Representative of one financier (with full disclosure about there only being one option available)
      • Other retail outlets (supplier representatives) would have modified obligations including-
        • EDR membership for the retailer (as opposed to individual staff members)
        • Modified responsible lending provided all financial details are taken directly from the consumer by the financier.

CCLC considers car yard finance an extremely high risk area for consumers and does not therefore support applying any modifications to the regulatory regime applying to other credit industry participants for car yard finance.

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Productivity Commission Review of the Consumer Protection Framework

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Financial Services and Credit Reform – Improving, Simplifying and Standardising Financial Services and Credit Regulation

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Responsible lending practices in relation to consumer credit cards

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Personal Property Securities Regulations

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Personal Property Securities Bill

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