Australian Ombudsman: Default fees policy

[natweststaffmember]

In recent times there have been reports in the media regarding the level of default fees charged by banks in certain situations, such as late payment fees or dishonour fees. As a result of these media reports, a number of calls have been received at the Financial Ombudsman Service regarding the level of default fees. The Financial Ombudsman Service considers complaints made about banks and other financial services providers that are members of the scheme. Where a complaint relates to a fee the Ombudsman will consider whether the fee was properly disclosed to the customer, whether the fee was correctly charged in accordance with the customer’s contract with the financial services provider and whether it was correctly applied in accordance with any scale of fees used by the financial services provider.
Under our Terms of Reference, we cannot consider the amount of a fee so far as it relates to a policy or practice of a bank, unless that policy or practice is in breach of a specific obligation or duty to the customer. The level of any disclosed default fee is a matter of bank policy that this office is unable to review.
In the Financial Ombudsman Service's view, the question of whether the level of a default fees charged by banks is unenforceable at law is a matter that would be best dealt with by the appropriate regulator or determined by a court.
The Ombudsman’s Terms of Reference are set by the Board of the Scheme after consultation with all stakeholders. The Board is comprised of equal numbers of consumer and industry directors and an independent Chair.


Financial Ombudsman Service approach to default fees :: Financial Ombudsman Service
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Information for consumers in financial difficulty

This information is also available to download as a fact sheet: Financial difficulty[PDF]

Individuals and small businesses can unexpectedly find themselves in a situation where they are unable to meet their repayments under a credit facility. We call this situation financial difficulty. The causes of financial difficulty can include sickness, unemployment or over commitment.

What do I do if I can’t meet my repayments for a short period of time?
You may have obtained credit from a financial services provider (FSP) that is a member of the Financial Ombudsman Service such as:

• a personal loan;
• a business loan;
• a home loan;
• an overdraft facility; or
• credit card.

If your financial situation changes so that you cannot meet regular repayments for a short time, then you can ask the FSP for assistance to overcome your financial difficulties. This may include a request to change the repayments under the credit contract for a period of time until you are able to meet repayments in full.
If your financial situation is not likely to improve in the short term (three to six months), you may wish to seek some financial advice about options that may be available to you. This may include the sale of an asset.

What sort of help can I ask for?
You can, for example, ask your FSP to make the following types of changes, including:

1. Extending the period of the loan and reducing the amount of the regular repayments;
2. Delaying payments due on a specific date;
3. Stop making payments for a period of time and extend the period of the loan; and
4. Any reasonable alternative to vary the credit contract that may help you to overcome your financial difficulty.

Sometimes your FSP will not agree to make any changes to your credit contract or will not agree to make the changes that you have requested.

How can I object to the FSP’s decision?
If you disagree with the FSP’s decision then you should first tell the FSP and ask for the decision to be reviewed. You can ask how long the review will take. If the FSP does not provide a further response or you are unhappy with the further response, you can refer the matter to us for review.

Does the FSP have to agree to change the repayments under the credit contract?
No. However, there is a certain process that the FSP must follow when you ask for a hange to your repayments. The FSP must look at your current financial position and may ask you for more information to assess how it may be able to assist you. The FSP will consider whether or not things are likely to improve and whether you will eventually be able to repay the debt. The FSP does not have to agree to make the changes you have asked for.
If your circumstances have permanently changed, a variation to your credit contract may not necessarily be in your best interests as this may be postponing inevitable default under the facility.

What can the Financial Ombudsman Service do if the FSP does not agree to change the repayments under the credit contract?

1. We can review whether the FSP has followed the correct procedures when considering a request for short terms assistance with repayments. If the correct procedure has not been followed, we can award compensation such as fees and interest which may have been imposed, however this does not iclude waiver of the debt.
2. From January 2010, depending on the type and size of the credit facility, we will have the power to make a FSP change the repayments under some credit contracts including:

• most credit card contracts,
• personal loans,
• car loans; and
• some home loans (if they are less than $500,000) from January 2011.

Whilst we may exercise the power to vary in accordance with its procedures, our aim however is for financial difficulty disputes to be resolved by agreement being reached between the parties, through negation or conciliation where ever possible, with the power to vary the credit contract being used as a last resort.
Your financial circumstances and ability to meet a variation to the credit contract will be taken into account when reaching a decision to change the repayments under a credit contract.

