REVIEW OF THE CREDIT UNION DISPUTE RESOLUTION CENTRE

Transcription

1 Credit Union Dispute Resolution Centre Credit Union Dispute Resolution Centre Pty Ltd ABN GPO Box 3, Melbourne, Vic, 3001 Telephone: Facsimile: (03) REVIEW OF THE CREDIT UNION DISPUTE RESOLUTION CENTRE BACKGROUND PAPER June 2005 This Paper has been produced by CUDRC. Its purpose is to provide background information for the assistance of the reviewer and for those interested in the review or in CUDRC. Any views expressed are internal views or conclusions and do not necessarily represent the views of the reviewer.

2 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION Background to the Review Purpose and Content of the Background Paper 5 CHAPTER 2: BACKGROUND TO CUDRC Background How CUDRC developed Change in Dispute Manager ASIC Approval of CUDRC Present Position 13 CHAPTER 3: THE STRUCTURE OF CUDRC The powers and role of the Manager The structure and role of the Board Membership of CUDRC The funding of the scheme The people 16 CHAPTER 4: THE JURISDICTION OF CUDRC Introduction: the Terms of Reference of CUDRC The jurisdiction of CUDRC in summary Matters outside the jurisdiction of CUDRC The monetary limit: its rationale, past increases and future considerations Remedies available 24 CHAPTER 5: DISPUTE RESOLUTION AND DECISION-MAKING PROCESSES Accessing CUDRC After receipt of a written dispute 27 2

3 5.3 Stages of Resolution: referral to and response by the member Stages of Resolution: Investigation Stages of Resolution: Determination Procedural fairness in practice Fairness in outcomes 34 CHAPTER 6: RAISING STANDARDS: ANCILLARY ROLES OF AN EDR SCHEME Identifying and resolving systemic issues Member and external education 38 CHAPTER 7: SYSTEMS, DATA COLLECTION AND REPORTING The use of technology in CUDRC processes Collecting and recording of case information Reporting to stakeholders and the public Monitoring members compliance Performance targets Recording and reporting systemic issues 44 CHAPTER 8: FUTURE PLANNING FOR THE BOARD OF CUDRC Issues for the future 46 LINKS FOR FURTHER INFORMATION 48 APPENDIX 1: ASIC POLICY STATEMENT

4 Chapter 1: Introduction 1.1 Background to the Review Credit Union Dispute Resolution Centre (CUDRC) is an independent dispute resolution service which considers and seeks to resolve disputes between Australian credit unions who are members of CUDRC and their individual and small business customers. It is an alternative to litigation and free to individuals and small business CUDRC is approved by the Australian Securities and Investments Commission (ASIC) as an external dispute resolution scheme for financial services licensees under Part 7 of the Corporations Act 2001 (Cth). ASIC is an independent Australian government body, which regulates companies and financial services providers and enforces the relevant laws. Sections 912A(1) (g) and 912A(2) of the Corporations Act require a licensee providing financial services to retail clients, as defined in the Act, to have a dispute resolution system that includes membership of an external dispute resolution scheme approved by ASIC. Policy statements are issued by ASIC to provide guidance on matters relevant to compliance with Part 7 of the Corporations Act. Policy Statement 139, Approval of External Dispute Resolution Schemes, sets out guidelines for the approval of schemes such as CUDRC CUDRC was approved by ASIC in September Some 143 Australian Credit Unions have joined CUDRC Clause 9.3(c) of the Constitution of Credit Union Dispute Resolution Centre requires the Directors to commission an independent 4

5 review of the operations and procedures of the scheme every three years or more frequently if the Directors consider this to be appropriate The requirement of the Constitution is consistent with ASIC Policy Statement 139, Approval of external complaints resolution schemes, paragraph PS : A scheme should commission an independent review of its operations and procedures every three years. This time frame should not preclude a review occurring sooner if appropriate Pursuant to this requirement, the Board of CUDRC has commissioned an independent review of the operations and procedures of CUDRC to take place in Purpose and Content of the Background Paper Under PS 139, an ASIC-approved scheme such as CUDRC is required to have certain characteristics. These are: accessibility; independence; fairness; accountability; efficiency; and effectiveness The purpose of this Background Paper is to provide information about the operations and procedures of CUDRC for the reviewer and for those interested in the review who may wish to provide comment to the reviewer 5

6 or otherwise inform themselves about CUDRC This Background Paper describes the history, structure, jurisdiction, processes and systems of CUDRC. It concludes by raising a number of issues relevant to future planning by the CUDRC Board The Terms of Reference of the review have been set by the Board. They have been provided to and will be available from the reviewer. 6

