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Systemic Issues Update

This article summarises systemic issues that we identified during the September quarter of 2011 and reported to ASIC.  It also provides an update on some current and recently resolved systemic issue investigations.

The Financial Ombudsman Service’s (FOS) systemic issues process is outlined in issue 4 of The Circular []. The process is used by FOS to handle the identification and resolution of Systemic Issues as required by its obligations to the Australian Securities and Investments Commission.

To learn more about the FOS approach to Systemic Issues Management, you can access our online training by clicking the following link:

New Definite Systemic Issues

Error in Credit Listings
A dispute was received in which it appeared that the financial services provider (FSP) had made default listings on a customer’s personal credit file for the accelerated amount of the debt, rather than the actual amount that was 60 days overdue. It was also noted that the Notices of Demand used by the FSP may not have been compliant with the requirements of the Uniform Consumer Credit Code which was in force at the time. We therefore referred the matter as potentially systemic to the FSP.

The FSP responded by acknowledging that it had made several listings in breach of the requirements of the Privacy Act 1988 (Cth) which it had rectified with the credit bureau. It advised FOS that, as a result of our investigation, it had commenced a process review in order to reduce the likelihood of similar breaches occurring in the future.  This process review included introducing amendments to its credit and collections policy and processes, as well as to its Notices of Demand.  The Ombudsman Banking and Finance reviewed the information provided and confirmed that, in his view, the matter represented a definite systemic issue.

Flood Disputes: Misleading IDR Definition
FOS received a number of disputes where the FSP had denied the applicants’ claims for water damage to home contents, on the basis that the applicable policy did not cover damage caused by flood. In its IDR responses to the customers the FSP made comments that we considered to be potentially misleading and inaccurate and could discourage a customer from complaining to FOS. The FSP also failed to inform the customer about the two- year timeframe for lodging a dispute with FOS.

The General Insurance Ombudsman confirmed that this was a definite systemic issue.


Some of the ongoing definite systemic issues investigated in the September quarter are summarised below.

Methodology and disclosure of break costs on fixed interest loans
A number of investigations into this issue remain on foot. Others have been resolved, resulting in the implementation of revised methodologies, the identification of affected customers and the reimbursement of any loss suffered by those customers.

Errors in credit listings and inaccurate credit file enquiries
One new definite systemic issue investigation commenced during this quarter relating to this issue. Furthermore, an investigation relating to this issue has been resolved, which has resulted in the removal of a large number of incorrectly made credit listings.

Claims handling processes and policy interpretation
General insurance claims arising from the recent floods highlighted these issues. A new definite systemic issue relating to IDR definitions is being investigated. An investigation of a previously identified issue has been resolved.

Policies for dealing with customers in financial difficulty
An FSP is continuing a complete review of its processes and procedures for dealing with customers in financial difficulty to ensure they comply with their obligations.  A number of issues relating to financial difficulty policies have been raised with other FSPs.