Non-major pays $530K for breaching consumer credit laws

A regional bank has paid infringement notice penalties totalling $270,000 together with remediation of $260,000 after ASIC found it breached important consumer protection provisions.

ASIC today announced that due to an internal error, Suncorp Bank failed to notify a large number of consumers of changes in the amount of their loan repayments and, in some cases, failed to advise the consumers of their first direct debit default. This led to some of the consumers inadvertently defaulting on their loans and being contacted by Suncorp's collections team.

According to the corporate watchdog, a lender must notify a consumer of changes to loan repayments (for example, amount or frequency of repayments) no later than 20 days before the change takes effect. Further, where a consumer's direct debit has failed for the first time, the lender is required to send the consumer a direct debit default notice.

ASIC found that between November 2015 and March 2016, Suncorp:

• failed to provide consumers with the required written notice regarding a change in loan repayments; and
• failed to provide consumers with a direct debit default notice.

As a result of these failures, consumers were not given the opportunity to prepare for a change in their repayment obligations or may not have been aware that their direct debit payment had failed. Subsequently, some consumers were subject to collections activity, including telephone calls or letters from Suncorp's debt collections staff.

“Companies engaging in credit activity need to ensure that their systems have rigorous checks and balances, so that when errors occur, they are detected quickly and don't cause disruption to customers,” ASIC deputy chairman Peter Kell said.

“A change in repayments can have a significant effect on a consumer's household budget and consumers need to be given time to prepare for that impact. The law demands that lenders keep their customers informed,” he said.

Suncorp has implemented a $260,000 remediation plan refunding any default fees and any interest customers incurred and has paid some consumers reasonable compensation where appropriate. Suncorp has written to all consumers who were affected by the above failures.

Suncorp has also agreed to engage an external compliance consultant to review its processes and procedures in relation to the causes of the above breaches. The consultant's report will be provided to ASIC.

The matter came to the attention of ASIC in March 2016 when Suncorp voluntarily reported the issue. Since becoming aware of the breaches, Suncorp has implemented new processes to prevent a similar occurrence of non-compliance with these provisions.

ASIC conducted its own investigation into Suncorp's non-compliance. On 16 December 2016, ASIC issued 20 infringement notices totalling $270,000 for 10 breaches of section 65 (repayment changes) and 10 breaches of section 87 (direct debit default notice) of the National Credit Code.

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