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Dispute Handling

 

AGREEMENT WITH CREDIT OMBUDSMAN SERVICE LIMITED

 

The Financial Ombudsman Service Limited (‘FOS’) and the Credit Ombudsman Service Limited (‘COSL’) are external dispute resolution schemes approved by the Australian Securities and Investments Commission.  Both FOS and COSL receive complaints against financial service providers (‘FSP’) who are members of their respective schemes. 

In a securitisation programme, the programme funder or servicer (also known variously as programme manager, fund manager, wholesale lender or wholesale funder) may be a member of one scheme while the securitisation trustee may be a member of the other scheme.  To facilitate the efficient consideration of a dispute regarding a loan which is part of a securitisation programme, FOS and COSL have entered into an agreement in relation to the handling of a dispute received by one scheme but more appropriately dealt with by the other.


Background

In a securitisation programme, the trustee is the lender of record, but under the servicing agreement between the trustee and the programme funder (‘counter-party’), the day-to-day administration of the programme and other management responsibilities are discharged by the counter-party.  Issues which are strictly the responsibility of the trustee are almost always delegated to the counter-party, such that the counter-party will accept complaints about, among other things, debt-collection, legal proceedings, unjustness or financial hardship applications on behalf of the lender.

Furthermore, such trustees are exempt from the licensing and responsible lending provisions of the National Consumer Credit Protection Act on the basis that the counter-party will perform the obligations or exercise the rights of the trustee. 

(Some counter-parties do not deal directly with the borrower (that is, until the loan falls into arrears), and rely instead on a mortgage manager to manage the loan by, for example, issuing statements, monitor repayments and making enquiries about arrears.) 

Macquarie Bank (as funder of the PUMA programme) is unique in this regard.  They will accept complaints and disputes if the matter relates to them as a programme funder or servicer, but where the matter relates to an Originator/Manager in the PUMA program (invariably members of COSL), the complaint or dispute is referred to COSL (in some cases the Originator/Mortgage Manager will deal directly with COSL and in others, Macquarie will liaise with COSL on behalf of the Originator).


Appropriate EDR scheme

In light of this background, FOS and COSL have agreed on the following: 

 

  1. A complaint or dispute about a credit facility which has as its lender of record a securitisation trustee (‘securitised loan’) should, as a general rule, be directed by the scheme which receives the complaint or dispute to whichever scheme the counter-party belongs to.
     
  2. FOS and COSL have agreed that the proper scheme to consider a complaint or dispute about a securitised loan, is as follows:
     
     Trustee is a memebr of  Counter-party is a member of Proper scheme will be 
     FOS  FOS  FOS 
     COSL  COSL  COSL 
     COSL  FOS  FOS
     FOS  COSL  COSL
     FOS and COSL  FOS  FOS
     FOS and COSL  COSL  COSL













    If a scheme receives a complaint or dispute which is not the proper scheme to consider the dispute, the scheme will transfer the documents comprising the complaint or dispute as well as supporting material upon the complainant or applicant consenting to this.
     
  3. The complaint or dispute will be referred back to the scheme to which the trustee is a member if the counterparty is unable or unwilling for any reason to deal with a complaint or dispute which involves:
    1. An application to vary or set aside a credit contract on the grounds of financial hardship;
    2. An application to postpone enforcement proceedings;
    3. An allegation that the loan or the fees are unjust or unconscionable; or
    4. An allegation that the credit contract is “unsuitable”.
       
  4. Each of FOS and COSL will refer to the other a complaint or dispute received by it about a securitised loan under a PUMA programme funded by Macquarie Bank (and will transfer the documents comprising the complaint as well as supporting material if the complainant or applicant has consented to this), as follows:
     
    Trustee is a member of:  Subject-matter of complaint relates to: Proper scheme will be:
    FOS and/or COSL Macquarie Bank (member of FOS)

     FOS

    FOS and/or COSL  Originator/Mortgage Manager (member of COSL) COSL

     

 

 

                      
  

 

 

Process

FOS and COSL have agreed on the following approach:

  1. On receipt of a complaint or dispute, the receiving scheme will identify if the complaint or dispute is a loan which forms part of a securitisation programme and, if so, take steps to identify the counterparty as soon as possible.  (As this may involve referral to the trustee, there may be a short delay in identifying the appropriate scheme to deal with the complaint or dispute;
  2. If it is determined that the other scheme (“the transferee scheme”) is the more appropriate forum, the complaint or dispute will be transferred to the transferee scheme within three business days, and the consumer will be informed in writing that their complaint or dispute has been transferred and the reason for that transfer;
  3. The transferee scheme will provide a written acknowledgement to the consumer that they have received the complaint or dispute within three days of the receipt of the transferred file and will otherwise deal with the complaint or dispute as soon as practicable according to its own Terms of Reference or Rules.
  4. Where a dispute or complaint is referred to the transferee scheme by the receiving scheme, the time limit for bringing the dispute or complaint to the transferee scheme will apply from the date it was lodged with the receiving scheme and the dispute or complaint will be deemed to have been lodged with the transferee scheme on the date it was lodged with the receiving scheme.  Any recovery action, including legal proceedings, which occurs after the date of lodgement with the receiving scheme is to be discontinued;
  5. Both schemes will at all times and in cooperation with the consumer ensure that there are open lines of communication in accordance with each scheme’s procedures.
  6. If the authorised representatives cannot agree which scheme should deal with the complaint or dispute, or if any other issue arises which cannot be managed or resolved by the authorised representatives, they will refer the matter to the Ombudsman of their respective scheme for resolution.

 

The FOS Ombudsman and the COSL Ombudsman can agree to amend these arrangements as occasion demands.


How FOS members who act as trustees in securitisation programmes can assist

When a dispute is first processed by us, an e-mail notification is usually sent within an hour to the FSP nominated by the applicant as the FSP that the dispute concerns.  Where a dispute relates to a loan provided under a securitisation programme, and the dispute is lodged by an applicant against the trustee, it is unlikely that this will come to our attention immediately.

If you work for a financial services provider that acts as a securitisation trustee and you receive a notification from us about a dispute that you believe should be dealt with by COSL on the basis that the counter-party is a member of COSL, please contact us to let us know.  To make this easy for you and to avoid any confusion, we have designed an electronic form (in Excel format) that can be completed and e-mailed to us in these circumstances.  The form can be downloaded here.  When we receive a completed form from you, we will ensure that the dispute is transferred to COSL and that you do not incur a cost in relation to the dispute.

If you have any questions or feedback in relation to the process, please contact Jack Furphy (Manager – Registration) on 03 9613 7314.

 

 

DISPUTES INVOLVING MULTIPLE MEMBERS

 

Our Terms of Reference (TOR) provide that in dealing with disputes we must do what in our opinion is appropriate to resolve disputes in a cooperative, efficient, timely and fair manner.  
As more financial services providers (FSPs) become FOS members, we have noticed an increase in disputes involving two FOS members.  

In this article we provide information about the approach we have adopted to ensure that disputes involving multiple members are dealt with in the most efficient manner possible.  Please note that this information only relates to disputes involving FOS members.

The following types of disputes may involve more than one FOS member:

  1. disputes about the actions of two members where issues in dispute may be linked, but no relationship exists between each FSP and each FSP provides a separate financial service (e.g. delay in settlement involving incoming and outgoing credit providers)
  2. disputes involving FSPs who have a business relationship or connection (e.g. original credit provider and an assignee of the debt, a mortgage manager and credit provider).

 

Multiple FSPs where no relationship exists

Where there is no relationship between the FOS members and they have provided a separate financial service, the normal course is to open two separate disputes.  Examples are set out in the table below:

 

Financial advice/service provided over a period of time, when the adviser providing the advice was with more than one FSP 
  • We will consider a dispute against each FSP if the applicant is disputing the advice/service that was provided by more than one FSP.  For example, if an applicant is disputing two instances of financial advice provided by a financial advisor, and the advisor was an authorised representative of a different FSP on each occasion, then a dispute will be considered against each FSP in respect of the advice for which it is responsible.  
  • if the applicant complains about inappropriate advice, and claims loss that arises after the adviser moves to another FSP, a dispute will be considered against the second FSP to consider whether loss may have arisen due to a failure to review the original advice in a timely manner.
Life insurance advice across more than one broker 
  • We will consider a dispute against each relevant FSP if the applicant is disputing advice that was provided by more than one FSP. The key consideration is what advice allegedly led to the claimed loss.
Life insurer and financial adviser that provided advice to take out life insurance
  • If an applicant is disputing both the operation of their insurance policy (e.g. a denial of claim) and the advice that was provided by a financial planner to take out the policy, then we will consider a dispute against each FSP.
  • If an applicant is not disputing the insurance policy operation (e.g. is not disputing a denial of claim), but is disputing the advice provided to enter into the policy, then we will consider only one dispute – against the FSP responsible for the advice.
Multiple funds managers acting on behalf of funds manager or lender 
  • We will consider a dispute for each fund manager if more than one fund manager is the responsible entity/fund manager for the funds in dispute.  The issues in each dispute will need to relate to the conduct/actions of the relevant fund manager.
Dispute against an FSP about inappropriate financial advice concerning a managed investment, and a dispute against the responsible entity of the managed investment 
  • If the adviser is an authorised representative of the responsible entity, we will consider one dispute against the responsible entity.
  • If the adviser was not a representative of the responsible entity, we will consider a dispute in respect of the advice against the FSP the adviser was representing and a dispute against the responsible entity in respect of its conduct
Dispute against multiple FSPs involved in the transfer of investment funds, where delays/problems with the transfer have caused financial loss
  • We will consider a dispute against each FSP involved in the transfer/transaction of the investment funds.
Broker and insurer
  • If the applicant is complaining about both the conduct of the broker and the conduct of the insurer, we will consider a dispute against each FSP.  Where the broker acted as the insurer’s agent, the dispute against the insurer will include a review of the insurer’s responsibility for the broker’s conduct.
  • If the applicant is only complaining about the insurer’s conduct (e.g. a denial of claim) then only one dispute will be considered against the insurer.
Two insurers
  • This may occur where there is one event and two claims, e.g. a dispute about which insurer is liable for the event where the applicant has two separate policies.  In this case a dispute will be considered against each FSP. 
Dispute against two members where no relationship exists between them (generally) 
  • Where there is clearly no relationship and the dispute relates to the provision of clearly separate financial services, we will consider a dispute against each FSP and each FSP will be asked to respond to the issues raised that relate to its conduct. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multiple FSP dispute where a relationship exists between the FSPs