7 Chapter 2: Background to CUDRC 2.1 Background The Credit Union Dispute Resolution Centre (CUDRC) is the ASIC approved external dispute resolution provider for the majority of Australian credit unions. Funded by participating credit unions, the scheme offers independent and impartial dispute resolution services to credit union members with costs paid by participating credit unions. CUDRC is approved by the Australian Securities and Investments Commission as an approved external dispute resolution service CUDRC has its origins in the development of the Credit Union Code of Practice, a self-regulatory industry code of practice to which the majority of Australian credit union subscribe The Credit Union Code of Practice (developed during the same period as the Banking Code of Practice) established a requirement for credit unions to make available to their members, free of charge, an external and impartial dispute resolution system. While the Code commenced formally in 1996, credit unions affiliated with Credit Union Services Corporation (Australia) Limited (CUSCAL) adopted the terms and mandatory compliance with the Code in principle at the CUSCAL Annual General Meeting in As part of the adoption of the Code, CUSCAL, at the instruction of its member credit unions, set about establishing an industry-wide professional dispute resolution service to meet the obligations under the Code and the EFT Code of Conduct. At the time of the adoption of the Credit Union Code of Practice, credit unions had in place a number of separate external 7

8 dispute resolution schemes. While the Code established mandatory requirements for EDR services for members, the decision on how to meet these obligations (and which scheme or service to join) remains a matter for individual credit unions The structure of CUDRC was settled in consultation with member credit unions, in consultation with existing dispute resolution schemes and industry practice. The main objectives to establishing CUDRC were: i. To satisfy the public expectation that providers of financial services should be accountable to customers; ii. An effective Scheme would help credit unions compete with other providers of financial services and ensure compliance with the Code and other regulatory requirements were effectively managed for members; and iii. An effective Scheme would improve practices in individual credit unions areas where administrative reform is needed. 2.2 How CUDRC Developed CUDRC (then named the Credit Union Dispute Reference Centre) commenced operations in November The company was established as a subsidiary of CUSCAL, with additional requirements to ensure the requisite degree of independence in its operations and decision making from the other operations of CUSCAL and credit unions The Directors of that company consisted of an independent Chair and four nominated representatives of CUSCAL s Board. 8

9 A separate Council, comprised of an independent Chair and two nominated positions for both representatives of the consumer movement and the credit union sector, was established to oversee the management and governance of the Scheme The separation of the governance responsibilities of the Board and Council were established in the Articles of Association and Terms of Reference of the original scheme The Board determined the Terms of Reference which defined the jurisdiction of the Credit Union Dispute Manager. It also approved budget, raised levies from credit unions to fund the Scheme s operation, and appointed the Council members The Council, however, was responsible for the operation of the CUDRC Scheme. Its duties included establishing the annual budget, making recommendations to the Directors in respect to the Terms of Reference, oversaw the general operation of the Scheme and appointed the Dispute Manager. It was not empowered to hear or determine any disputes. The Council consisted of two credit union representatives, two consumer representatives and an independent Chair The day to day operations of CUDRC were outsourced and managed on behalf of CUDRC by an external professional dispute resolution service, under formal tender processes overseen by the Council. In July 1996 the Australian Commercial Disputes Centre successfully tendered to provide external dispute services to CUDRC CUDRC was established under a funding formula whereby participating credit unions contributed annual levies and separate charges for variable 9

10 costs associated with individual disputes. This funding arrangement continues through to CUDRC s operations today The Scheme evolved quickly in its first year. 202 credit unions joined in the first year, representing more than 80% of CUSCAL s membership at the time. CUDRC developed a focus on negotiation and conciliation in settling disputes, reflecting the values and close member relationship of credit unions with their members. 30 disputes were heard in the first year of CUDRC s operations. By 1998/99, CUDRC reported to ASIC a total of 767 disputes across 2 million accounts and 137 million transactions. 90% of these disputes were resolved to members satisfaction without CUDRC exercising its formal dispute powers From 1996 to 2000, CUDRC instituted a number of changes to its Terms of Reference and procedures. The name of the service changed from Credit Union Dispute Reference Centre to Credit Union Dispute Resolution Centre (passed by SGM in February 2000 and registered in March 2000). From that time, of course, the scheme was promoted using the new name While the majority of Australian credit unions have, since its inception, been members of CUDRC, membership of a particular EDR scheme is not mandated in the Credit Union Code. As a result, several smaller dispute resolution schemes continued to operate through the late 1990 s/early 2000 across the credit union sector. In its annual report on Compliance with the Payments Systems Codes of Practice and the EFT Code of Conduct, April 2000 March 2001, for example, ASIC noted five schemes operating across the credit union sector as below: 10

