CIO Systemic issues update

The Credit and Investments Ombudsman recently discussed the work carried out by CIO’s Systemic Issue Investigations team during the October – December 2016 quarter.

The most prominent category of conduct investigated by CIO during the quarter was responsible lending. These investigations related mainly to the practices of small amount lenders and lease, hire or rental providers.

Common issues included failing to make inquiries regarding the consumers’ financial positions, inadequate verification steps and reliance upon benchmark expenses. CIO also investigated a large number of matters relating to misrepresentation or misleading conduct, unconscionable conduct, failure to act with due care, skill and diligence, and poor complaint handling processes.

The CIO’s recent reviews and recommendations include:

Case summary 15 November 2016 A

The consumers’ complaint concerned two cross-collateralised loans that the financial services provider (FSP) arranged for the consumers. CIO found that the FSP failed to arrange one of the loans in accordance with the consumers’ requirements and objectives. To remedy this, the consumers were required to refinance both loans given that the securities were cross-collateralised. CIO recommended that the FSP should reimburse the consumers for all reasonable costs that they incur to refinance the loans and pass on to the consumers any profit (including commissions) that the FSP had received from the lender in relation to both loans.

Case summary 15 November 2016 B

A consumer obtained goods from a store and entered a lease agreement which required him to repay the FSP over 36 months . The salesperson told him that there would be “no interest” charged to him under the contract. He later realised that he was required to pay a total of $11,810.46 for goods valued at $7,150. The FSP offered to cancel the consumer’s contract,  waive the debt and allow the consumer to return the goods. They also confirmed that there would be no default listing on the consumer’s credit reports. CIO found that the FSP’s offer was reasonable and recommended that the consumer accept the offer.

Case summary 15 November 2016 C

CIO found that a loan was fraudulently taken out in the consumer’s name. CIO recommended that the FSP should stop pursuing the consumer for the debt owing, remove any negative listings on the consumer’s credit reports, and bear the costs of repossessing the vehicle.

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