Australian regulators weekly wrap — Monday, 15 May 2023

Keeping on top of the latest financial services regulatory & compliance trends?

Investing time in your professional development within a rapidly changing financial services industry is challenging. To meet that challenge, the Australian regulators weekly wrap is designed to keep you at forefront of your practice by quickly setting out the top 5 developments from the past week, analysis and practical considerations for the future.

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1. Credit (ASIC): ASIC has warned credit providers and debt management firms that strong, targeted action against predatory lending, high-cost credit and misconduct impacting consumers experiencing financial difficulty will occur. (It doesn’t surprise me — I have done some research, and some are out there charging 47% interest!) ASIC Deputy Chair Sarah Court swill sharpen its focus on credit providers and debt management firms, stating: ‘We will continue to use our full suite of powers to protect consumers looking to access credit. This could be via a stop order for breaching the financial product design and distribution requirements or could be warning the company directly via our monitoring and surveillance programs.’ It follows ASIC’s successful action against ClearLoans earlier in the year, where its related entities failed to act efficiently, honestly and fairly when dealing with debtors in financial hardship and commenced court proceedings to enforce credit contracts in a state other than where the borrower/guarantor lived (that judgment is here).
2. UCT (ASIC): ASIC has sued HCF Life, alleging that the ‘pre-existing condition’ term in the contracts is an unfair contract term and could mislead the public. That is because the term purports to deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner forms an opinion that symptoms of the condition existed prior to the customer entering into the contract, even if a diagnosis had not been made, and the term suggests that HCF Life can deny coverage even if the customer was not aware of the pre-existing condition. s47 of the Insurance Contacts Act 1984 (Cth) prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the customer was unaware of the condition when taking out the insurance, and a reasonable person in the circumstances could not be expected to have been aware of the condition. The concise statement is here.
3. Greenwashing (ASIC): ASIC has made 35 interventions in response to its greenwashing surveillance activities from 1 July 2022 to 31 March 2023. (We have also heard of ASIC calling out ‘green hushing’ to super companies who do no put enough ESG information on their websites.) It is a really useful document, as it compiles examples of ASIC’s regulatory interventions with reference to the following themes: net zero statements and targets; use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’ fund labels, and; scope and application of investment exclusions and screens. My top read for the week for all funds!
4. Privacy commissioner (Government): there will be a standalone Privacy Commissioner to deal threats to data security, and the increasing volume and complexity of privacy issues. Not much information on this role yet, though the Government has said it will have the “…resources and powers to meet the ongoing challenges of the digital age and protect their personal information.
5. ”AI regulation (UK): Lord Sales, Justice of the UK Supreme Court, gave a great speech on the regulation of AI in the public sector. There are about 40 algorithms automating parts of the UK public sector, increasing speed, efficiency and decreasing cost. The key problems identified by Lord Sales include: 1) opacity of automated decision-making; 2) mistakes e.g. systems insufficiently flexible or sensitive to accommodate themselves to the messy facts of individual cases e.g. the robo-debt case in our own country; and, 3) our interaction with the state may be devalued or degraded by its mechanisation. We can all relate to this one, even if just by the number of machines we need to get through to talk to a ‘real’ person at bit Government departments. Lord Sales then delves into the issues in regulating these issues, determining that “If a public body does have the power to adopt an automated system, that does not mean that the system is ipso facto lawful. The adoption of the system will be subject to other duties, arising under (i) administrative law, (ii) human rights law, (iii) equality law, and (iv) the law of data protection.” An utterly fascinating reading to start your week!

Thought for the future: please go through your T&Cs, and PDSs and check them for UCT issues. Take a very conservative approach. Reach out to us and get a copy of our UCT checklist if it will help — old assets i.e. ones not reviewed post October 2021 are at risk!