ASIC has published Report 513 ASIC enforcement outcomes: July to December 2016 (REP 513) detailing ASIC’s enforcement actions for the period 1 July to 31 December 2016 and its enforcement priorities for the next 6 months.
In the area of consumer credit ASIC highlighted that it issued 54 infringement notices for breaches of the consumer credit provisions, requiring payment of penalties totalling $1.8 million.
Those figures include Cash Converters’ infringement notice penalties of $1.35 million for its failure to make reasonable inquiries into consumers’ income and expenses when processing small amount credit contracts through its website, particularly when the loan was unsuitable under the National Credit Act. ASIC was also concerned that Cash Converters did not take reasonable steps to verify consumers’ expenses in accordance with its responsible lending obligations, instead only applying an internally generated benchmark with no relationship to the actual expenses of individual consumers.
In addition to the penalties, ASIC accepted an enforceable undertaking from Cash Converters which requires it to:
(a) refund eligible consumers fees totalling $10.8 million through a consumer remediation program overseen by an independent expert; and
(b) engage the independent expert to review its current business operations and compliance with the consumer credit regime and report to ASIC.
The agreement with Cash Converters does not cover loans made in stores.
Regulatory risks and priorities
The regulatory key risks identified by ASIC include:
Digital disruption: ASIC is focusing on managing the risks that result from structural change and disruption in financial markets and services arising from the rapid pace of technological developments—including new products and service delivery models that, if poorly implemented and operated, can undermine market integrity and trust and confidence.
Cyber threats: ASIC continues to focus on the risks from cyber attacks which can undermine increasingly digital businesses, destabilise markets, and erode trust and confidence in the
financial system.
Misalignment of retail product design and distribution with consumer understanding: ASIC is focusing on the risk from misalignment between people’s understanding of financial products and how these products are designed, disclosed and marketed to them.
Over the next six months, ASIC will continue to focus on enforcing higher standards in the financial services industry, paying particular attention to:
(a) responsible lending practices in the credit industry, including an emphasis on systemic breaches by licensees;
(b) financial advisers’ compliance with their best interests duty and obligation to provide appropriate advice to clients;
(c) licensees’ failure to deliver ongoing advice services to financial advice customers who are paying fees to receive those services; and
(d) instances where licensees claim to provide general advice to retail clients during the sale of financial products (and therefore do not need to comply with the best interests duty and related obligations), but are actually providing personal advice.
