As a Sydney-based finance broking firm has its credit licence cancelled by ASIC for failing to renew its membership of an approved external dispute resolution scheme (EDR), Australian organisations have been put on warning that poor internal communication can lead to major compliance headaches.
Under the National Consumer Credit Protection Act 2009 all credit licensees must be a member of an ASIC approved EDR but, due to non-payment of membership fees, Dean Mooney Pty Ltd had its EDR membership cancelled by the Financial Ombudsman Service.
As Dean Mooney wasn’t a member of the Credit Ombudsman Service Limited, the only other ASIC approved EDR scheme, ASIC decided to cancel its credit license.
“It’s a good example of the left hand not knowing what the right hand is doing. In big firms, a lack of communication can be its downfall. Someone forgets to renew the membership or tell colleagues that it’s up for renewal, and that’s when ASIC cracks down,” QED Risk Services director told Corporate Risk & Insurance sister title Australian Broker Online.
He added that lying to ASIC – if caught out – makes matters even worse.
“It seems to be a big thing with ASIC. If you’re caught out, and lie about it, you’ll face harsher penalties. It’s much better to be transparent and open,” he said.
ASIC Commissioner Peter Kell said that EDR schemes “provide consumers with alternatives to legal proceedings in respect of resolving complaints with their credit service providers, therefore, when a credit licensee fails to maintain membership in such a scheme, ASIC will act to protect consumers by cancelling the entity’s credit licence”.
Dean Mooney has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.
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