11 ADR Scheme/Process Number of Credit Unions CUDRC 163 Credit Union Ombudsman 1 22 Endispute 2 6 Both CUDRC & CUO 2 2 Other (largely separately contracted) 2 5 Source: ASIC Code Monitoring Report March 2002 Over time (see ASIC Approval below) the majority of the smaller schemes have been disbanded. CUDRC remains the main dispute services provider to the majority of Australian credit unions. 2.3 Change in Dispute Manager During 2001/2002, following a review of CUDRC s operations and Terms of Reference, the provision of Dispute Management services was retendered and the Australian Banking Industry Ombudsman (now the Banking and Financial Services Ombudsman) became the Manager of the scheme from 1 September 2002 after a competitive selection process The Banking and Financial Services Ombudsman continues to provide a dispute resolution service to CUDRC which continues to operate with separate branding, identification, contact details and Terms of Reference, and under a separate governance structure. 1. The Credit Union Ombudsman is now known as the FCDRS 2. No other schemes now exist 11

12 2.4 ASIC Approval of CUDRC In 2001, the Parliament passed the Financial Services Reform Act 2001, establishing a new regulatory, licensing and disclosure regime for financial services providers. Under transition arrangements under FSR, existing financial services providers were granted a transition period to March 2002 to meet the new requirements of the FSR landscape An important part of the FSR regime for Australian Financial Services Licensees is the obligations on internal and external dispute resolution for customers. Membership of an ASIC-approved external dispute resolution scheme was also established as a licensing requirement for the new FSR environment. ASIC s approval requirements are set out in Policy Statement 139 (Approval of External Complaints Resolution Schemes). ASIC formally approved the CUDRC scheme on 31 August A number of changes and improvements to CUDRC operations were made during consultations on CUDRC s approval by ASIC. A new single-tiered governance structure, removing the separate operations of the CUDRC Board and Council, commenced operations from 1 January A new Board, comprised of an independent Chair, two consumer movement representatives (appointed in consultation with peak consumer groups) and two industry directors (appointed in consultation with participating credit unions) was appointed The previous Chair of the CUDRC Council, the Hon Tom Waddell QC, generously agreed to accept an invitation from the CUDRC Board to Chair the new Board for a limited period while a new independent Chair was appointed. The Hon Tom Waddell, in addition to extensive service and 12

13 contribution to CUDRC, had also chaired the independent Review of the Credit Union Code of Practice through to Present Position CUDRC today has 143 participating credit unions, representing 85% of the credit union section. 29 credit unions are members of a separate ASIC approved scheme, the Financial Co-operative Dispute Resolution Scheme. 13

14 Chapter 3: The structure of CUDRC 3.1 The powers and role of the Manager The Manager is appointed by the Board according to the Constitution of CUDRC. To ensure independence, the Constitution requires the Manager not to be a member or a director of the company, nor be a director or employee of a credit union or act in a professional capacity for a credit union The Manager s powers are set out in the Terms of Reference of the scheme. Under Clause 3 of the Terms of Reference, the Manager s principal powers and duties are to consider disputes within the Terms of Reference and to facilitate the satisfaction, settlement or resolution of such disputes whether by agreement, by making recommendations or determinations or by such other means as may seem expedient The Manager s role is further informed by the aim of the scheme, described in clause 1.3 to be to provide an independent and prompt resolution of the disputes described in clause 3 of the Terms of Reference having regard to law, applicable industry codes or guidelines, good industry practice and fairness in all the circumstances. 3.2 The structure and role of the Board The corporate structure of CUDRC Pty Ltd is a company limited by the sole shareholder of which is CUSCAL. The scheme is overseen by a Board of Directors which has two industry representatives, two Consumers Directors and an independent Chairman. 14

15 3.2.2 The Board is not involved in considering or reviewing disputes. Its principal roles are to: appoint the Manager and preserve his impartiality and independence from the members; manage the business of the company; recommend and promote consultation about proposed changes to the Terms of Reference; consider and agree the budget (submitted by the Manager); and commission an independent review of the operations and procedures of the scheme every three years or more frequently. The Board also has a role in receiving and considering complaints about the operation of the scheme, although this must not involve reviewing disputes or decisions made by the Manager or his staff The current Board members are: Chair: Tom Sherman, AO Consumers Directors: Gordon Renouf and Tony Devlin Members Directors: Louise Petschler, CUSCAL and Peter Ford, Members Education Credit Union. 15

16 3.3 Membership of CUDRC A current list of credit unions is available at The funding of the scheme The total funding for CUDRC is provided as follows The Board of CUDRC has agreed with the Banking and Financial Services Ombudsman Limited (BFSO) that BFSO will provide dispute resolution services to CUDRC upon payment of an annual fee plus a charge per written complaint received by CUDRC plus an hourly charge should a complaint require investigation. BFSO also provides the services of the Ombudsman as Dispute Manager The Board levies credit unions for an amount sufficient to cover the annual fee referred to above and CUSCAL collects from credit unions and pays to BFSO, the charges per complaint made by BFSO for dispute resolution services BFSO meets on a cost recovery basis, the total cost of administering the CUDRC scheme from the combination of the annual fee and the charge made per complaint. 3.5 The people BFSO provides the services of its Ombudsman as Dispute Manager, a dedicated Case Manager for telephone queries and a Case Officer. The skill and experience expertise of BFSO s Legal Counsel and other Case Managers 16

