Tag: ASIC

Proposed Financial Institutions Supervisory Levies For 2016-7

The financial industry levies are set to recover the operational costs of APRA and other specific costs incurred by certain Commonwealth agencies and departments, including the Australian Securities and Investments Commission, the Australian Taxation Office, and the Department of Human Services. ASIC gets a 150% uplift, reflecting the requirement for greater supervision of across financial services.

The Treasury has released a paper, prepared in conjunction with the Australian Prudential Regulation Authority (APRA), seeking submissions on the proposed financial institutions supervisory levies that will apply for the 2016-17 financial year by  Friday, 3 June 2016.

LeveyHere they are itemised by industry segment.

Levey1Australian Securities and Investments Commission component

A component of the levies is collected to partially offset ASIC’s regulatory costs in relation to consumer protection, financial literacy, regulatory and enforcement activities relating to the products and services of APRA regulated institutions as well as the operation of the Superannuation Complaints Tribunal (SCT). In addition, the levies are used to offset the cost of a number of Government initiatives including the over the counter (OTC) derivatives market supervision reforms and ASIC’s MoneySmart programmes.

$70.4 million will be recovered to offset ASIC regulatory costs through the levies in 2016-17. This amount is 150.1 per cent more than in 2015-16 as a consequence of the Government’s decisions to provide funding to the SCT to deal with legacy complaints and improve processes and infrastructure ($5.2 million) and to bolster ASIC to protect Australian consumers ($37.0 million).

As part of the improving outcomes in financial services package, the Government will:

  • invest $61.1 million over four years to enhance ASIC’s data analytics and surveillance capabilities as well as modernise ASIC’s data management systems;
  • provide ASIC with $57.0 million over four years to enable increased surveillance and enforcement in the areas of financial advice, responsible lending, life insurance and breach reporting; and
  • accelerate the implementation of a number of key measures recommended by the Financial System Inquiry.

From 2017-18 onwards, ASIC’s regulatory costs will be recovered from all industry sectors regulated by ASIC. The Government will consult extensively with industry to refine and settle an industry funding model for ASIC.

Australian Taxation Office component

Funding from the levies collected from the superannuation industry includes a component to cover the ATO’s regulatory costs in administering the Superannuation Lost Member Register (LMR) and Unclaimed Superannuation Money (USM) frameworks. In 2016-17, it is estimated that the total cost to the ATO in undertaking these functions will be $17.8 million, with the full amount to be recovered through the levies in line with the requirements of the Government’s Charging Framework.

The majority of this funding supports the ATO’s activities, which include:

  • the implementation of strategies to reunite individuals with lost and unclaimed superannuation money including promotion of the ATO On Line Individuals Portal and targeted SMS/e mail campaigns;
  • working collaboratively with funds to engage members being reunited with their super, including Super Match and providing funds with updated contact information about their lost members;
  • processing of lodgements, statements and other associated account activities;
  • processing of claims and payments, including the recovery of overpayments;reviewing and improving the integrity of data on the LMR and in the USM system; and
  • reviewing and improving data matching techniques, which facilitates the display of lost and unclaimed accounts on the ATO On Line Individuals Portal.

The funding also supports the ongoing upkeep and enhancement of the ATO’s administrative system for USM frameworks and the LMR, and for continued work to improve efficiency and automate processing where applicable.

Department of Human Services component

The Department of Human Services administers the Early Release of Superannuation Benefits on Compassionate Grounds programme (ERSB). The compassionate grounds enable the Regulator (the Chief Executive of Medicare) to consider the early release of a person’s preserved superannuation in specified circumstances.

The volume of ERSB applications has significantly increased since it was made possible to apply online. In 2015-16, the ERSB received 27,688 applications. This was a 44 per cent increase compared with the previous year. In 2016-17, the ERSB is forecast to receive approximately 38,763 applications. This will represent an approximate increase in volume of 40 per cent compared with the previous year.

The programme is expected to cost the Government $4.8 million in 2016-17. In line with the Government’s Charging Framework, this amount will be recovered in full through the levies.

SuperStream component

Announced as part of the former Government’s Stronger Super reforms, SuperStream is a collection of measures that are designed to deliver greater efficiency in back-office processing across the superannuation industry. Superannuation funds will benefit from standardised and simplified data and payment administration processes when dealing with employers and other funds and from easier matching and consolidation of superannuation accounts. The costs associated with the implementation of the SuperStream measures are to be collected as part of the levies on superannuation funds. The levies will recover the full cost of the implementation of the SuperStream reforms and are to be imposed as a temporary levy on APRA-regulated superannuation entities from 2012-13 to 2017-18 inclusive.

