FOS has summarised the new credit-related systemic issues that it identified during the December quarter of 2011 and reported to the Australian Securities and Investments Commission (ASIC):

Recovery from applicant of costs of dealing with FOS
Paragraph 1.1 of the FOS Terms of Reference states that the dispute resolution service provided by FOS is free of charge to applicants and is paid for by FSPs. ASIC Regulatory Guide 165: Licensing: Internal and external dispute resolution (RG 165) also affirms the principle that customers should not have to pay to use internal dispute resolution services.

An FSP acknowledged that, despite its policy providing that any costs incurred relating to accessing FOS must be borne by the FSP, it had identified instances where legal costs had erroneously been charged to a customer’s loan account.

In order to resolve the issue, FOS requested that all costs erroneously charged to the affected customers be refunded in full, together with interest payable at the relevant loan rate and that lawyers should produce separate invoices for legal costs relating to disputes lodged with FOS to reduce the likelihood of similar errors occurring in future.

Error in credit listing
FOS has handled a number of disputes in which the applicant alleged that the FSP had made default listings on its personal credit files for amounts that were not 60 days overdue. It appeared that the FSP was incorrectly listing amounts equivalent to the accelerated amount of the debt, thus depriving applicants of the opportunity to remedy the default prior to listings being made.

In addition, FOS had concerns about the adequacy of the default notice used by the FSP. The apparent faults included the inaccuracy of the amount in arrears, the FSP’s failure to warn applicants that the remaining loan balance was payable if they failed to rectify the default within 35 days and its failure to specify the amount of the remaining loan balance as required by the Credit Code . Further, the notice did not mention the possibility that a report could be made to a credit reporting agency or that a default listing might follow if payment was not made within a specified time.

FOS also had concerns that the FSP appeared to treat the remaining loan balance as payable 30 days from the date of its notice rather than the deemed delivery date in the ordinary course of post.