EDR process outweighs debt recovery
Financial services companies pursuing debt recovery legal action against clients with respect to unpaid margin loans or other similar debts will have to stay their hands if those clients pursue complaints with an external dispute resolution (EDR) service.
That is the bottom line of new guidance issued by the Australian Securities and Investments Commission (ASIC) following a review of the jurisdiction of EDR schemes in relation to certain consumer complaints.
Explaining its view, the relevant ASIC approach states that "in practice, this requires an EDR scheme member to stay or discontinue the legal proceedings while the complaint is being handled at the EDR stage".
In doing so ASIC has taken account of concerns expressed by consumer organisations.
The formal ASIC announcement dealing with the release of the report said the review had confirmed the appropriateness of the existing policy setting and "reinforced the useful role ASIC-approved EDR schemes and their debt recovery legal proceedings jurisdiction plays in assisting consumers and financial investors who may benefit by a hardship variation, need more time to sell their home, may have been granted loans in breach of responsible lending requirements or face debt collection issues".
ASIC commissioner Peter Kell said the review had helped focus attention on a number of areas where the dispute resolution system could be enhanced, beyond specific regulatory guidance.
He nominated areas where improvements could be achieved by all parties, including:
- licensees taking steps to better identify hardship in its earlier stages, and better resourcing and training their complaints handling teams to become more efficient and effective;
- ASIC-approved EDR schemes improving their operations by working with scheme members and consumer representatives to improve scheme handling and processing of debt recovery legal proceedings complaints; and
- enhanced consumer understanding of how an EDR scheme's debt-recovery legal proceedings jurisdiction can assist, as well as the continued obligation to make repayments where possible.
Recommended for you
As the year draws to a close, a new report has explored the key trends and areas of focus for financial advisers over the last 12 months.
Assured Support explores five tips to help financial advisers embed compliance into the heart of their business, with 2025 set to see further regulatory change.
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