The costs associated with the implementation of the SuperStream reforms are estimated to be $35.5 million in 2016-17 and $32.0 million in 2017-18.

ASIC’s Innovation Hub: Regulatory sandbox proposal

ASIC today provided a further update on its Innovation Hub. ASIC’s Innovation Hub has now been operating for just over a year and is continuing to assist financial technology (fintech) start-ups navigate the regulatory framework.

See the Background section of this release for an overview of the Innovation Hub activity, which involves a comprehensive program of engagement with industry initiatives, providing tailored guidance and a significant range of support measures.

Commissioner John Price said that, ‘ASIC will continue to prioritise assistance to fintech start-ups to promote market efficiencies and benefits for consumers and investors. We will build on our first year’s Innovation Hub experience with a variety of initiatives.’

In June, ASIC will issue a public consultation paper on a proposed regulatory sandbox licensing exemption and other measures. Important features of the proposals are set out below but will be described in detail in the consultation paper.

‘This consultation paper will seek feedback on additional steps that ASIC may take to facilitate fintech innovation while maintaining protections to ensure investor and consumer trust and confidence’.  Mr Price said.

‘ASIC’s consultation proposals have been prepared after input from representatives of the fintech industry (including ASIC’s Digital Finance Advisory Committee and the Treasurer’s FinTech advisory group)’, he added.

Consultation paper – additional steps to facilitate fintech innovation

In ASIC’s upcoming Consultation Paper, we will seek feedback on proposals to provide:

  • greater clarity and guidance on how we assess whether new businesses have the skills and experience required to be granted a licence from ASIC (especially where that business seeks to rely on Option 5 in Regulatory Guide 105 Licensing: Organisational competence);
  • additional flexibility around the skills and experience requirements –  including whether some licensees with restricted authorisations should be able to rely more on appropriate third parties to show they have the ‘organisational competence’ required to be granted a licence; and
  • a class-wide licensing waiver for new businesses to run early-stage tests and trials (the ‘regulatory sandbox exemption’).

Important features of the regulatory sandbox exemption to be consulted on will include:

  • a six-month window for testing of certain financial services conducted without the need for a licence;
  • restrictions on the types of services that can be provided in a testing capacity and the products those services can relate to (for example, advice and dealing in relation to liquid investments);
  • an ability for sophisticated investors to participate, along with a limited number of retail clients (e.g. up to 100 retail clients), as well as separate monetary exposure limits for those clients;
  • consumer protections, such as membership of an external dispute resolution scheme and adequate compensation arrangements that should apply; and
  • modified conduct and disclosure obligations that will apply to the testing business.

“ASIC anticipates that the proposed regulatory sandbox exemption may bring better financial services to market quicker while being mindful of consumer protection concerns,” Mr Price said.

Background: ASIC’s Innovation Hub (what have we done to date)

The Innovation Hub has five elements:

  1. Engagement with other fintech initiatives, including physical hubs and co-working spaces for startups. ASIC has had over a 100 meetings with stakeholders (including existing licensees) and presented at a range of fintech ‘meetups’ including recently with four other regulators.

  2. Informal assistance – ASIC helps new businesses consider the important regulatory issues. Eligible businesses can request guidance from ASIC through our website (innovationhub@asic.gov.au). ASIC has worked with over 80 entities, including 55 that have requested assistance from ASIC. Of these, 14 have now been granted a new licence to operate a financial services or credit business.

  3. A dedicated website – the ‘Innovation Hub’ webpages provide tailored guidance and signposts for innovative businesses to access information and services targeted at them.

  4. Coordination – ASIC has established an overarching senior internal taskforce to coordinate our work on new business models. The taskforce draws together dispersed knowledge and skills from across ASIC. This taskforce is complemented by internal working groups on automated financial advice (roboadvice), digital marketplace lending, equity crowdfunding and blockchain technology.

  5. Establishment of the Digital Finance Advisory Committee (DFAC) to provide ASIC with advice on its efforts in this area. DFAC is about to have its fourth quarterly meeting. Members of DFAC are drawn from across the fintech community, as well as academia and consumer backgrounds. Other financial regulators are observers on DFAC.

