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The past 12 months…

The past 12 months…. We have seen a large increase in disputes involving financial difficulty in the last year Wide range of disputes: Low, middle and high income earners Consumer loans and business loans Secured and unsecured loans. Significant future events.

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The past 12 months…

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  1. The past 12 months… • We have seen a large increase in disputes involving financial difficulty in the last year • Wide range of disputes: • Low, middle and high income earners • Consumer loans and business loans • Secured and unsecured loans

  2. Significant future events • National Consumer Credit Protection Bill • Financial OmbudsmanService – new: • Terms of Reference(with ASIC for approval) • Operational Guidelines • Policies and Procedures

  3. National Consumer Credit Protection Bill • If NCCP Bill is passed in its current form, StateCourts and Tribunals (eg VCAT and CTTT) willno longer hear hardship applications • If the consumer makes a hardship application toa credit provider and it is not accepted, then underthe NCCP Bill consumers will have the option of: (a) commencing proceedings in the Federal Magistrate Court (b) bringing their dispute to an EDR scheme • $500,000 hardship threshold • Notification of EDR scheme in default notices from1 July 2010

  4. Proposed Terms of Reference • Clause 5.1(c) - we can consider a variation of a consumer credit contract as an exception to the commercial decision exclusion • Clause 9.1(f) - we will have power to vary the terms of a credit contract in cases of financial hardship • Clause 13.1(a) - we will consider a dispute lodged with us, even though the Financial Services Provider has previously commenced legal proceedings

  5. Internal Dispute Resolution first • Clause 6.3 introduces a formal requirement that an Applicant must go to a Financial Services Provider first before we can consider the dispute • A FSP will generally have a 45 day period in which to provide an IDR response after the initial date of contact • The 45 day period can be shortened if we consider the matter is urgent • ASIC Consultation Paper 112 – less than 45 day timeframe – proposes 21

  6. New process for hardship variations • Starts toward the end of 2009 or when credit reforms in operation • May expedite consideration of disputes about a refusal to grant a variation of a NCCP loan • Telephone conciliation – will be set following receipt of an IDR response or after number of required days has elapsed since an IDR response has been requested (unless there are reasons why it can not be held at an early stage) • Ombudsman Case Conferences where appropriate

  7. What we aim to achieve • Accessible dispute resolution process • Resolution of disputes in a cooperative, efficient, timely and fair manner • Minimum formality and technicality • Avoidance of debt escalation and erosion of security

  8. New process for hardship variations • Non-NCCP hardship disputes may also be conciliated • Small business/complex disputes may require longer timeframes before conciliation can occur to enable appropriate exchange of information between the parties

  9. Telephone conciliation conference • Forum to attempt to resolve dispute at an earlier stage • The telephone conciliation will be facilitated by a conciliator at Financial Ombudsman Service • What if the dispute is not resolved by telephone conciliation?

  10. In the future… • We will be able to make binding decisions to vary a credit contract when the credit reforms come into operation • We will be able to consider disputes after legal proceedings have been issued (before judgement has been entered) • Telephone conciliation process will be used extensively to resolve disputes in a timely manner

  11. Financial Difficulty Team • Joanna HarrisFinancial Difficulty Manager • Georgina Frost & Anna MandokiCase Managers • Meredith WalkerTeam Leader • Sally ThompsonSenior Case Officer

  12. How to contact us • Diana EnnisManager – Disputes, Banking & Finance *GPO Box 3, Melbourne VIC 3001 8info@fos.org.au '1300 78 08 08 • www.fos.org.au Customers in Financial Difficulty factsheet

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