What is conciliation?
The Financial Ombudsman Service offers telephone conciliation conferences to help resolve disputes between applicants and FSPs.
Conciliation is an independent and informal process which enables the parties in dispute to openly discuss and identify the relevant issues, and to generate potential options for resolving the dispute.
Conciliation conferences generally take about two hours and are conducted by an independent Financial Ombudsman Service Conciliator. During the conciliation conference, you will be able to speak directly to the FSP and the Conciliator all at the same time and in private with the Conciliator if necessary. The outcome of a conciliation conference is determined by the parties.
Participation in a telephone conciliation conference will be compulsory for you and the FSP. It is necessary that both parties have authority to settle. You may be represented by an agent however you must attend the telephone conciliation conference with your agent.
The Guide to Conciliation Conferences further explains the Conciliation Conference process.

Who should I contact first?
You should contact your FSP first and tell them about your situation. You should ask them if they have a dedicated financial hardship customer representative that you can speak to. However, if you have already asked your FSP to vary repayments and it has written to you and told you that it will not or it has not responded to you, you can contact us.

What happens if the FSP has already taken action in court against me or my business?
In some circumstances, we can make the FSP put the legal proceedings on hold while it considers the dispute. Whether legal proceedings can be put on hold will depend on what stage the proceedings are at. See Clause 13 of our Operational Guidelines for more information about this.

What information do I need to give you?
We need the following information:

1. Outline that the dispute is about financial difficulty;
2. Provide the name of the FSP that has refused or not provided any response to your request for assistance;
3. Explain what assistance you have asked for and why;
4. Tell us what your monthly income is and what your monthly expenses are (such as rent, living expenses (food etc), car expenses, other loans or any other expenses); and
5. Explain when and how you think the situation will improve.

What happens after I write to the Financial Ombudsman Service?
We will ask the FSP to respond to your request for assistance. If your dispute is not resolved directly between you and the FSP then, where appropriate, we will write to you again to arrange a date for a telephone conciliation conference.
We may require you and the FSP to provide more information about the debt and your current financial position before a telephone conciliation can take place.
Please note that if you do not provide information requested or attend a telephone conciliation conference, we will not be able to consider the dispute further. This may mean that you are not able to have the credit contract changed.

What should I do while the Financial Ombudsman Service is looking at my dispute?
It is important that you:

• make whatever repayments you can afford while we are looking at the dispute; and
• reply to any requests made by the FSP or us for information about your situation.

What happens if I am unhappy with the result?
If you are still unhappy following a telephone conciliation and you can provide written reasons why you consider the request to vary has not been properly considered, we will look at the dispute and decide whether there is anything further we can consider. The dispute may be investigated or it may be referred directly to the Ombudsman.
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Debt collection and social security recipients :: Financial Ombudsman Service

Their processes on debt collection and social security payments.

[natweststaffmember]

Re: Australian Ombudsman: Default fees policy

Law et al relating to Banking in Australia

[natweststaffmember]

Re: Australian Ombudsman: Default fees policy

A few more links thanks to CHOICE who are consumer campaigners in Australia who kindly emailed me some links.

The announcement of a massive class action against Australia's big banks for fee gouging reinforces how widespread the problem is., says CHOICE.

Unfair bank penalty fees with Choice.com.au


And further information on the class action case in Australia

Your Money was taken UNFAIRLY. Join us as we take the Banks to court to GET IT BACK

[megansden]

Re: Australian Ombudsman: Default fees policy

Hi! All

And why cant we do this sort of thing, forget the supreme court for a moment, this is people power there are thousands of us who the banks have screwed, can we post a notice to see what reaction we get (or maybe you have done this in past and i have missed it)

Thats my feeling after reading the aussie bit

megansden

[natweststaffmember]

Re: Australian Ombudsman: Default fees policy

http://www.austlii.edu.au/au/legis/c...ct/tpa1974149/
Sections 51 and 52 apply to bank charges in Australia.

The link below is to shares plummeting after the test case is announced.
Banks take jolt over fee fears

Interesting quote from it:

"More recently, Australian banks have been lobbying against the introduction of new rules banning ''unfair terms'' in contracts - a measure that stands to reduce their ability to enforce fees.
Under the new rules approved by the Senate in March, where a term in a consumer contract is found to be unfair, regulators, such as the Australian Securities and Investments Commission or the Australian Competition and Consumer Commission, may seek a ruling from a court to void the contract.
The new rules also allow for consumers to pursue their own remedies."
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http://www.austlii.edu.au/au/legis/c...ct/tpa1974149/
Sections 51 and 52 apply to bank charges in Australia.