Morrison warns banks not to pass on new ‘user-pays’ impost to finance ASIC reform

From The Conversation.

Treasurer Scott Morrison has warned Australian banks not to pass on to customers the $121 million user-pays charge imposed on them to finance a strengthened Australian Securities and Investments Commission (ASIC).

The banks will pay for almost all the $127 million four-year package, which the government hopes will take the sting out of Labor’s promise that it would set up a royal commission.

But Opposition Leader Bill Shorten said the issues were not just matters of the law but the culture.

The government will provide $61.1 million to boost ASIC’s technology to boost its surveillance capabilities. “In the 21st century economy, you need a tech cop on the beat,” Morrison said.

Another $9.2 million will go to ASIC and Treasury to ensure they can implement appropriate law and regulatory reform.

ASIC will get a further $57 million for the ongoing cost of increased surveillance and enforcement in the areas of financial advice, responsible lending, life insurance and breach reporting.

The measures follow a capability review of ASIC initiated by the government in July.

Among other changes, an extra ASIC commissioner will be appointed with experience in the prosecution of crimes in the financial services industry.

The government is accelerating the implementation of recommendations from the Murray review of the financial system for increased penalties and greater powers for ASIC to intervene on financial products.

ASIC’s employment practices will be exempted from the public service act, so it can recruit from the market people with experience in the sector.

The government will recommend that the financial services ombudsman changes its thresholds to provide greater access for treatment of claims and compliance.

An “eminent panel” will examine bringing together forums to have a “one stop shop” for consumer complaints.

Morrison told a joint news conference with Assistant Treasurer Kelly O’Dwyer that the banks would pay an additional $121 million to increase the resources of ASIC.

ASIC would also be moved to a full user-pays funding model. “No longer will it be the case that taxpayers will be hit to fund this regulator, this enforcement authority, this cop on the beat. Those whom it’s enforcing the regulations and rules on, will pay the price for that,” he said.

Asked whether the banks would not just pass on the impost in higher fees and charges, Morrison said the levies were “easily digestible by the banks”. He would be “furious” if the banks sought to pass the cost on and they had that message from him.

The term of ASIC chairman Greg Medcraft, which is expiring, has been extended – but only for 18 months to oversee the implementation of the reforms.

Making his pitch for reforming ASIC rather than having a royal commission, Morrison said: “What I have outlined today is a serious action plan. … This is what practical, effective targeted government looks like and that’s how we are responding to these issues of real concerns to Australians.”

He said Shorten “wants to spend your money to fund his political exercise which won’t get outcomes for people – it will just get a political outcome for Bill Shorten”.

O’Dwyer denied that the government previously tried to wind back consumer protections in the financial sector. “That’s simply not correct,” she said.

The Abbott government introduced regulations to water down the Labor government’s Future of Financial Advice (FOFA) reforms. But later these were disallowed by the Senate.

Shadow treasurer Chris Bowen said the package was “nothing more a political fix” to try to avoid a royal commission. “It’s a plan to hobble through an election.”

Responding to the government’s announcement Westpac said “The measures announced today by the government will play an important role in ensuring customers can be confident in our banking system.

“In line with our submission to the financial system inquiry, Westpac supports a user pays model for ASIC.”

Australian Bankers’ Association chief executive Steven Münchenberg said: “We support the introduction of a new industry funding model for ASIC” adding that it was “important that contributions are transparent and that the amount of fees levied matches the level of regulation and resources required for ASIC”.

He said that the banking industry supported, in principle, the product intervention power for ASIC to bolster consumer protections. “However, we need to be wary of any action that may have unintended consequences and adversely impact on product innovation or consumer choice.”

Author: Michelle Grattan, Professorial Fellow, University of Canberra

ASIC welcomes significant reforms

ASIC today welcomed the Government’s announcement of major additional funding for the regulator.

‘This will enable further surveillance and enforcement in areas such as financial planning, responsible lending, life insurance, and misconduct and breach reporting. It will also allow us to build our technological capacity to identify and assess risks and misconduct,’ said ASIC Chairman Greg Medcraft.

ASIC welcomed the Government’s support for the introduction of an Industry Funding Model.

‘ASIC has long believed that those who generate the need for regulation should pay for it,’ Mr Medcraft said.

‘ASIC has worked with Treasury to consult with industry and we look forward to continued engagement with those we regulate to see Industry Funding work well.’

