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The Australian Securities and Investment Commission (ASIC) unveiled its plans during the 34th Annual Credit Law Conference on 24 October. There was a strong emphasis on protecting consumers during the persistent cost-of-living crisis.
“ASIC continues to place the highest priority on protecting consumers from poor conduct and harm from products in the credit and banking sectors,” said ASIC commissioner Kate O’Rourke.
“As you might expect, given the ongoing cost-of-living pressures, we have a significant range of work in this area. To structure the overview of these workstreams, I will cover this in three tranches: recently published reports; ongoing ASIC-initiated workstreams; and other multi-party reviews and processes.”
Five strategic priorities were made clear from the beginning:
1. To improve consumer outcomes in relation to financial products and services.
2. To address financial system climate change risk.
3. To encourage better retirement outcomes and member services.
4. To advance digital and data resilience and safety.
5. To drive consistency and transparency across private and public markets and products.
Lenders in particular were highlighted as perpetuating some of the challenges consumers face.
“Lenders should be taking steps to ensure their customers are aware that financial hardship assistance is available and that they understand when and how to request it. That process should be easy and efficient – and customer-facing staff should be trained to identify and respond to hardship notices,” said O’Rourke.
“However, it would be fair to say that, based on what we observed, this was not generally the case. While our review and report are now complete, our work here is not done. We are continuing to collect hardship-related data until at least June 2025 – and will engage with lenders where we identify indicators of poor customer outcomes.”
ASIC made reference to the high-fee controversy that saw refunds to consumers of $28 million in July. This fine has reportedly seen some positive action taken to better protect customers.
“As a result of our interventions, the banks have improved processes. By adopting opt-out migration approaches to reduce customer burden in accessing low-fee accounts. By expanding eligibility to reflect receipt of low income – as opposed to limiting eligibility to customers with a government concession card. By reviewing and creating new lower-fee products – and by improving customer communications,” said O’Rourke.
“Tangible outcomes from the project also include banks returning over $28 million in fees and migrating more than 200,000 customers into low-fee accounts. This will save those customers an estimated $10.7 million in future yearly fees.”
To assist in protecting consumers, ASIC has approved a “new and enhanced” version of the Australian Banking Association’s Banking Code of Practice back in June. These changes will commence in February 2025.
“From our perspective, it was essential the Code remained responsive to changing community needs – and relevant to current and emerging circumstances. Because, only by taking these factors into account, can it genuinely support customers’ best interests,” said O’Rourke.
“Among the improvements we sought are enhanced protections for loan guarantors, a broadened definition of financial difficulty – with more examples of its causes – as well as improved inclusivity and accessibility for customers of banking services.”
Included in these changes is a broadened definition of small business. This will mean it will be eligible for protections to help bolster the industry with an additional 10,000 organisations.
Further, the Council of Financial Regulators (CFR), in consultation with the ACCC, is reviewing the mid-tier banking sector. The goal is to examine the role these banks play in providing competition, including any regulatory and market trends affecting their competitiveness.
“The CFR has established a working group and is in the process of drafting an issues paper, following its initial round of stakeholder engagement with industry. Industry has already begun to raise issues and potential proposals on what would assist the sector to be more competitive,” O’Rourke said.
“ASIC is supportive of the review and working together with fellow CFR agencies in identifying solutions which encourage competition without weakening consumer protections.”
Responsible lending obligations were analysed, with ASIC claiming that easing these obligations “would not necessarily result in an increase in affordable credit.”
“Property lending is increasing. The value of new housing loans rose by 23 per cent in the 12 months to August 2024, with monthly lending reaching $30.4 billion. In fact, new monthly lending for property purchases is now larger in Australia than it is in the United Kingdom. Lending by banks remains the main source – at 95.1 per cent in August 2024,” O’Rourke said
“In our view, this data dispels, to some extent, the proposition that ‘conservative settings’ are driving consumers toward non-bank lenders to any significant degree. While many consumers have embraced buy now, pay later as an alternative to products like credit cards, its usage (while steadily increasing) only represents around 2 per cent of Australian card purchases.
“We acknowledge that there are a range of factors that impact the accessibility and availability of credit and that it can be difficult to unpick the varying impacts of each of these factors, including the specific impact of the responsible lending obligations. We will continue to monitor these settings and their outcomes – and we remain interested in new data and market developments. However, our assessment of the data suggests that easing the responsible lending obligations would not necessarily result in an increase in affordable credit.”
Next, ASIC took aim at credit cards, claiming lenders should be doing more to reduce harm.
“[We] looked at 20 million accounts, across 13 lenders, over a six-year period, with a focus on understanding changes in credit card usage, credit card features, problematic debt and the implementation of the design and distribution obligations,” O’Rourke said.
“The report highlights a number of actions lenders can take to reduce harm and improve consumer outcomes, which all credit card providers should consider adopting. One example of a number in the report: lenders can help consumers choose credit cards that better suit their likely usage by promoting targeted credit card selector tools and conducting ongoing assessment of how consumers are using high-interest rate or high-fee cards.”
ASIC will continue to investigate consumer leases and try to weed out any non-compliance.
“On our review of consumer leasing, we’ve observed some providers moving away from consumer leases, into other credit products. Such as the sale of goods by instalment contracts. We have been reviewing compliance with these products as well. We’ve also seen a significant reduction in the overall value of Centrepay deductions since the reforms came in. Should ASIC continue to see non-compliance with the latest reforms on consumer lease providers, we will take action,” O’Rourke said.
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