The link below is to shares plummeting after the test case is announced.
Banks take jolt over fee fears

Interesting quote from it:

"More recently, Australian banks have been lobbying against the introduction of new rules banning ''unfair terms'' in contracts - a measure that stands to reduce their ability to enforce fees.
Under the new rules approved by the Senate in March, where a term in a consumer contract is found to be unfair, regulators, such as the Australian Securities and Investments Commission or the Australian Competition and Consumer Commission, may seek a ruling from a court to void the contract.
The new rules also allow for consumers to pursue their own remedies."

[orc]

Re: Australian Ombudsman: Default fees policy

Reading the link it refers to the class-action being funded by IMF Australia. This is what I took as important.

Class action is something I know little about but I don't think we have an equivalent financial vehicle here and would legal costs depend on legal aid or private means of finance. Presumably, funding such as this is the key to taking class action, in Australia, or here even. Are there companies here doing this?? Can someone please advise on this if anyone knows.

Here is more info on IMF Australia.

http://www.imf.com.au/about.asp

IMF is a publicly listed company providing funding of legal claims and other related services where the claim size is over $2 million. IMF has brought together the major participants in the litigation funding market in Australia and has an Australian Financial Services Licence (AFSL:286906). IMF is the largest litigation funder in Australia and the first to be listed on the Australian Securities Exchange (ASX:IMF).


Our Services



IMF provides:

• funding for litigation and investigations preliminary to litigation;
• payment of adverse costs orders;
• strategic planning, monitoring and managing of litigation;
• factual investigation including asset tracing; and
• assistance in facilitating settlements and maximizing the value of each claim.

IMF does not provide legal advice of any sort.
Benefits



Litigation funding is a valuable resource where a person or company:

• has a good claim but no money to pursue it; or
• cannot provide security to meet a security for costs order; or
• wishes to diversify the financial risk associated with litigation; or
• is concerned about being exposed to pay the other side's costs,

The benefits IMF strives to deliver and which we believe sets IMF apart include:

• fast decisions with simple and flexible funding terms;
• direct contact with decision makers who are experts in their field;
• our appraisal of the claim;
• a proactive approach focused on achieving the best possible outcomes; and
• Management of the Litigation and cost control.

[natweststaffmember]

Re: Australian Ombudsman: Default fees policy

Orc, I have already got an email from them cos I did contact them. They have more or less 85000 claimants and will be proceeding on that case.

[orc]

Re: Australian Ombudsman: Default fees policy

Orc, I have already got an email from them cos I did contact them. They have more or less 85000 claimants and will be proceeding on that case.

Good on you.

Ask them if they want to come over here and take on our banks. They would be welcome.


Over 20,000 sign up for class action

May 13, 2010

AAP
Law firm Maurice Blackburn says more than 20,000 unhappy bank customers have already signed up to join Australia's largest ever class action to recover allegedly unjust penalty fees.
Maurice Blackburn chairman Bernard Murphy said potential claimants were registering their interest at a rate of 1000 per hour, with 22,000 having contacted the firm as of 1200 (AEST) on Thursday.
The firm is preparing to launch what it says is Australia's biggest class action against 12 banks to recoup a range of penalty charges.

[EXC]

Re: Australian Ombudsman: Default fees policy

Are there companies here doing this?? Can someone please advise on this if anyone knows.

Yes, Beagles' very own law firm Hausfeld LLP

[orc]

Re: Australian Ombudsman: Default fees policy

Thank you EXC, that is very interesting and I was not aware- you learn something new, hopefully every day.

I appreciate your and LBs views on individual claimants taking forward claims as a result of opinion received from Counsel which is fair enough and I fully accept that and the reasons for it.

However, in view of links between Hausfields and yourselves at LB, it seems logical to ask you, following the train of thought in earlier posts, if you have ever discussed the merits/ pros and cons/ etc of potential class action/ group action on bank charges with them.

If that has not happened to date, and if a potential new legal argument was found, say CCA, (which I accept you think will not be successful), would you consider class action as an option.

I am not asking these questions to put you in an awkward position BTW, please accept that as the case. Its purely asked in relation to the campaign.

As you know, Penalty Charges had been keen on that possibility, but their action seems to be targetting people likely to qualify for legal aid whereas IMF Australia seek some other form of funding and presumably Hausfields or similar could do likewise.

[Amethyst]

Re: Australian Ombudsman: Default fees policy

However, in view of links between Hausfields and yourselves at LB, it seems logical to ask you, following the train of thought in earlier posts, if you have ever discussed the merits/ pros and cons/ etc of potential class action/ group action on bank charges with them.

Yes, at length.

It is difficult to discuss things as of course we are bound by some confidentiality. The Opinion was part of a wider instruction.