ASIC also welcomed the Government’s response to the Capability Review. ASIC has provided an official response to the Capability Review which sets out the positive actions ASIC is already taking or will take to develop its capabilities in areas such as governance, culture and communication.

‘The Capability Review provided ASIC with the opportunity to consider the capabilities we need for the future to ensure trust and confidence in the markets we regulate and to deliver improved market outcomes for the Australian community. We thank the panel for its findings, observations and recommendations,’ Mr Medcraft said.

ASIC also noted the Government’s commitment to ensuring the key recommendations from the Financial System Inquiry are implemented as a matter of priority.

‘We will work with the Government and Treasury to make sure the regulatory framework allows ASIC to most effectively address market misconduct and contains the appropriate incentives for firms to put their customers first.

‘I also welcome the Government’s appointment of an additional commissioner for ASIC.’

On the 18-month extension to his term, Mr Medcraft said, ‘I welcome the Minister’s extension to my term as chairman.

It is an honour to be ASIC chairman and to work alongside the outstanding men and women employed here. We have a lot of important work to continue and I am keen to get on with the job.’

FactCheck: does ASIC already have the powers of a royal commission and more?

From The Conversation.

ASIC has the powers of a royal commission and, in fact, it has greater powers than a royal commission. – Treasurer Scott Morrison, speaking to reporters, April 8, 2016.

Opposition Leader Bill Shorten has promised to set up a royal commission into misconduct in the banking and financial services industry if elected.

Treasurer Scott Morrison has said that Australia’s banking system is already well regulated and that the Australian Securities and Investments Commission (ASIC) has all the powers of a royal commission and more.

Shadow Treasurer Chris Bowen said that a royal commission has a far broader reach than ASIC.

Who is right?

The answer is: it’s complicated. It depends on what it is you hope to achieve.

What the government said

The government and the opposition have been trading media releases on this issue.

A press release issued by Morrison outlined the relative powers of a royal commission, and ASIC. It is reproduced below:

Media release from Treasurer Scott Morrison. Media release from the federal treasurer Scott Morrison.

In addition to the above, ASIC can impose penalties, liability to pay compensation and management banning orders.

It is true ASIC does have very broad powers, but investigations typically centre around a specific suspected breach of the law.

If the aim is to investigate the banking industry as a whole – issues like ethics, culture and whether regulators have done a good job – then a royal commission would have broader scope to do this.

However, unlike ASIC, a royal commission cannot initiate civil, civil penalty or criminal proceedings. It must instead refer instances of suspected wrongdoing to relevant regulatory bodies, such as ASIC and the Director of Public Prosecutions.

What the opposition said

Shadow Treasurer Chris Bowen has said a royal commission could go further than ASIC. In a press release, he said:

A royal commission has the power to hold public and private hearings, to use search warrants, to compel the production of documents and to call witnesses from a wider pool than an individual investigation of the kind ASIC normally runs.

Critically, the royal commission will be set up to examine the entire system, including the broader context and causes of individual cases of misconduct and how these systemic issues can be addressed.

The royal commission will also examine whether Australia’s regulators are equipped to identify and prevent illegal and unethical behaviour, especially important in the context of the Liberals’ A$120 million cuts to ASIC. Clearly, ASIC cannot examine their own capacity in the way a royal commission can.

What Bowen is describing here is a much wider look at banking than ASIC would normally take.

A royal commission’s terms of reference are set by the government and can be as broad or as narrow as the government wishes. A royal commission might investigate how a particular catastrophic event occurred – such as the collapse of HIH. A royal commission might also be set up to investigate broader, systemic problems such as institutional child abuse.

The Royal Commissions Act gives royal commissions strong coercive powers, including the power to summon witnesses to give evidence under oath, compel the production of documents and apply for a search warrant.

What can ASIC do?

ASIC’s main role is to monitor compliance with a range of corporate and financial laws. There are two ways ASIC might look into the performance of banks.

First, ASIC can conduct an investigation either on its own initiative or following a direction from the minister. An investigation can only relate to certain matters specified in the ASIC Act – mainly isolated instances of suspected illegal activity or a need to monitor compliance with the law. An investigation must be conducted in private.

Alternatively, ASIC can conduct a hearing, which can be either public or private depending on the circumstances. The hearing has to be “for the purposes of the performance or exercise of any of ASIC’s functions or powers”.