17 are available to deal with complaints or provide information to credit unions or their members on a needs basis. 17

18 Chapter 4: The jurisdiction of CUDRC 4.1 Introduction: the Terms of Reference of CUDRC The structure and operation of the scheme and the powers and duties of the Manager are set out in the Terms of Reference and the Constitution. The Terms of Reference describe, amongst other things, the scheme itself and the functions, powers and duties of the Manager The Manager in practice is able to make recommendations to the Board for changes to the Terms of Reference. Unless the changes are minor, changes may only be made after the Board has consulted with appropriate individuals and organisations. The Board must consult with ASIC about all changes, including those identified as minor Clause 5.3 of the Terms of Reference provides that the Manager must publish dispute resolution procedures and develop guidelines for the interpretation of these Terms of Reference and this was done to coincide with the publication of the current Terms of Reference. The procedures are designed to assist members, their advisers and credit unions. The procedures may be amended from time to time. 4.2 The jurisdiction of CUDRC in summary The Terms of Reference and the procedures set out and discuss the jurisdiction of the Manager in detail and provide information additional to that set out here. In summary, the Manager has jurisdiction to consider disputes involving amounts of up to $100,000 brought by an individual or small business, as defined in the Terms of Reference. That member must have received the financial service the subject of the dispute, or have 18

19 provided the security relevant to the financial service or whose information is the subject of a privacy dispute. The limit applies to each separate and unrelated claim brought by the member. The Manager also has power to make a non-binding Recommendation involving an amount by way of compensation in excess of $100, The small business eligibility provisions of the Terms of Reference have changed over the years of CUDRC s operation. Therefore, different tests are applied to determine whether a small business is eligible to lodge a dispute, depending on the date of the events, which first gave rise to the dispute A dispute must relate to an act or omission by a financial services provider in relation to a financial service in Australia or in relation to confidentiality and privacy. A dispute, broadly, is defined as a disagreement between a credit union and a member which has not been resolved and, if the member is an individual, a privacy issue. 4.3 Matters outside the jurisdiction of CUDRC CUDRC cannot consider a dispute in a number of situations set out in Clause 4 of the Terms of Reference. They include that the dispute: Relates solely to a financial services provider s commercial judgement in a decision about lending or security, such as assessment of risk, the taking or release of security or a decision to lend or not, unless the dispute involves an act or omission in breach of a duty owed at law, including a contractual duty; 19

20 Relates solely to a practice or policy such as an interest rate or feesetting policy, unless an error is made in applying the policy or a breach of any obligation or duty or serious misconduct is involved; Is or has been the subject of court proceedings or is more appropriately dealt with by a court or in another forum, such as the office of the Privacy Commissioner; Relates to events which occurred more than 6 years before the first written notification of the dispute to the financial services provider; Involves a claim for more than $100,000 or a claim that is part of or related to a larger claim involving more than $100,000. However, the Manager may make a Recommendation in relation to cases involving over $100, If a Recommendation is accepted by a credit union, it becomes binding (Clause 8.5 to 8.12) A court may be a more appropriate forum for a number of reasons including that: Evidence from a third party not willing to cooperate in the process is essential to the resolution of the dispute; The dispute is brought as a fishing expedition to prepare for contemplated court proceedings; The decision turns solely on an issue of credibility and it is more appropriate that the evidence be given on oath and tested by crossexamination; 20

21 Resolution depends upon an inquiry into and a finding as to whether criminal conduct has taken place; or The dispute is more efficiently brought in conjunction with existing or contemplated proceedings involving third parties Clause 9 of the Terms of Reference sets out a test-case procedure. A credit union may give notice to the Manager that the dispute involves an important or novel point of law or an issue which may have important consequences to the business of a credit union or credit unions generally. The credit union must undertake to pay the members costs of any proceedings issued within six months of the notice and seek to resolve the dispute expeditiously. On receipt of the notice and the undertakings, the Manager must cease consideration of the dispute The Manager has the power to decide whether a dispute falls within the Terms of Reference (Clause 4). That decision will involve consideration of any submissions made or further information provided by the member or the credit union. The Manager s decision as to whether a dispute is inside or outside of the Terms of Reference is final. 4.4 The monetary limit: its rationale, past increases and future considerations CUDRC was established in 1996 with a monetary limit of $100,000, which has not changed In 2003 and 2004, none of the cases recorded by CUDRC involved claims of more than the monetary limit. This may reflect the fact that the monetary limit is easily communicated and understood. 21

