ASIC has taken action over the insurance sales practices of GE Money’s Hallmark companies and
the debt collection practices of the GE Money consumer credit
businesses.

Hallmark insurance advice licence conditions imposed

ASIC has imposed additional conditions on the Australian
financial services license (AFSL) of GE Money’s Hallmark General
Insurance Company Ltd and Hallmark Life Insurance Company Ltd after
those companies failed to comply with commitments each made in a 2006
Enforceable Undertaking (EU) to ASIC.

ASIC found that parts of the insurance advice and
sales business were often poorly managed and not meeting the legal
obligation requiring there be a ‘reasonable basis’ for personal advice
given to customers. Specifically, ASIC was concerned that staff were
selling insurance to customers whose needs had not been identified or
understood.

As the Hallmark companies did not comply
with a number of key undertakings given to ASIC in 2006, the regulator
decided  to impose conditions
on the AFSLs of GE Money’s Hallmark companies to replace  the 2006 EU.

These additional license conditions require the Hallmark companies:

• to engage an independent expert, over a period
  of up to 15 months, to review and assess the advice, sales, training,
  management and corporate governance processes in its branch network and
  make recommendations to correct any deficiencies, to ensure these
  processes are at an industry best practice level;
• to engage the same expert to assess the
  steps already taken by the Hallmark companies to compensate their
  customers and make recommendations as to any additional compensation
  steps that may be necessary;
• if the expert makes recommendations, to provide ASIC with an Action Plan to implement those recommendations; and
• to provide ASIC with full details of the
  compensation already paid to customers by means of a director’s
  statutory declaration, by 18 July 2008.

Furthermore, the Hallmark companies are now required
to limit the insurance advice their staff provide to ‘general advice’
only and not ‘personal advice’.

GE Money debt collection Enforceable Undertaking

Separate to the imposition of additional licence
conditions on the Hallmark companies, GE Money has entered into an EU
to address ASIC’s concerns about the debt collection practices of its
consumer credit business. This is in response to consumer complaints
about harassment from the debt collection practices of that business.
Those practices included excessive or inappropriate contact with
customers, contact at unreasonable hours and an inflexible approach to
repayment arrangements.

As part of this EU, the GE Money consumer credit business is required:

• to engage an independent expert, over a period
  of two years, to review and assess its debt collection processes to
  ensure that it complies with the ASIC/ACCC Debt Collection Guidelines
  and make recommendations to correct any deficiencies;
• if the expert makes recommendations for improvements, to provide ASIC with an Action Plan to implement those recommendations;
• to pay compensation to affected customers
  in accordance with guidelines prepared by the Banking and Financial
  Services Ombudsman; and
• to arrange and pay for an industry workshop to promote best practice in the debt collection industry.