Again, it’s not a blank cheque to review the performance of an industry, and in practice seems to be used for individual cases such as licensing matters, or disqualifying directors. The minister is not able to direct ASIC to conduct a hearing.

For both an investigation and a hearing, ASIC can require witnesses to attend and give evidence on oath, compel the production of documents and apply for a search warrant.

What can APRA do?

Another player in the game is the Australian Prudential Regulation Authority (APRA), which regulates financial service providers like banks, superannuation funds and insurance companies.

Unlike ASIC, its activities focus on supervision of financial service providers and encouragement of good practice, rather than enforcement of rules.

However, like ASIC, it has extensive powers to require people, banks and other corporations to provide documents and information. While most of APRA’s activities focus on actual or potential failings of specific institutions, it also has a role in conducting broader assessments of the state of financial industries.

So who’s right?

A lot of this is bickering about technical details. Both a royal commission and ASIC can require a person to give evidence, on pain of imprisonment – that’s a strong coercive power.

And it is true ASIC can prosecute and a royal commission can’t – but a royal commission can refer suspected offences to the Director of Public Prosecutions, who can prosecute them.

Morrison is correct that the Australian banking industry is regulated by bodies with significant investigative powers, including some powers that a royal commission would not have – such as the power to initiate civil and criminal proceedings on its own.

But Bowen is also correct that a royal commission could have the ability to conduct a broader inquiry than APRA and ASIC. Those bodies generally deal with individual cases rather than systemic problems.

If Labor’s position is that the regulatory system itself (as opposed to the actions of individual banks) is at fault, there are obvious limitations in giving the existing regulatory bodies the task of overhauling the system. It is a bit like asking someone to check their own homework. There has already been a significant recent Senate inquiry into ASIC’s performance, but few of its recommendations have been implemented.

In other words, the parties are talking at cross purposes.

Verdict

Both Morrison and Bowen’s specific claims about the respective powers of ASIC, APRA and a royal commission are correct. However, the central question is: power to do what?

If the aim is to investigate and prosecute specific instances of suspected breaches, ASIC is well equipped to do this on its own in a way that a royal commission could not.

If the aim is to examine the industry and system as a whole, a royal commission would have broader scope to do this. – Anna Olijnyk

Review

This is a sound article that seeks to present a balanced view of both sides of the argument.

I would add one important point. While it is true a royal commission can refer suspected offences to the Director of Public Prosecutions who can prosecute, the evidence is that criminal prosecutions rarely result from the recommendations made by royal commissions or parliamentary inquiries.

Take, for example, the Cole Inquiry, which was set up in 2006 to investigate more than $US 200 million paid in kickbacks to Iraq in contravention of the UN Oil-for-Food Program by the now defunct government-owned corporation, the Australian Wheat Board (AWB).

That particular royal commission found that there were circumstances which could give rise to criminal proceedings against AWB and various people – but no criminal action was ever pursued.

ASIC only instituted civil penalty proceedings against six former directors and officers of AWB relating to directors’ duties.

Similarly, a Special Commission of Inquiry relating to the James Hardie asbestos scandal recommended that criminal proceedings be brought against certain people. However, ASIC and the Director of Public Prosecutions did not take any criminal action and launched only civil penalty proceedings. – Vicky Comino

Author: Anna Olijnyk, Lecturer, Adelaide Law School, University of Adelaide
Reviewer: Vicky Comino, Lecturer in Corporations Law and Regulation of Corporate Misconduct, The University of Queensland

 

ASIC commences civil penalty proceedings against Westpac for BBSW conduct

ASIC says it has today commenced legal proceedings in the Federal Court in Melbourne against Westpac Banking Corporation (Westpac) for unconscionable conduct and market manipulation in relation to Westpac’s involvement in setting the bank bill swap reference rate (BBSW) in the period 6 April 2010 and 6 June 2012.

The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association (AFMA). On 27 September 2013, AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to occurred before the change in methodology.

It is alleged that Westpac traded in a manner intended to create an artificial price for bank bills on 16 occasions during the period of 6 April 2010 and 6 June 2012.

ASIC alleges that on these days Westpac had a large number of products which were priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower. ASIC alleges that Westpac was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to Westpac’s.

ASIC is seeking declarations that Westpac contravened s.12CA, s.12CB and the former s.12CC of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), s.912A(1), s.1041A  of the Corporations Act 2001 (Cth) (Corporations Act).