Here are some examples of how we approach dispute involving FSPs who are in a contractual relationship:

 

Dispute about credit licensee and/or one of its authorised credit representatives (ACR)
  • We will consider a dispute against the credit licensee and ask the licensee to respond to the issues raised against it and its ACR.
  • If the credit licensee provides information asserting that the subject contract is not regulated by the National Consumer Credit Protection Act 2009 and the ACR was not its agent when dealing with the applicant, we may also consider a dispute against the ACR.  A key consideration will be whether the ACR was, in any event, the credit licensee’s agent at law.
Dispute about lender and mortgage manager (MM)
  • We will consider a dispute against the MM.
  • If the MM is not a member of an EDR scheme, but the lender is a FOS member, the dispute will be considered against thelender. The lender may appoint an agent (e.g. the MM) to deal with FOS on its behalf, in which case the file will remain in the name of the lender only and an agent authority/letter from the lender appointing the MM as agent will be required.
Dispute involving an assigned debt
  • If the dispute relates solely to the conduct of the original credit provider prior to the assignment of debt, and the assignee is no longer pursuing the debt as it has been repaid, we will consider the dispute against the original credit provider, who will be asked to respond to the issues raised by the applicant.
  • If a dispute relates solely to the assignee’s conduct (including debt collection practices, allocation of payments, etc.), we will consider the dispute against the assignee, who will be asked to respond to the issues raised by the applicant.
  • If the dispute relates to a request for assistance because of financial difficulty, we will consider the dispute against the assignee.
  • If the dispute relates to a combination of:
    1. an event which occurred prior to the assignment of the debt by the credit provider to the assignee (such as a claim of maladministration, a dispute about credit listing or a dispute about whether the debt was incurred by the applicant); and

    2. the assignee is continuing to pursue the applicant for the debt, then the dispute will be considered against the assignee.  The process for our investigation is outlined below.

 

Assigned debts

Our approach to disputes involving assigned debts has changed significantly from the approach taken before 2008.

Previously, disputes involving assigned debts were referred to the member whose conduct has been queried.  Accordingly, if the conduct of the original credit provider was in issue, such as a maladministration claim, the dispute would be referred to the credit provider.  If the conduct of the assignee was in question, such as debt collection activity, the dispute would be referred to the assignee.  If the conduct of both was in question, two cases would be created and referred off to both members.  If the dispute was only referred to the original credit provider, we would contact the assignee and advise them that a dispute has been lodged and we would require them to hold any recovery action until we reviewed the dispute against the original credit provider.