It would be a representative action more than a class action. I'm pretty sure there is some discussion on this somewhere on here.

[EXC]

Re: Australian Ombudsman: Default fees policy

Class actions: why are we waiting? - Times Online


Class actions: why are we waiting?


When is a class action not a class action? When it’s a collective redress scheme or a representative action or basically anything that does not sound like loony American litigation.

Whatever you call it, however, the idea of bringing a case on behalf of a group of consumers who have to opt out of the action — rather than opt in, as now — is slowly gaining ground. But with the business community united in opposition, slow is the operative word.
Last month the Ministry of Justice (MoJ) accepted that “there may be circumstances where cases could be brought more efficiently on a collective basis”, but then promptly rejected the idea of introducing a generic procedure applicable to all cases.

Responding to recommendations from the Civil Justice Council (CJC), the MoJ said that each government department should assess whether there is evidence of need for a collective redress procedure sector by sector, with the help of a policy framework that the MoJ is developing. If so, the department will decide how it will work.

“It may be the Government’s way of kicking the CJC proposal into the long grass,” says John Meltzer, head of the product liability network at Lovells, the City firm. “Unless the ministry is really prepared to drive the process of reform, I doubt other departments are going to have the appetite to do it.”

The council wants only to add opt-out actions to the options for bringing group claims — not replace them — but it is a sign of the controversy they provoke that it counts as progress that the ministry did not shelve the idea entirely.

Robert Musgrove, chief executive of the council, is pleased that the Ministry of Justice accepted most of its recommendations, saying they “should herald considerable improvements in access to justice”. These were based on research that found “overwhelming evidence” that the system is preventing meritorious consumer claims from being pursued. Getting the balance right between developing more effective procedures for people to bring meritorious claims, protecting defendants from non-meritorious claims and ensuring that court proceedings are only ever utilised where there are no more efficient or timely routes to redress, has been challenging,” he says.

Ingrid Gubbay, a co-author of the CJC’s report and consultant in the London office of Hausfeld, the US class action firm, is less diplomatic. She suggests that the Government is worried in part about finding itself on the receiving end of class actions even though, in reality, such cases would be tough to bring, as the Equitable Life action proves.

“The sector-by-sector approach is a way of slowing down almost to a halt any possibility of bringing in any effective procedure,” she says, “and does raise a credibility question as to how far the response may be selfserving.”

With litigation seen as the last resort, the ministry highlighted regulatory action as potentially “a more cost-effective way of dealing with cases involving a large number of small claims”, which Meltzer says is in keeping with the European approach.

It also sounds like a veiled reference to the case Which? brought against JJB Sports over football shirt pricefixing, in which consumers who bought offending strips could claim £20. But Gubbay, who previously worked at Which? and launched the action, says that requires consumer groups, charities and trade unions — as well as regulators — to make private enforcement a priority. Few seem willing or able to do this.

The council has tried to make its proposals look as little like US class actions as possible, despite research indicating that the reality is not as loony as the myths anyway, in an effort to reassure the business community that they would not lead to a mass of speculative claims. To the extent that opt-out is a feature of US class actions, then such cases are US-style, but equally they are Canadian and Australian-style. What makes US class actions scary are contingency fees, punitive damages and no loser-pays rule; and we are a long way from that.

It is also often forgotten that class actions help defendants, too, by consolidating all claimants into one action and offering finality. Not everyone thinks they will now rest quietly in the long grass. The European Commission is looking closely at collective redress, while an as-yet unpublished report commissioned by the Government Equalities Office calls for opt-out actions to be tried out in employment tribunals to deal with the thousands of group discrimination and equal pay cases clogging up the system.

Tim Strong, a partner at Barlow Lyde & Gilbert, the City firm, believes the present climate provides fertile ground for government departments to get on and examine whether they need such actions. “Lord Justice Jackson’s costs review has focused attention on the high cost of litigation in the UK and issues of access to justice,” he says. “In addition, there are now large classes of claimants with recession-based claims against their financial advisers and others. The issue of collective actions may therefore be near the top of many government departments’ ‘to do’ lists come early 2010.”

[orc]

Re: Australian Ombudsman: Default fees policy

Thank you both for the information.

[orc]

Re: Australian Ombudsman: Default fees policy

................ but I don't think we have an equivalent financial vehicle here and would legal costs depend on legal aid or private means of finance. Presumably, funding such as this is the key to taking class action, in Australia, or here even.

Do Hausefield LLP have access to a similar package of funding as used by IMF Australia, as oppossed to depending on client funds or legal aid?