FOS has published the new systemic issues that it identified during the March quarter of 2015 and reported to the Australian Securities and Investments Commission (ASIC).
The issues include:
Credit card: Application of interest rates
A dispute at FOS indicated that the FSP had applied the higher ‘cash advance’ interest rate to lottery ticket purchases, despite such a purchase not being explicitly listed in the definition set out in the account’s terms and conditions.
In FOS’s view the wording of ‘cash advance’ in the account’s terms and conditions did not accurately reflect the FSP’s intention to categorise the purchase of a lottery ticket as a cash substitute. FOS says that a lottery ticket cannot be considered a cash substitute as it cannot be considered a medium of exchange, nor is it specifically identified in the list of relevant examples in the terms and conditions. FOS therefore considered that the FSP had charged the higher ‘cash advance’ interest rate in error.
Misleading conduct
A customer arranged a travel insurance policy with the FSP at the time of booking an overseas flight on an airline website. The customer was not an Australian resident and was not in Australia when he arranged the insurance. When the customer lodged a claim on the policy it was rejected by the FSP on the ground that the policy eligibility criteria was not met. The FSP advised that the policy is available to Australian residents and non-residents provided they are in Australia at the time the Certificate of Insurance is issued.
The FSP accepted that there may be an issue with the distribution of travel insurance policies through the airline website. The eligibility requirement to be an Australian resident, or if a non-resident to be in Australia at the time of the purchase, is not clear and effective during the sales process.
Failure to include stamp duty calculation
A number of disputes at FOS concerned the FSP’s failure to include stamp duty and transfer fees in the calculation of the market value of the insured vehicle.
The FSP confirmed that the methodology it uses to calculate market value for total loss motor vehicles does not include a specific calculation for stamp duty and transfer costs. Rather, it ensures a claimant suffers no detriment after a total loss, by allowing a sufficient margin in the settlement figure to accommodate the additional costs associated with the purchase of a replacement vehicle (including stamp duty and transfer fees).
Processing error
Information was provided directly to FOS by the FSP in which it identified a systemic failure by the FSP to correctly link offset accounts to relevant home loan accounts.
