The Australian Securities and Investments Commission (ASIC) has taken action over the sales and debt collection practices of companies in the GE Money group.
The Australian Securities and Investments Commission (ASIC) has taken action over the sales and debt collection practices of companies in the GE Money group.
The action relates to the advice provided by parts of GE's insurance advice and sales business and also, the debt collection practices of the GE Money consumer credit businesses.
ASIC has imposed conditions on the Australian financial services license (AFSL) of GE Money's Hallmark General Insurance Company Ltd and Hallmark Life Insurance Company Ltd after those companies failed to comply with commitments each made in a 2006 Enforceable Undertaking (EU) to ASIC.
ASIC found that parts of the insurance advice and sales business were often poorly managed and not meeting the legal obligation requiring there be a 'reasonable basis' for personal advice given to customers.
Specifically, ASIC was concerned that staff were selling insurance to customers whose needs had not been identified or understood.
Given that the Hallmark companies did not comply with a number of key undertakings given to ASIC in 2006, the regulator has decided the best way to protect consumers is to impose conditions on the AFSLs of GE Money's Hallmark companies.
The more stringent conditions now included in the AFSLs of the GE Money's Hallmark companies replace the 2006 EU. These additional license conditions require the Hallmark companies;
- to engage an independent expert, over a period of up to 15 months, to review and assess the advice, sales, training, management and corporate governance processes in its branch network and make recommendations to correct any deficiencies to ensure these processes are at an industry best practice level;
- to engage the same expert to assess the steps already taken by the Hallmark companies to compensate their customers and make recommendations as to any additional compensation steps that may be necessary;
- if the expert makes recommendations, to provide ASIC with an Action Plan to implement those recommendations; and
- to provide ASIC with full details of the compensation already paid to customers by means of a director's statutory declaration, by 18 July 2008.
Furthermore, the Hallmark companies are now required to limit the insurance advice their staff provide to 'general advice' only and not 'personal advice'.
Separate to the imposition of additional licence conditions on the Hallmark companies, GE Money has entered into an EU to address ASIC's concerns about the debt collection practices of its consumer credit business.
This is in response to consumer complaintsabout harassment from the debt collection practices of that business.
Those practices included excessive or inappropriate contact with customers, contact at unreasonable hours and an inflexible approach to repayment arrangements.
As part of this EU, the GE Money consumer credit business is required:
- to engage an independent expert, over a period of two years, to review and assess its debt collection processes to ensure that it complies with the ASIC/ACCC Debt Collection Guidelines and make recommendations to correct any deficiencies;
- if the expert makes recommendations for improvements, to provide ASIC with an Action Plan to implement those recommendations;
- to pay compensation to affected customers in accordance with guidelines prepared by the Banking and Financial Services Ombudsman; and
- to arrange and pay for an industry workshop to promote best practice in the debt collection industry.
A copy of the new EU relating to GE Money's debt collection practices is available from the ASIC website at www.asic.gov.au.
'ASIC's approach to these serious issues has taken into account the major changes in personnel to GE Money's senior management and the substantive and voluntary changes undertaken by the new regime, including compensation payments and the stated desire of the new management to ensure better compliance with the law', ASIC Executive Director of Enforcement, Ms Jan Redfern said.
'However, financial services licensees should note that GE Money's previous failure to live up to its undertakings has resulted in conditions being imposed on its AFSL. ASIC will continue to monitor GE Money closely and will not hesitate to pursue additional regulatory options, if required'.