22 4.4.3 For a dispute resolution scheme to be approved by ASIC and maintain approved status it must have coverage sufficient to deal with: The majority of consumer complaints in the relevant industry and the whole of the complaint; and Consumer complaints involving monetary limits up to a specified maximum that is consistent with the nature, extent and value of consumer transactions in the relevant industry [ASIC Policy Statement ] In assessing a scheme s monetary limit, ASIC will also consider: The nature of the complaints made to the scheme; The limits operated by other schemes with similar coverage; and The desirability of ensuring consistent coverage across schemes that consider complaints about similar products or services, or have a common membership. [ASIC Policy Statements and ] Factors to take into account when considering the adequacy of CUDRC s monetary limit include: Increases in the size of housing and small business loans; Median house prices (houses are commonly the security for a guarantee); Rises in the inflation index (17.9% between June quarter 1996 and June quarter 2003); The Reserve Bank definition of small business lending (commercial loans under $500,000); 22

23 Expansion of member categories; The need to ensure that retail clients under the Corporations Act are able to access the scheme; Parity with other schemes; and Increases in jurisdiction of the lower and middle level courts (Magistrates and District or County Courts) The relevant amount in a CUDRC claim is the amount in dispute not the size of the facility or the value of the product. However, where the claim is about issues such as maladministration in the decision to lend, guarantees, poor investment advice or negligence in arranging insurance there is likely to be a direct relationship between the size of the facility or transaction and the size of the claim The monetary limit for CUDRC is generally lower than the limit for other schemes that cover similar products and services, with some exceptions. In life insurance matters, FICS can make binding determinations of up to $250,000. IOS can make non-binding Recommendations for amounts between $120,000 and $290,000. BFSO can make a binding determination in relation to any financial service for an amount up to $250, The jurisdictional limit of the District Court of New South Wales is $750,000 in civil cases. The jurisdiction of the County Court of Victoria is $200,000 in non-personal injury civil cases. Different considerations apply to court jurisdictional limits. However, it is important to bear those limits in mind when considering the monetary limit for a scheme that is intended to be an alternative to the courts. 23

24 4.5 Remedies available A Determination of the Manager can include: A sum of money which does not exceed $100,000; Where the dispute involves a privacy issue, any other non-monetary requirement that may be made under s 52 of the Privacy Act; and An order for the provision of information relating to the subject matter of the dispute The Manager may require a credit union to pay compensation to a member for loss or damage suffered as a result of the conduct of the financial services provider, up to a maximum of $100,000. Compensation may take the form of an actual cash payment or its equivalent, which may include the reduction of a loan balance, the reconstruction of a loan or the reduction of an interest rate on a loan Non-monetary remedies may include a determination that a contract or a contract term is unenforceable or should not be enforced for reasons of law or fairness. Other non-monetary remedies may form part of a negotiated settlement. They may include refinance of a debt, the provision of a service at a discounted rate or fee, a written apology or an acknowledgment of error addressed, for example, to payees of wrongly dishonoured cheques. 24

25 Chapter 5: Dispute Resolution and decision-making processes 5.1 Accessing CUDRC Members in dispute with a credit union can contact CUDRC: By telephone using the Financial Ombudsman Service (FOS) shared telephone service: or TTY (03) ; By fax: (03) By writing: to GPO Box 3, Melbourne VIC 3001 Such contact arises normally when a member of a credit union finds himself/herself in dispute with a credit union and, having attempted to resolve that dispute with the credit union or the internal dispute resolution mechanism of that credit union, makes contact with CUDRC usually upon referral by the credit union but sometimes as a result of a recommendation being made by a financial counsellor, Community Legal Centre or other organisation which might have been consulted by the member FOS is a co-operative venture between BFSO, Financial Industry Complaints Service Limited and Insurance Ombudsman Limited. It provides customers with a single access number for assistance with enquiries covered by those three schemes and also CUDRC, the Credit Ombudsman Service Limited, formerly the Mortgage Industry Ombudsman, the Superannuation Complaints Tribunal and the Insurance Brokers Dispute Scheme The CUDRC website does not provide an online dispute lodgement service. In practice, BFSO allows members to submit a dispute directly to a web 25

26 server via a secure encrypted area, which is used when CUDRC is asked to facilitate lodgement of a dispute by such a method A TTY number allows callers with a speech or hearing impediment to converse via text. An interpreting service is available for callers whose first language is not English and arrangements can be made for written material to be translated so that members can send correspondence to CUDRC in their first language. Both services are used by callers, and are thought to be an important initiative enabling all those who wish to use CUDRC to do so. The CUDRC brochure is available on the website When a person first telephones CUDRC, the case officer answering the call will assess whether the dispute is likely to fall within CUDRC s jurisdiction and if not will refer the caller to other organisations that may be able to assist. The case officer will encourage the caller to contact the credit union direct to try to resolve the dispute. The case officer provides the contact details of the area nominated by the credit union to deal with customer disputes. If the dispute appears to be within CUDRC s jurisdiction, CUDRC s postal details are also provided so that the caller can lodge a dispute if they are unable to resolve it with the credit union As an FSR requirement, licensees are required to provide details of their external dispute resolution scheme to customers. That information is generally provided in written material concerning disputes made available by credit unions to members, on credit union websites and orally by credit union employees to members If a member is unable to lodge a written dispute the case officer will take the details of the dispute over the telephone and will then send a written record of the dispute for them to verify and sign. Members can also authorise an agent to bring the dispute and communicate on their behalf 26

