Mackay Chapman August 2024 ASIC Update

In this month’s ASIC update:

• American Express ordered to pay an $8 million penalty for failing to meet its design and distribution obligations;
• ASIC and OAIC sign information-sharing MoU to accelerate data and privacy breach responses;
• Big banks to refund millions in fees to low-income customers following ASIC report;
• ASIC and APRA issue final rules and information for the Financial Accountability Regime;
• Federal Court declares PayPal Australia used an unfair contract term; and
• ASIC urges AFS licensees to correct records on the Financial Advisers Register.

American Express Ordered to Pay $8 Million Penalty for Failing to Meet its Design and Distribution Obligations

ASIC has levied a significant $8 million penalty on American Express for misconduct related to its co-branded credit cards sold at David Jones stores. The company was found to have breached consumer protection laws by failing to adequately assess the cards' suitability for customers. High cancellation rates indicated the cards were inappropriate for the target market, but Amex neglected to rectify the situation. This case underscores the importance of financial institutions maintaining rigorous oversight of their product offerings to ensure consumer protection.

‍ASIC and OAIC Sign Information-Sharing MoU to Accelerate Data and Privacy Breach Responses

ASIC and the privacy watchdog OAIC have joined forces to enhance protection against data breaches and cybercrime. The agencies will share information to improve their response times and capabilities. This collaboration aims to safeguard consumers and businesses in Australia's increasingly digital landscape.

More here.

‍Big Banks to Refund Millions in Fees to Low-Income Customers Following ASIC Report

ASIC has ordered four major banks to refund over $28 million to low-income customers, including a significant portion to First Nations communities. The banks were found to have charged excessive fees to customers who could least afford it. 

ASIC's investigation revealed that millions of Australians were trapped in high-fee accounts due to complex banking systems and limited options. As a result of the regulator's intervention, banks will not only refund customers but also implement changes to prevent similar issues in the future.

ASIC and APRA Issue Final Rules and Information for the Financial Accountability Regime

ASIC and APRA have released a final information package to help insurers and superannuation trustees prepare for the Financial Accountability Regime (FAR) coming into effect on March 15, 2025.

This package includes:

Final Key Function Descriptions: 

These define critical roles within insurance and superannuation companies and ensure clear accountability.

Updated Guidance: 

Information papers, templates, and instructions have been revised to reflect the finalised regulations.

Consultation Response Summary: 

A joint response from ASIC and APRA addresses key issues raised during public consultation.

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Resources are available on both ASIC and APRA websites. The information package completes the suite of FAR guidance materials for the insurance and superannuation sectors.

Court Declares PayPal Australia Used an Unfair Contract Term

The Federal Court has ruled that a term in PayPal's contracts with small businesses was unfair. The term allowed PayPal to retain erroneous fees if not disputed within 60 days. This decision protects over 600,000 small businesses who used PayPal between September 2021 and November 2023.

ASIC successfully argued that the term gave PayPal an unfair advantage and placed an unreasonable burden on small businesses. PayPal has been ordered to stop using the term and pay ASIC's legal costs. This case highlights ASIC's commitment to protecting consumers and small businesses from unfair contract terms.

‍ASIC Urges AFS Licensees to Correct Records on the Financial Advisers Register

ASIC has identified inaccuracies in the information provided about financial advisors on the Financial Advisers Register. Following a recent review, the regulator discovered errors and inconsistencies in the qualifications and training marked as 'approved' for many advisors. Additionally, some contact details for financial advisors were found to be outdated.

To rectify these issues, ASIC urges all Australian Financial Services licensees to immediately verify the details of their financial advisors on the register. Licensees should pay particular attention to the accuracy of approved qualifications, tax advice eligibility, business address, and telephone number. Any incorrect or outdated information must be corrected promptly through ASIC Connect.

The regulator has emphasised the seriousness of providing false or misleading information and outlined potential penalties for non-compliance. To ensure the accuracy of qualification information on the register, a compliance program will be implemented on August 1, 2024.

In response to these findings, ASIC has changed the public-facing Financial Advisers Register. To reduce confusion for consumers, the display of whether a financial advisor's qualifications meet the requirements of an 'approved' qualification has been removed.

ASIC has also made available a one-time dataset to assist licensees in identifying qualifications currently marked as 'approved' on the register. This dataset will be accessible until July 31, 2024.

Find out more here.

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.