The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission) will commence its first round of public hearings today. The hearings will focus on consumer experiences when purchasing products such as credit cards, car loans and residential mortgages from banking and financial services providers. The business practices of these entities and their intermediaries will also be investigated.
The Royal Commission will examine these topics by looking at a series of case studies on residential mortgages, car finance, credit cards, add-on insurance products, credit offers and account administration. Examples of the case studies include Aussie Home Loans fraudulent brokers and broker arrangements, Westpac/St George car finance practices, Citi imposition of international transaction fees, CBA credit insurance relating to home loans, personal loans and credit cards, ANZ unsuitable pre-approved overdraft offers and ANZ account administration errors.
The Royal Commission will also hear evidence from a number of consumers as to their particular experiences.
The hearings are scheduled to continue until 23 March 2018. They will be followed on 16 April 2018 by hearings relating to the financial planning and wealth management industry.
Source: Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Public Hearings website.
Wolters Kluwer’s Australian Consumer Credit Law Reporter contains a Responsible Lending Checklist. The checklist analyses each responsible lending obligation in detail together with relevant legislation/ASIC guidance/cases and includes practical tips to assist with compliance. See the following excerpt as an example:
|Key RL requirement||Notes/practical tips||Legislation/ASIC guidance/cases|
|Make reasonable inquiries about a consumer’s financial situation||For further detailed information see ¶16-050, ¶16-140.||National Consumer Credit Protection Act 2009 (NCCP Act), s 130(1)(b)|
|The credit provider must make sufficient inquiries to satisfy itself that the consumer will be able to service the loan without substantial hardship. The degree of required inquiry depends on the customer’s individual circumstances, eg additional inquiries may be required:|
• for significant or complex commitments such as home loans
• where the loan repayments are relatively significant compared to the excess money available to the customer after paying all their expenses and the new loan repayments
• where inconsistent information is received
• where the customer is not an existing customer.
|RG 209.30–32, ASIC v The Cash Story Pty Ltd (in liq) (2014) ASC ¶155-200;  FCA 926|
|The credit provider must enquire about the customer’s income, expenses and commitments.||RG 209.32|
|The credit provider must conduct a servicing check, satisfying itself that the customer’s income will be sufficient to service the loan, after taking into account all expenses and commitments, as well as the new loan payment.||RG 209.30–31|
|It is unacceptable to use benchmark figures (eg as to average household expenses) as a substitute for making inquiries.||RG 209.105|
|Depending on customer circumstances, credit providers may need to require customers to provide detailed information as to expenses and commitments, rather than relying on broad summary figures provided by customers.||ASIC v Channic (No 4) (2016) ASC ¶155-210;  FCA 1174|
ASIC Report 445 Finding 26(c) para 219
|Credit providers should not rely on information provided by a consumer, and need to make additional inquiries, if they have reason to doubt its reliability.||RG 209.56|