APRA releases prudential standards on governance

The Australian Prudential Regulation Authority (APRA) has released draft prudential standards and a discussion paper outlining proposed governance arrangements for authorised deposit-taking institutions (ADIs) such as banks, building societies and credit unions.

The objectives are to ensure that an ADI is well managed, has access to appropriate independent expertise, and gives due consideration to the impact of its decisions on depositors.

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Misleading mobile lending employment advertisement

In 2004 the ACCC alleged Wizard Home Loans Pty Ltd breached section 52 of the Trade Practices Act by placing advertisements for Mobile Lending Managers in newspapers in New South Wales, Victoria and Queensland which were liable to mislead people into believing the positions were employed positions when they were self-employment opportunities.

The ACCC further alleged that annual remuneration figures provided to the managers were likely to mislead.

The ACCC also took representative action seeking compensation on behalf of an individual who responded to an advertisement and accepted one of the positions.

Wizard Home Loans Pty Ltd has now agreed to compensate a candidate for a Mobile Lending Manager position after admitting that it engaged in misleading conduct. The Federal Court has ordered Wizard, by consent, to compensate Mr David Cassar who responded to an advertisement and accepted the position.

Wizard has admitted that it breached section 52 of the Trade Practices Act 1974 by making representations to Mr Cassar, in an interview, about a level of commission that a good performing mobile lending manager may earn when there were not reasonable grounds to do so.

Wizard has reviewed its recruitment practices. The court proceeding settlement provides for:

• a declaration that Wizard misled Mr Cassar in an interview for a position as a mobile lending manager with Wizard
• a compensation order for Wizard to pay a confidential sum to Mr Cassar representing lost earning opportunity, and
• costs.

In addition Wizard has agreed to give a section 87B undertaking to the ACCC that it will not, for a three year period, make representations to any mobile lending manager candidate about the annual commission that person may earn unless there are reasonable grounds, after considering:

• the average annual commissions earned by mobile lending managers at that time
• the average annual commissions earned by mobile lending managers engaged in the geographical area where that mobile lending manager will be or is engaged
• the level of residential sales and sale prices in the geographical area where that mobile lending manager will be or is engaged, and
• the number of mobile lending managers engaged at that time and to be engaged during the next 12 months in the same geographical area.

As part of this undertaking, Wizard will implement and maintain a trade practices compliance program for a period of three years designed to make Wizard personnel aware of their responsibilities and obligations with respect to section 52 of the Act in connection with the recruitment of mobile lending managers.

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