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HIH Royal Commission Report
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Justice Neville Owen has now presented his report on the failure of the HIH insurance group.

View the report in HTML

Read the Treasurer's response

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Credit Code Mandatory Comparison Rates-
Statements of Enforcement Policy
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SCOCA has issued 7 Statements of Enforcement Policy intended to clarify a number of issues in relation to the Consumer Credit Code comparison rates provisions which come into effect on 1 July 2003. They indicate the enforcement approach that will be adopted by government consumer agencies in relation to these issues.

The policies are as follows:

* If a Government agency to which a fee or charge must be paid deals with the public only through a contracted service provider, any service charges paid to this service provider should be considered to be a government fee or charge for the purposes of the comparison rate formula.

* Where a credit provider offers credit for any of the prescribed amounts which have 25 year terms, but the credit provider only offers that amount for a term of less than 25 years and for purposes other than a home loan, the comparison rate schedule should provide a comparison rate which is based on the term for which that amount of credit is actually offered rather than the 25 year term. The schedule should state the term for which the comparison rate is calculated.

* Comparison rate schedules for consumer credit products which are priced for risk should, for each of relevant prescribed amounts and terms, provide five comparison rates. These should be calculated on the basis of the average annual percentage rate which is charged by the credit provider, rounded to the nearest whole number, and for two whole number rates above and below the average rate. The schedules should clearly indicate the annual percentage rate, amount and term which correspond to each comparison rate.

* Comparison rate schedules are permitted to indicate whether comparison rates are for secured or unsecured loans for loan amounts other than the amounts which are prescribed by section 33E of the Consumer Credit Amendment Regulation (No. 1) 2003.

* Comparison rate schedules are not notices provided under the Consumer Credit Code.

* Where there is no uncertainty over whether a consumer will be charged a valuation fee, but the exact amount of the fee is not known at the time a comparison rate is disclosed, a reasonable estimate of the likely valuation fee is to be included for the purposes of calculating the comparison rate.

* Credit advertisements which are on radio may provide a warning in spoken form, and credit advertisements which are on television, the Internet or other electronic display medium should comply with section 146I of the Consumer Credit (Queensland) Amendment Act 2002 rather than section 33C(1) of the Consumer Credit Amendment Regulation (No. 1) 2003.

Read the full text of the Statements of Enforcement Policy

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ASIC releases results of code monitoring report
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The Australian Securities and Investments Commission (ASIC) has released its annual monitoring report on compliance with the Banking, Credit Union and Building Society Codes of Practice and the Electronic Funds Transfer (EFT) Code.

The codes are voluntary but almost all Australian financial institutions have signed up to the codes that are relevant to them, and are bound by their provisions. The report covers the period from April 2001 to March 2002.

'While there's been a steep increase in the number of transactions covered by the codes, the overall incidence of complaints remained low', ASIC's Deputy Executive Director of Consumer Protection, Ms Delia Rickard said.

'Complaints under the Banking Code of Conduct decreased from 3.28 per million transactions in the 2000/2001 reporting period to 2.17 in this one - at the same time, the number of banking transactions rose by roughly 500 million to 4,334 million. The majority of disputes dealt with internally were resolved in favour of the customer (48%) or by mutual agreement (13%)'.

Cmplaints under the Credit Union Code increased while still small in number (2524) when compared to the total number of transactions (438,848,061), they rose from 3.8 per million in the last period to 5.8 per million in the current period. Of these however, 64% were resolved within the credit union in the customer's favour, and 7.5% by mutual agreement.

There was a smaller increase under the Building Society Code from 1.2 to 1.7 per million transactions, with 55.2% resolved internally in favour of the customer, and 13% by mutual consent', Ms Rickard said

'The largest number of disputes under the banking and credit union codes related to EFT (PIN)-based transactions. Other common complaint categories were fees and charges, account debiting and crediting, and service delivery.'

The EFT Code of Conduct, as it applied at the time the monitoring period relates to, sets out the rules for allocating liability for disputed ATM and EFTPOS transactions.

In the period under review, the overall number of complaints under the EFT code increased from 121,434 in 2000/2001 to 132,517 in 2001/02. This corresponded with an increase of 140 million in the number of ATM and EFTPOS transactions performed by Australians, to over 1,640 million transactions.

The rate of complaints per million transactions remained constant at 81 complaints per million transactions. However, there was a marked change in the breakdown of these complaints:

complaints about system malfunction rose by 18.6% to 97,047 (76% of these complaints were resolved in favour of the card holder);
complaints about unauthorised transactions fell by 6.2% to 23,978 or 14 per million transactions. Of these, the customer was found liable in 57 per cent of cases, or in 8 transactions per million; and
there was a 32% decrease in complaints relating to areas such as confusion over the merchant name or processing date or double debit complaints. These fell to 11,493, of which 78% were resolved in favour of the card issuer.

'Pleasingly, this was the second year in a row that we've seen a reduction in complaints about unauthorised transactions. The most common explanation for these transactions continues to be cardholders being careless with their PIN.

'Keeping your PIN a secret is the best way to protect yourself from unauthorised transactions. We all know you should never tell anyone your secret PIN or code – even a friend or family member, You should also never record it on your card or on anything you keep near your card', Ms Rickard said.

The unauthorised transaction cases under the Code are categorised under a number of different causes. An area of concern was the increase in the number of unauthorised transaction cases where cards were forged, faulty, expired or cancelled. The number of such cases where the card issuers was liable, accounted for less than one percent (33) of the total complaints in the 2000/2001 monitoring period, but jumped to 334 instances in the current review (4.2%)'.

It should be noted that consumers now have greater protection for the electronic banking transactions than they did at the time the monitoring report relates to.

A revised EFT Code of Conduct came into force on 1 April 2002, and extended the coverage of the code from the ATM and EFTPOS transactions mentioned in the monitoring report, to include all forms of electronic funds transfers, including internet, mobile phone and telephone banking and stored value products such as prepaid telephone cards.

Download a copy of the report

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