27 with CUDRC and the member. The agent may be a friend, family member, financial counsellor or other professional adviser. 5.2 After receipt of a written dispute When a dispute is received the details of it are entered on to CUDRC s Case Information Management System (CIMS) (see Chapter 8 for more information about CIMS and other systems). Information recorded is: Case number; Member name address and contact numbers; Credit Union complained about; Short summary of the dispute; The amount claimed; Product code(s) for the product(s) complained about; and Problem code(s) for the problem(s) complained about The case officer then assesses whether the dispute is within the Terms of Reference and seeks advice from legal counsel if necessary. If it is not within the Terms of Reference, CUDRC writes to the member explaining why it is not within jurisdiction. Appropriate contact details are also provided so that the member can pursue the dispute directly with the credit union or contact any other relevant agency or organisation that may be able to assist. However, the member is given the opportunity to respond to a letter saying that a dispute is outside CUDRC s Terms of Reference. A member can then respond by establishing that the matter is within jurisdiction, for example, by clarifying the nature of the dispute or the amount claimed If the dispute appears to be within jurisdiction, the case officer will write to the member acknowledging receipt of the dispute and explaining the 27

28 dispute resolution steps. The letter will enclose a brochure which explains the CUDRC procedures, the CUDRC Privacy brochure and an authorisation form which the member must sign and return to CUDRC. This form enables CUDRC to obtain information from and disclose information to the credit union. An authorisation form is also sent if the member wishes to bring the dispute through an agent. The case officer will also write to the credit union to give it the opportunity to resolve the dispute before further consideration by CUDRC If the dispute is from a small business, the case officer will also ask the business to sign a small business declaration and authority form which will enable an assessment to be made of whether the business is an eligible small business and will also identify the person authorised to discuss and resolve the dispute on behalf of the business If the dispute is from an individual and relates to an alleged breach of privacy, the member will be made aware of the option of referring the dispute to the Privacy Commissioner. 5.3 Stages of Resolution: referral to and response by the member The credit union has 30 days in which to either resolve the dispute or provide a response to CUDRC addressing the issues raised by the dispute and providing any documents that are relevant to the dispute. An extension may be sought but reasons must be provided There may also be exceptional circumstances where an earlier response or the fast tracking of the dispute generally will be required such as where the sale of a security property is imminent or the health of the member warrants a faster response. 28

29 5.3.3 The credit union must write to CUDRC with a response that confirms the outcome of its review of the dispute. The response will either be notification that the dispute has been settled with a copy of correspondence sent to the member or notification that the dispute has not been settled with details of the credit union s position If it appears to the case officer that the credit union s response may have resolved the dispute, the case officer writes to the member asking whether the response has resolved the dispute and if not asks the member to explain why they are not satisfied and provide any new or relevant information for consideration. If it then appears that the matter, although not resolved, may be able to be resolved fairly quickly, the case officer will refer the member s reply to the member for further consideration and may discuss the prospects for resolution with the member and the credit union. During this stage, as at all other stages, the member and the credit union are encouraged to seek to resolve the dispute with or without the assistance of CUDRC. 5.4 Stages of Resolution: Investigation Where a case remains unresolved after it has been referred to the credit union and the credit union has responded, the case will move into the investigation process. In the twelve month period to 31/3/2005, 19.3% of cases found to be within Terms of Reference were investigated When a case manager commences their investigation they will telephone or write to the member and the credit union to: Outline their understanding of the dispute as put by the member and the credit union s response and asking for correction of any misunderstanding of either the dispute or the credit union s 29

30 response; Set out the legal, industry practice or factual issues they will be addressing in the investigation; and Request any further information necessary for the assessment of the dispute After the case manager has received the requested information, there are several ways in which the dispute may be resolved Negotiated Settlement At all stages of a dispute it is open to the parties to negotiate a settlement of the dispute. The case manager will often facilitate a settlement by acting as a conduit between the parties. If a resolution is reached the terms of the settlement are set out in a Confirmation of Settlement form which is signed by the member and sent to the credit union. Sometimes the credit union will also require an additional Release and Indemnity. Members are encouraged to seek independent legal advice before signing either of these documents. In the year to 31/3/2005, a settlement was negotiated in 57 cases. (51.4% of the cases received which were within Terms of Reference) Conciliation Conference At any stage a case may be referred to a conciliation conference with the Manager or with the case manager. This can be done at the suggestion of the case manager or at the request of the member or the credit union. The conference is arranged at a location geographically convenient to the member, so in practice conciliation conferences could be held all over Australia. The member may attend alone or with a person that they trust and a legal representative may accompany them. The credit union must be represented by an officer with knowledge of the case and authority to settle 30