Further, ASIC has sought from the court pecuniary penalties against Westpac and an order requiring Westpac to implement a compliance program.

ASIC will be making no further comment at this time.

Background

On 4 March 2016, ASIC commenced legal proceedings in the Federal Court against the Australia and New Zealand Banking Group (ANZ) (refer: 16-060MR).

Prior to filing against ANZ, ASIC’s investigations into misconduct in the BBSW has seen ASIC accept enforceable undertakings from UBS-AG, BNP Paribas and the Royal Bank of Scotland (refer: 13-366MR, 14-014MR, 14-169MR). The institutions also made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.

In July 2015, ASIC published Report 440, which addresses the potential manipulation of financial benchmarks and related conduct issues.

Former mortgage broker admits home loan fraud

According to ASIC, Ms Emma Feduniw (also known as Emma Khalil) of Brisbane, Queensland, a former mortgage broker with AHL Investments Pty Ltd (trading as Aussie), has admitted through her solicitor to eight charges brought by ASIC. The charges related to the falsification of employment documents to secure approvals for home loans, submitted to Westpac.

ASIC’s investigation found that between March 2013 and February 2014, Ms Feduniw submitted eight loan applications, totalling $2,720,400, containing false borrower employment letters. Of the eight loan applications, five were approved and disbursed, totalling $1,608,400. Ms Feduniw received commission on those five loans of $6,847.53.

The eight loan applications ranged in value from $250,000 to $480,000.

Ms Feduniw appeared before Beenleigh’s Magistrates Court and through her solicitor admitted to providing documents knowing they were false or misleading.

ASIC Deputy Chairman Peter Kell said, ‘The credit laws are designed to ensure borrowers do not take out loans they cannot afford. Actions by mortgage brokers to circumvent the laws, for their own financial benefit, erode trust and confidence in the mortgage broking industry and will not be tolerated’.

Ms Feduniw next appears in court on 3 June 2016 for sentencing.

The Commonwealth Director of Public Prosecutions (CDPP) is prosecuting the matter.

Background

Ms Feduniw was authorised to provide credit services as a credit representative to consumers from 1 July 2010 to 4 April 2014, when Aussie terminated her authorisation.

Ms Feduniw received her commission through Miga Loans Pty Ltd (ACN 106 962 467) a company controlled and owned by her.

Ms Feduniw was charged by ASIC under section 160D of the National Consumer Credit Protection Act 2009 whilst she was engaging in credit activity on behalf of Aussie. Section 160D makes it an offence for a person engaging in credit activities to give false or misleading information or documents to another person. She appeared in Court and pleaded guilty to the charges on 1 April 2016.

Ms Feduniw faces a maximum penalty of two years imprisonment or a fine, for each charge.

ANZ to refund $5 million to basic account holders – ASIC

ASIC says Australia and New Zealand Banking Group (ANZ) is refunding around 25,000 customers approximately $5 million after it failed to properly apply some fee reductions and fee waivers for customers who held an ANZ Access Basic account and who also held an ANZ consumer credit card or ANZ Everyday Visa Debit Card since 2007.

The fees included over limit and late payment fees on consumer credit cards and overdrawn fees on Everyday Visa Debit cards.

The refunds to affected customers also include an additional amount of interest. Some customers’ refunds include a component to cover the overpayment of credit card insurance premiums resulting from the impact of these errors on their account balances.

The failure arose as a result of breakdowns in the interaction between automated and manual processes, and in particular, the lack of reliability of some manual processes and controls. ANZ has implemented a permanent automated solution with a system-based automated waiver, eliminating the need for manual intervention.

An Access Basic account is available to customers that meet certain criteria which include holding a Seniors Concession card, Pensioner Concession card, Centrelink Health Care card or a Repatriation Health card.

ASIC Deputy Chairman Peter Kell said, ‘ANZ’s Access Basic account is specifically designed for low income consumers who are unable to pay high fees. This matter highlights the importance of appropriately managing manual processes to apply fee waivers and discounts, and designing and maintaining robust systems to support such features’.

ANZ has commenced contacting affected customers to explain the error and the reimbursement and intends to complete the remediation process by the end of April 2016.

Customers with queries or concerns about this matter should contact ANZ on 13 13 14.

The matter was reported by ANZ to ASIC under its breach reporting obligations in the Corporations Act. ASIC acknowledges the cooperation of ANZ in its handling of this matter.

