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Consumer Credit Code Update
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At the recent Credit Law conference Ian Clyde, the current chair of UCCCMC, announced that a draft Bill to amend the Code to deal clearly with electronic transacting issues is currently being prepared and is likely to be released for public comment around the end of the year. It is hoped that the amendments will take effect mid next year.

Ever since the Code came into operation there have been differing views as to the extent to which credit providers can transact with their customers electronically - eg whether account statements can be given electronically. Hopefully the proposed amendments will clarify the legal position.

Chris Batt, the former chair of UCCCMC, gave a presentation on Comparison Rates and later led a discussion group on the topic. I think it is fair to say that it is recognised that there are issues with the legislation, but it is too early to form a view as to whether the provisions are likely to be extended beyond their 'sunset' date, either at all or in some amended form.


Shannon Adams
Partner
Norman Waterhouse Lawyers
email: sadams@normans.com.au
website: http://www.normans.com.au

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Banking and Financial Services Ombudsman Annual Report
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The 2002/03 Annual Report of the Banking and Financial Services Ombudsman (BFSO) shows that the number of disputes referred to the Ombudsman has decreased for the first time in many years.

However the ombudsman Mr Neave said while the fall in disputes was pleasing, there was still cause for concern that banks often only responded to complaints after intervention by the Ombudsman's office.

"The number of cases dealt with by the Scheme in the year to 30 June 2003 shows that the number of new cases received declined by 13.3 per cent," Mr Neave said.

"This decline in disputes indicates that banks themselves are dealing more effectively with their customers and taking steps to avoid escalation of disputes which require assistance from our office.

"However, during the year in review BFSO officers still answered a total of 44,304 calls, and received a total of 6,930 written complaints.

"These figures clearly indicate that more work still needs to be done by the banks to promote their internal dispute resolution mechanisms.

Mr Neave said the Scheme is able to admit non-bank members but the Annual Report just released covers the performance of banks only.

"In August 2003 the members of the Scheme approved a major change to the constitution of the Australian Banking Industry Ombudsman Scheme to enable non-banks to become members," he said.

"The name has been changed to the Banking and Financial Services Ombudsman which reflects the broader potential membership base and the fact that most Scheme members see themselves as not only providing banking services but broader financial services."

"During the year in review a total of 5,074 cases were considered to be within the Terms of Reference. Of these 87 per cent were resolved promptly after referral to the bank, and without significant involvement by BFSO.

"Despite the overall reduction in the number of cases closed this year, the number of closed investigations was 733, only six fewer than last year."

Mr Neave said disputes about consumer finance (29%), housing finance (21%) and deposit accounts (18%) represented the majority of cases received by the Scheme during the year in review.

Download a copy of the Latest Annual Report

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Privacy and financial advisers
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Question: I am a financial adviser (authorised representative) acting for a dealer group ('A'). I am considering transferring to another dealer group ('B'). What are the key privacy obligations towards clients to whom I provide advice?

The Office of the Federal Privacy Commissioner has released a Frequently Asked Question (FAQ) regarding the privacy obligations that financial advisors have when they choose to transfer between financial dealer groups.

"Customers wishes must come first when financial advisers consider what to do with clients' personal information when the advisers move from one financial dealer group to another," said Federal Privacy Commissioner, Malcolm Crompton.

"It's very important to ensure that clients (the individual receiving advice) know what is happening with their personal information and that they are given a clear and up-front choice about what they want done with their personal information.

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ASIC commences new proceedings against Henry Kaye and National Investment Institute
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On 7 October the Federal Court of Australia gave directions in new proceedings brought by the Australian Securities and Investments Commission (ASIC) against Mr Henry Kaye and National Investment Institute Pty Ltd (NII).

Mr Kaye and MII are involved in running investment training courses, which purport to teach people various methods for increasing their wealth through investment in property. The courses, which comprise seminars, conferences, workshops and other training programs, also promote and provide information about investment in mezzanine finance products and cost between $4,000 and $55,000 to attend.

These proceedings arise from conduct by Mr Kaye and NII following ASIC's acceptance of an enforceable undertaking (EU) from Mr Kaye, NII, Novasource Consulting Pty Ltd and Mr Alan Meagher on 30 July 2003. Neither Novasource Consulting Pty Ltd nor Mr Meagher are parties to the new proceeding.

ASIC alleges that NII and Mr Kaye have breached the compensation provisions of the EU. These provisions provide for the payment of compensation to people who paid money to attend courses conducted by NII, as a result of having relied on statements that courses or products were approved by ASIC (the ASIC approval statement).

ASIC's concerns relate to allegations that the defendants told potential refund claimants that:

a refund can only be obtained under the compensation provisions of the EU if the claimant can prove that an ASIC approval statement (as defined in the EU) was the sole factor that induced him/her to enrol in the courses and seminars offered by NII;

a claimant for a refund under the compensation provisions of the EU will be required to swear an affidavit, produce supporting documentation and be cross-examined by a Queen's Counsel retained by NII, and will go to jail for any false statement;

that an ASIC approval statement only appeared in one brochure distributed by NII and was alleged by ASIC in the original proceeding to have been made by only one of NII's authorised representatives and on only one occasion;

the Court made a finding in the original proceeding that the original defendants had not done anything wrong;

ASIC subjected the defendants to a thorough audit which extended over a period of eight months; and

having completed that audit, ASIC found nothing wrong with the activities of the defendants and gave the defendants a "clean bill of health".

ASIC contends that each of these statements are misleading or deceptive, or likely to mislead and deceive potential claimants under the compensation provisions of the EU.

The defendants gave permanent undertakings to the Federal Court that they will not make any of these statements again.

ASIC is seeking declarations from the Court that in making these alleged statements or representations, the defendants have breached a number of sections in the ASIC Act, the Corporations Act and/or the Trade Practices Act.

ASIC is also seeking orders requiring the defendants to forward letters, in terms specified by the Court, to all potential refund claimants, and to place newspaper advertisements to correct the alleged false or misleading statements.

Further, ASIC is seeking orders about the management of the compensation process under the enforceable undertaking so as to ensure that all enquiries by claimants or potential claimants concerning the lodgement of claims and the claims process generally, are handled by an independent party (which the defendants will be required to engage), rather than by the defendants.

The Federal Court adjourned the hearing of the case until 2 December 2003.

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New Model Direct Marketing Code
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Telemarketers will be prohibited from cold calling on Sundays and national public holidays under amendments to the Direct Marketing Model Code of Conduct.

Direct marketers would also be prohibited from sending commercial e-mails to consumers without their consent unless they had an existing relationship with the consumer.

When contacting consumers, direct marketers will be required to:

identify themselves and the direct marketer they represent;

state their purpose, and if calling from outside Australia, identify the country;

not state that they are undertaking market research when their purpose is a commercial one; and

provide details of the source from which the consumer's personal information was obtained if a consumer requests this.

The changes are among 14 recommended by a working party of senior Australian and State government officers who reviewed the Model Code for the Ministerial Council on Consumer Affairs (MCCA) and expected to be adopted by the majority of direct marketers across Australia.

The Code was introduced in 1997 and adopted by the Australian Direct Marketing Association ADMA), which represents over 500 member organisations and reportedly covers more than 80 per cent of the industry.

The Model Code is a voluntary statement of best practice for the direct marketing industry.

Download the Review Paper and the new Direct Marketing Model Code of Practice

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