31 it and may also have legal representation, if the member is legally represented. If a resolution is reached the Heads of Agreement are recorded and a Confirmation of Settlement form will be sent subsequently to the member to sign. Members are encouraged to obtain independent legal advice before signing the Confirmation of Settlement and any other related documents. In the year to 31/3/2005, three cases were discussed at a conciliation conference Finding If the case is not resolved during the investigation process, the case manager will write a Finding. The majority of cases referred to investigation result in a Finding, which is a written decision on the merits, with reasons. A Finding includes: A summary of the dispute; A summary of the issues raised by the dispute; The case manager s analysis of the information, any applicable legal principles, any relevant codes, the relevant standard of industry practice and fairness; and The case manager s conclusions about the merits of the dispute and how it should be resolved The Finding is sent to both the member and the credit union. Any documents relied upon in the Finding will either be available to the parties on request or attached to the Finding. Both parties have 30 days in which to accept or reject the Finding, providing reasons for any rejection. Acceptance is acknowledged by the signing of a Confirmation of Settlement form by the member (in cases where the Finding recommends the payment of money or other compensation to the member). Members are encouraged to seek independent legal advice if they have any concerns. 31

32 5.4.8 Most Findings are subject to a quality assessment process. This involves a review of the draft by legal counsel, the general manager or a senior case manager, who will check the Finding to ensure that it identifies and addresses the relevant issues, gives appropriate weight to relevant information and is clear. 5.5 Stages of resolution: Determination A party rejecting a Finding must provide reasons which may include the following: There is some fact or matter relied upon in the Finding which is incorrect, including information provided by the other party; There is additional relevant information which may change the Finding; The analysis of the applicable law is incorrect; or Insufficient weight has been given to particular information The Manager must notify the parties of his intention to issue a Determination. Either party is free to make further submissions about the matters in dispute and has 30 days to do so If a Finding is rejected and the dispute is not otherwise resolved, the Manager will provide a Determination. This is a written decision with reasons taking into account the Finding, matters raised by either party in response to the Finding or the other party s reasons for rejecting it, and any 32

33 required legal or industry practice advice The Determination is sent to both parties. If the member rejects the Determination, there is no further right of appeal and the member must pursue the dispute elsewhere. The credit union is bound by the Determination. 5.6 Procedural fairness in practice The procedures of CUDRC are designed to ensure that the parties are given a reasonable opportunity to present their case and to have an independent decision provided in writing, with reasons, and logical analysis based on relevant information. Written reasons will clearly identify the documents or information relied upon, which will be annexed, sent to the parties, be available on request or clearly summarised in the decision. If a party requests that information be kept confidential from the other party it will not be able to be relied upon in a decision adverse to the other party (see Clause 5.9 of the Terms of Reference) The investigation process is inquisitorial. This means that the case managers and the Manager ask questions of the parties and require information from them. This is done in the context of a letter sent to both parties at the commencement of the investigation setting out a summary of the dispute and the credit union s response and the issues identified as relevant. The letter gives both parties the opportunity to correct the summary of the dispute and provide further relevant information Both parties may appeal the Finding and provide any new or additional relevant information, which is considered before the issue of a Determination by the Manager. 33

34 5.6.4 The quality assessment process, described in 5.4.8, is designed to ensure that all relevant information is taken into account in reaching a decision, and is given its appropriate weight, and the decision is properly made on the balance of probabilities. The Manager is not bound by the rules of evidence and may consider information provided by either party. It is important, therefore, to ensure that such information is given its appropriate weight There is an expectation that parties will participate in the process in good faith. In addition, clauses 5.5 and 5.6 of the Terms of Reference allow the Manager to require a credit union to provide any information the Manager considers relevant to a dispute and require the credit union to comply with such a request as soon as reasonably practicable except where: to do so would be in breach of a duty of confidentiality owed to a third party; and the credit union has used its best endeavours to obtain consent to disclosure. In addition, if legal professional privilege applies to documents CUDRC will not compel their disclosure. 5.7 Fairness in outcomes How is independence of mind maintained when a scheme is funded by industry? This is a question that is raised by some members and their representatives and reflects a legitimate concern with ensuring that the processes and outcomes of EDR schemes such as CUDRC are fair. In the case of CUDRC, a number of structural and procedural factors operate to 34

35 ensure that the Manager and his staff are able to make independent decisions and are supported in maintaining independence: 35