This approach has been significantly revised, as follows:

 

  • If a dispute is lodged about the conduct of the original credit provider and the debt has been assigned and the assignee is no longer pursuing the applicant (e.g. debt may have been repaid to stop further action), we will consider the dispute lodged against the original credit provider.
  • If the dispute relates solely to the conduct of the assignee (e.g. a claim of financial difficulty or a dispute about debt collection practices), we will consider and refer the dispute to the assignee.
  • If the dispute relates to a combination of:
    1. an event which occurred prior to the assignment of the debt by the credit provider (such as a claim of maladministration, a dispute about credit listings or a claim that the debt was not incurred by the applicant) and
    2. the assignee is continuing to pursue the debt, 
      the process will be as follows:
  • We will refer the dispute to the assignee.
  • The assignee will put a hold on debt collection activity, legal or enforcement proceedings in respect of the debt that forms part of the dispute.
  • The assignee may elect to
    • consider the dispute, including the issues raised against the original credit provider, or
    • refer the dispute to the original credit provider, in which case the assignee must undertake:
      1. to comply with our Terms of Reference and Operational Guidelines, notwithstanding that the assignee is not a party to the dispute, and accept any terms of settlement entered into between us, the applicant and the credit provider to address repayment of the debt; and
      2. to be bound by our decision on the merits of the dispute if the decision is accepted by the applicant; and
      3. not to pursue any legal or enforcement proceedings while our file remains open.

 

The assignee and the original credit provider need to decide how the dispute will progress.  Until the original credit provider confirms that it is taking carriage of the matter, the dispute will proceed against the assignee and the assignee will be expected to provide a response to all issues raised. This means the assignee is obliged to notify the original credit provider and forward all relevant correspondence received from us concerning the dispute.

When we receive confirmation that the original credit provider is to take carriage of the matter, we will transfer the dispute into the original credit provider’s name and it will be responsible for all case costs.

 

Impact on members

Members may be affected by the changes to our approach in a number of ways. They might need to develop systems to manage the disputes and the efficient exchange of information between members.

 

Assignees
Members that purchase assigned debts will now receive disputes requesting that they respond to the issues raised about the original credit provider’s conduct as well as their own.  If they wish to refer the dispute to the original credit provider to respond to us, they may do so but we will not record the dispute against the original credit provider until the original credit provider has confirmed in writing that it will take carriage of the matter.

Members that have purchased assigned debts will have to develop procedures to ensure that FOS correspondence about a dispute is referred when appropriate to the original credit provider. 

While there may be an agreement between the members as to costs, it is not a matter for FOS.  The member that the dispute is lodged against when the file is closed is the member that will be invoiced for the case cost. 

A dispute may be registered against the original credit provider if an applicant registers a dispute online.  But if the debt has been assigned and remains outstanding, we expect that the original credit provider will notify the assignee of the dispute.  If the matter remains unresolved and the applicant wishes to progress the dispute, we will lodge the dispute against the assignee in the Acceptance stage.  If the assignee has not been provided with the 45 day IDR period (or 21 day period if the dispute concerns postponement of enforcement action or financial difficulty) previously but the original credit provider has (through the Registration process), we will not require the dispute to be registered.  Instead we will accept the dispute and refer it to Case Management. 

 

Assignors (original credit provider)
While a dispute about an assignor’s conduct prior to selling a debt will not be referred to the assignor in the first instance, the assignor can expect that the assignee will seek to either return the debt to it so that it can respond to all issues, or ask for it to act on the assignee’s behalf and respond to all issues, including agreeing to an appropriate repayment arrangement with the applicant. 

If the assignor receives a Registration or Acceptance notification about a dispute where it is apparent the debt has been assigned, then it should refer the matter to the assignee that is responsible for the debt.  Alternatively, if the assignor wishes to repurchase the debt, this is a matter for the assignee and assignor to resolve.

If the assignee elects to consider the dispute about all the issues raised, including the original credit provider’s conduct, we would ask the assignor to respond promptly to the assignee’s request for information.  We may contact the assignor requesting that the information be provided to the assignee if we are aware that it is overdue.

 

Credit provider (loan managed by a mortgage manager)
If a member previously received disputes as the credit provider, it will no longer do so unless the mortgage manager is not a member of FOS or another external dispute resolution scheme.  In those circumstances, we will refer the dispute to the credit provider and require it to provide a response, which may include a claim about the conduct of the mortgage manager.

 

Mortgage manager
The mortgage manager for a loan facility will now receive disputes from us whether the dispute is lodged against it or the credit provider.

If a dispute is registered against the credit provider, but the mortgage manager manages the loan, we expect that the credit provider will notify the mortgage manager of the dispute.  If the matter remains unresolved and the applicant wishes to progress the dispute, we will lodge the dispute against the mortgage manager in the Acceptance stage.  If the mortgage manager has not been provided with the 45 day internal dispute resolution period (or 21 day period if the dispute concerns postponement of enforcement action or financial difficulty) previously but the credit provider has (through the Registration process), we will not require the dispute to be registered.  Instead we will accept the dispute and refer it to Case Management. 

A different process applies in the case of certain securitized loans,  please see the article in this Circular regarding the FOS and COSL agreement regarding handling of disputes.

