The Financial Ombudsman Service has summarised in its latest Circular the new systemic issues that it identified during the December quarter of 2014 and reported to ASIC. The issues included:

Retention of documents

In one FOS dispute which related to a claim for irresponsible lending, the financial service provider (FSP) advised FOS that, because the disputed credit limit increases occurred more than five years earlier, it was unable to locate any information to clarify what steps, if any, it took to assess the customer’s ability to service the credit limit increase. This is the case where the credit limit increase application is in response to a credit limit increase invitation in particular.

FOS was concerned that the FSP’s practice does not appear to comply with its obligation to retain a record of all material that forms of the basis of an assessment for a period of seven years. FOS considered the FSP’s inability to provide financial or credit information that it relied upon five years after the date of the increase amounted to a definite systemic issue.

Conduct of employees/authorised representatives

A dispute raised concerns about the FSP’s oversight of a former authorised representative (AR). The AR assisted a customer in withdrawing portions of his superannuation despite him being under the preservation age and not entitled to make such a withdrawal. The customer was later investigated by the Australian Taxation Office (ATO) which levied penalties.

The AR had been banned by ASIC.

Following submissions about the AR’s conduct and the fact that a number of customers had been able to satisfactorily demonstrate that they were worse off as a result of obtaining early access to their superannuation, FOS considered that the matter represented a definite systemic issue. The FSP is required to contact all affected customers to advise them they are able to have their complaint considered individually and on their merits.

Processing error

A dispute illustrated that a customer continued to be charged monthly payments beyond the contracted period. The original contract had been provided by a dealer.

Further investigation to establish whether this issue had affected a wider class of customers demonstrated that the contract provided by the dealer at inception had been amended so that the original requirement for a customer to provide a 90 day notice period to the FSP had been deleted. The FSP had been unaware of the deletion and had therefore continued to charge the monthly rental beyond the expiry of the original term.

The matter was considered to be a definite systemic issue. The FSP reviewed all possibly affected contracts and identified similarly affected customers in order to refund their payments made in similar circumstances.