36 The Manager is appointed by and answerable to a Board, with equal representation of industry and consumer directors and an independent Chairman; The staff, whilst employed by BFSO, are answerable to the Manager not to credit unions. The Board does not and cannot interfere in decisions about individual cases made by the Manager or his staff; CUDRC is also accountable to ASIC, which is an independent government agency, as well as being generally accountable to the Australian community; Quality and fairness in decision-making are assisted by the quality assessment processes of CUDRC; Decisions about changes to the Terms of Reference are the subject of consultation with government, industry and consumer representatives; The policies, procedures and operations of the scheme are transparent and information about them is available on the web site Case studies are published in the Annual Report and from time to time in the Bulletins issued by the scheme; and All staff involved in decision-making receive training in the principles of natural justice and their application. Independence is reinforced by the Manager and by the culture of the organisation. Staff are supported in asserting independence where necessary. The Board receives copies of Determinations made by the Manager. 36

37 Chapter 6: Raising Standards: Ancillary roles of an EDR scheme 6.1 Identifying and resolving systemic issues CUDRC Terms of Reference (Clause 12), and ASIC Policy Statement 139, require CUDRC to identify systemic issues and serious misconduct, obtain a response from the relevant credit union and report to ASIC In broad terms, a systemic issue is an issue, which will have a material effect on a class of individuals or small business beyond the parties to the dispute. Serious misconduct is conduct that may be fraudulent, grossly negligent or involve wilful breaches of applicable laws Examples of systemic problems might be: Inadequate or misleading disclosure in documents given to customers relating to a particular product or service; Application of an undisclosed or inadequately disclosed fee or charge to members accounts or application of a fee in breach of the Consumer Credit Code; Breaches of privacy affecting a group of members caused by system malfunction or human error Examples of serious misconduct might be: Repeated failure to comply with the credit union s obligations to CUDRC or to comply with a relevant Code or law. 37

38 Unwarranted threats or seriously inappropriate behaviour towards a member Systemic issues are identified as early as possible and: Recorded in the systemic issues register by the CUDRC Systemic Issues Manager as possible systemic issues; Notified to staff so that they can identify cases raising the issue; Referred to the credit union for a response, including information necessary to determine whether a systemic issue in fact exists and, if so, what solution is proposed to rectify the issue and identify and compensate affected customers; If confirmed as a systemic issue, a notable case code is created on the CUDRC case management database for all cases which raise the issue; Discussed with the credit union with the aim of resolving the issue, including any necessary system or training changes; identification and compensation of affected members, including any necessary advertising; communication with affected members about the issue; and a timeframe for implementation Systemic issues reporting is described below. Rectification of a systemic issue will of course minimise the risk of a class action or regulatory action but the process and its benefits in terms of member satisfaction and the maintenance of trust appear to be well understood by credit unions. 38

39 6.1.7 Whilst a small number (3) of possible systemic issues have been identified by the Manager since 1 September 2003, only one of which turned out to be an issue which was reported to ASIC, but the Manager confirmed that it had been dealt with to his satisfaction. 6.2 Member and external education CUDRC contributes to the education of credit unions about issues raised in disputes and dispute resolution processes in a number of ways The Manager and his Case Manager, Legal Counsel and EFT Team Leader make presentations to and conduct training workshops with credit union staff on a regular basis on issues such as the EFT Code, the procedures and processes of CUDRC and other relevant issues as they arise Since 2002 CUDRC has published Bulletins which are addressed to all credit unions and other interested stakeholders or observers and are available on Guidelines to the CUDRC Terms of Reference are available on its website and, in practice, the BFSO Policies and Procedures Manual, which is available on its website, contains an explanation of the procedures as well as the policies followed by CUDRC in relation to particular types of disputes which frequently arise in the financial services sector. They provide commentary on the legal principles and industry practice issues that apply to those disputes and may set out the questions that will be asked in an investigation. The policies are designed to alert both members and credit unions to the approach that will be applied to particular kinds of disputes to encourage the parties to resolve the issue without necessarily involving CUDRC. They also assist transparency and consistency in the decision-making processes. 39

40 Chapter 7: Systems, Data Collection and Reporting 7.1 The use of technology in the CUDRC processes CUDRC uses the purpose built Case Information Management System (CIMS) to log and track all telephone enquiries and written disputes. The CIMS application has been continually developed and improved since 1990, when it was developed for BFSO In 2000, CIMS was rebuilt on a commercially available database engine. By using a commercially available database in which to store the data, BFSO is able to use sophisticated off-the-shelf reporting tools to provide both external stakeholder reporting and internal management reporting. The same system is used by CUDRC Given the management by BFSO of CUDRC s affairs, CUDRC uses the BFSO telephone systems which are based on a Nortel Meridian Option 11 PABX. The PABX has an integrated Automatic Call Distribution function (ACD) and a Voice Mail service. ACD queues are managed via the Avotus Control Centre software package. Incoming calls are distributed to CUDRC via the Financial Ombudsman Service Call Centre ( FOS ) described above (5.1.2) Calls are transferred to the CUDRC enquiries queue by the FOS staff. If case officers are on other calls, callers receive an on-hold message via the telephone system message service (Miran). Appropriate messages are provided to callers at designated intervals Online subscription research resources and selected Internet sites are available to all staff from their desktop computers and are used not only for 40