 

Conclusion

We hope the procedures outlined above will assist in giving certainty to members and applicants about how a dispute will be processed.  If you have any queries, please do not hesitate to contact membership@fos.org.au.

 

 

INFORMATION FROM PARTIES TO DISPUTES

 

Over recent months, we have experienced an increasing tendency by parties to a dispute to claim confidentiality over the information they provide to FOS.  We provide this timely reminder about our Terms of Reference (TOR) and procedures regarding the provision of information, any request for confidentiality and the consequences of any fetter on our ability to exchange and rely upon information.


Dispute resolution and procedural fairness

Pursuant to paragraph 7 of the TOR, we may resolve a dispute by negotiation, conciliation or deciding the dispute in accordance with the process set out in paragraph 8.

We are not bound by any legal rule of evidence, but observe the principles of procedural fairness.  The basic principles of procedural fairness, as applied to FOS, are:

  • we will give a fair hearing to a person with sufficient interest in a decision, namely the Applicant and the Financial Services Provider (FSP)
  • we will not be, or appear to be, biased
  • there must be some information upon which the decision can be based.


Fair hearing and provision of information

To ensure that the parties to a dispute are given a fair hearing, we provide each party with:

  • sufficient opportunity to present their point of view
  • submissions made by the other party and relevant information (to allow the first party to respond to that material). 

 

Therefore, in the standard FOS dispute form completed by an Applicant and in our initial letters to each of the parties, we advise that, unless you tell us otherwise, we will assume you agree that the information supplied to FOS may be provided to the other party where we consider it is relevant.  The onus rests with the party providing information to identify information over which confidentiality is claimed.


Confidentiality of exchanged information

FOS operates on a “without prejudice” basis.  Information obtained by a party during the course of our dispute resolution process is confidential and cannot be relied upon in any subsequent court proceedings unless required by court order or rules. We consider that the full and frank exchange of information facilitated by the confidential circumstances in which the information is provided assists the parties in trying to resolve the dispute.  As the exchange of information benefits the parties in this way, we expect each of them to honour the confidential nature of the information they obtain.

 

Consequences of our inability to rely on information

Pursuant to paragraph 8.4 of the TOR, if we propose to rely upon information to form a decision about the merits of a dispute, we must, before making a decision, provide the parties with access to that information.  The party against whom that information may be used to form an adverse conclusion should have the opportunity to respond before we form a concluded view.

Paragraph 8.4c) provides:

“If a party to a Dispute refuses consent to provide information to another party to the Dispute, FOS is not entitled to use that information to reach a decision adverse to the party to whom confidential information is denied unless FOS determines that special circumstances apply.” 

When a party refuses to consent to information being provided to another party that would be adverse to the other party’s position, without special circumstances being established, we will return the information to that party and are unable to make reference to it to accept the party’s view on the issue in dispute.


Establishing “special circumstances”

Fairness is not generally served by reaching decisions which are adverse to one party on relevant information where that party has not had the opportunity to provide feedback or comment.  Therefore, we will only consider there are special circumstances in very limited situations, such as:

  • where the information may endanger a third party
  • where the information may harm or embarrass a party if released
  • where the information is commercially sensitive, or
  • if it is appropriate to delay the release of the information.

 

An FSP’s file will not be considered commercially sensitive even though it may contain information about the FSP’s assessment of the customer’s credit or insurance risk or creditworthiness.  Information may be treated as commercially sensitive if its disclosure would adversely affect the FSP’s business if obtained by a competitor. 

If a party does not consent to information it provides to FOS being given to the other party, it should:

  • clearly identify the information over which it claims confidentiality
  • explain why the information should not be disclosed to the other party, but still taken into account by FOS in considering the dispute, and
  • suggest a method by which the other party could respond to the content of the information provided without having access to it (such as responding to a de-identified or masked copy).

 

Note, “Private and Confidential”, “Without prejudice” or similar notations stamped or endorsed on a document is insufficient to establish “special circumstances” and we will exchange relevant information marked in this way as we consider appropriate without prior consultation with the party that provided it.

If we consider parts of documents provided may be sensitive, we may mask the sensitive information or refer to and rely on extracts of information which we do not consider to be sensitive or confidential.


Consequences of failure to provide information

Pursuant to paragraph 7.5 of the TOR, if a party fails to provide information without a reasonable excuse, FOS may draw an adverse inference that the information does not favour the party who has failed to provide it.  That is, we may conclude that, in the absence of the information, the party failing to provide the information may not succeed on the issue under consideration.  Alternatively, if an Applicant fails to provide requested information without a reasonable excuse, we may refuse to continue to consider the dispute.