ASIC facilitates easier electronic disclosure under the ePayments Code

ASIC has today announced changes to the ePayments Code that will make it easier for businesses to give information to their customers in a digital form.

Under the changes, subscribers to the ePayments Code will be able to give information to their customers by making it available electronically and notifying the consumer. This follows similar changes ASIC made last year to the Corporations Act.

ASIC Deputy Chair Peter Kell said, ‘The changes mean that documents under the ePayments Code can be delivered to consumers digitally as the default option, unless the consumer opts out. This will reduce the costs of printing and mailing for businesses while preserving choice for those consumers who wish to receive paper.

‘Promoting the delivery of information in an electronic form is consistent with ASIC’s objectives, as well as the nature of payments governed by the Code.

‘ASIC encourages  industry to harness the opportunities of digitisation and to adopt the use of more engaging forms of communication  that can boost consumers’ understanding of financial services and products’, Mr Kell said

A summary of amendments made to the ePayments Code is available on the ASIC website.

Updated guidance on digital disclosure

ASIC has also released an updated version of Regulatory Guide 221 Facilitating digital financial services disclosure (RG 221). We have made minor changes to RG 221 that:

  • refer to our modification of the ePayments Code;
  • indicate that our general guidance on digital disclosure is also relevant to information given under the ePayments Code; and
  • update our guidance to include recent technical amendments we made to our relief under the Corporations Act.

Background

In July 2015, ASIC published RG 221 and two relief instruments under the Corporations Act (see 15-198MR). Among other things, this work facilitated the use of innovative digital disclosures by:

  • explaining our view that providers do not need ASIC relief in most instances to use clients’ electronic addresses for delivery of disclosures;
  • giving relief to create a new method of digital delivery under the Corporations Act enabling financial services providers to publish disclosures digitally and notify the client that it is available;
  • providing additional good practice guidance for digital disclosure (Appendix D of RG 221) to help ensure that clients continue to receive clear, concise and effective information when disclosures are delivered digitally and that consumer protections are retained in the digital environment.

Download

Payday lender Nimble to refund $1.5 million following ASIC probe

Following a significant ASIC investigation, payday lender Nimble Australia Pty Ltd (Nimble) will refund over 7,000 customers more than $1.5 million after ASIC had concerns that Nimble was failing to meet its responsible lending obligations.

ASIC identified significant deficiencies in Nimble’s compliance with the responsible lending laws when providing loans of short duration to consumers.

ASIC’s probe found that:

  • Nimble had not properly assessed the financial circumstances of many consumers before providing them with loans. Nimble relied on algorithms which did not properly take consumers’ financial information into account.
  • Nimble failed to consistently recognise where consumers had obtained repeat loans from payday lenders within a short period of time. Even where repeat loans were properly identified, Nimble did not take sufficient or appropriate steps as required by law before providing a loan to the consumer.
  • Nimble failed to make proper inquiries of consumers’ requirements and objectives, and inquiries that were made were of a general nature and resulted in not enough information for Nimble to fully understand the consumer’s needs.

‘This is a significant outcome for financially vulnerable consumers,’ said ASIC Deputy Chair Peter Kell.

‘This outcome is a further example of ASIC’s strong focus on the payday lending sector. This remains a high priority area for ASIC, and we expect the industry to continue to lift its game.’

As part of its undertaking to ASIC, Nimble is required to:

  • pay more than 7,000 consumers in excess of $1.5 million through a consumer remediation program overseen by Deloitte Touche Tohmatsu;
  • make a $50,000 contribution to Financial Counselling Australia; and
  • engage an independent external compliance consultant to review their current business operations and compliance with the consumer credit regime and report back to ASIC.

Consumers should expect to be contacted shortly as the remediation process must be completed within six months.

ASIC encourages all participants in the consumer credit industry to take note. All credit licensees need to consider the individual situation of each borrower. Further, automated processes need to be rigorously and continually tested to ensure that the licensee who uses them is complying with their responsible lending obligations.

Consumers who believe that they entered into an unsuitable loan with Nimble are encouraged to contact Nimble in the first instance. If they are not satisfied by Nimble’s response, consumers can lodge a complaint with the Credit and Investments Ombudsman. ASIC’s MoneySmart website has useful guidance on how payday loans work and alternative credit options.

ASIC acknowledges that Nimble has made significant changes to their system and processes since the ASIC investigation commenced.

Download the Enforceable Undertaking