Credit Ombudsman Service. Guidelines to the. Credit Ombudsman Service Rules

Credit Ombudsman Service Guidelines to the Credit Ombudsman Service Rules 2nd Edition Effective: 21 February 2007 Credit Ombudsman Service Limited ACN 104 961 882 PO Box A252 Sydney South NSW 1235 www.creditombudsman.com.au

CONTENTS Click on the page number to jump straight to the text 1. Introduction 6 1.1 About the Credit Ombudsman Service 6 1.2 What does the Credit Ombudsman do? 6 1.3 About these Guidelines 6 1.4 What if the Consumer only wants some disciplinary action taken against the Member? 7 1.5 Trying to resolve the Consumer's complaint directly with the Member is an essential preliminary step before COS considers a complaint 7 The underlying principle 7 How will COS work out if the Consumer has attempted to resolve their complaint? 8 What if the Consumer is not sure of the procedure to follow? 9 What if the Member says the Consumer has not attempted to resolve the Consumer's complaint with the Member? 9 2. COS Procedures 10 2.1 Procedural Fairness 10 2.2 COS's approach to dispute resolution 10 2.3 Example of investigative approach 11 How will COS deal with a Consumer's complaint about costs they have been charged for early termination of their Fixed Rate Loan ( Break Costs ) 11 2.4 What evidence does COS have regard to? 13 Status of previous COS decisions 13 3. Principles considered by COS in determining a complaint 14 3.1 The Benchmarks - Rule 49 14 3.2 Good Industry Practice 14 3.3 Fairness 15 2

3.4 Flexibility 15 4. Who can make a complaint to COS? 16 4.1 Who can make the complaint? - Rule 24 16 4.2 Individuals 16 4.3 Small Businesses 16 4.4 Representatives 17 4.5 Obstruction etc. by representative 20 4.6 Who is a Consumer? - Rule 142 definition of "Consumer" 21 4.7 What does an individual need to tell and give COS before COS will deal with their complaint? 21 4.8 What is a Small Business? - Rule 142 definition of "Small Business" 21 4.9 What does a Small Business need to tell and give COS before COS will deal with its complaint? 22 4.10 When will COS regard an individual as not qualifying as a Consumer? - Rule 142 definition of "Consumer" 22 4.11 Can someone who is not a Consumer make a complaint to COS? - Rules 25 and 26 23 4.12 What are Member Services? - Rule 142 definition of "Member Services" 23 4.13 Member Services also covers certain incidental things - Rule 142 definition of "Member Services" 24 4.14 When COS will deal with a complaint not lodged by all eligible Consumers 25 4.15 Dealing with a complaint once and for all 25 5. Complaints COS will deal with 26 5.1 What complaints does COS cover? - Rules 27 and 28 26 5.2 Rule 28 - Breach of relevant laws 27 5.3 Raising a new ground of complaint 28 6. Complaints COS will not deal with 30 6.1 What complaints doesn't COS cover? - Rule 34 30 6.2 Rule 34(a) 32 6.3 Rule 34(b) 32 3

6.4 Rule 34(c) 32 6.5 Rule 34 (d) 32 6.6 Rule 34(e) 35 6.7 Rule 34(f) 35 6.8 Rule 34(g) 36 6.9 Rule 34(h) 36 6.10 Rule 34(i) 36 6.11 Rule 34(j) 36 6.12 Rule 34(k) 37 6.13 Rule 34(l) 37 6.14 Rule 34(m) 37 6.15 Rule 34(n) 38 6.16 Rule 34(o) 39 Avoiding a multiplicity of proceedings 39 Where proceedings current 40 When do proceedings "commence"? 40 Prior proceedings discontinued 40 Objection Notices 41 Proceedings commenced by Member on or after date COS receives the complaint - Rules 103 to 105 41 Proceedings commenced by Consumer on or after date COS receives the complaint 41 6.17 Rule 34(p) 42 6.18 Rule 34 (q) 42 Complaints involving allegations of criminal activity 42 Other more appropriate EDR scheme 43 6.19 Rule 34(r) 43 6.20 Rule 34 (s) 43 6.21 Rule 34(t) 44 Examples of cases where COS will not deal or continue to deal with the Consumer's complaint 44 Dealing with a complaint once and for all 45 7. Compensation for loss 47 7.1 What compensation can the Consumer seek? - Rules 31 to 33 47 7.2 What is "Direct Loss"? 47 Interest, fees and charges accrual 49 Legal Fees 49 Other losses not regarded as "Direct Loss" 50 4

7.3 What other loss is recoverable? 50 Indirect loss or disadvantage 50 Legal or other professional costs 51 Non-financial loss or disadvantage 52 7.4 What kinds of orders can the Consumer ask COS to make? 53 8. Identifying the correct "respondent" to the complaint 54 8.1 Complaints can only be made about the Member's conduct 54 8.2 Joining a Third Party Member - Rules 106 to 110 54 8.3 An important checklist for Members about the correct "respondent" 57 9. What happens when the parties come to an agreement 59 9.2 What is a Settlement Agreement? 59 10. Communications between COS and the parties to the complaint 62 10.1 How COS communicates with the parties 62 10.2 Offensive and defamatory material 62 11. Extensions of time 63 11.1 Timeframes for Members' responses to Consumer complaints to COS 63 12. Credit Industry Advisors 65 12.1 COS can get advice about "good practice" in the Credit Industry 65 13. Legal representation 66 13.1 For a Member at a Hearing or Conciliation Conference 66 14. "Service" of correspondence and/or documents 67 5

1. Introduction 1.1 About the Credit Ombudsman Service Credit Ombudsman Service (COS) is an External Dispute Resolution Scheme (EDR Scheme) established by Credit Ombudsman Service Limited (the Company). COS provides Consumers with an accessible alternative to legal proceedings in a Court or Tribunal for the resolution of their complaints against members of the Company (Members). COS's dispute resolution services are free to a Consumer. COS deals with complaints against Members under rules called the Credit Ombudsman Service Rules (the Rules or these Rules). The Rules are published on the Company's web site at www.creditombudsman.com.au. COS is approved by the Australian Securities and Investments Commission (ASIC) under its Policy Statement relating to approval of EDR Schemes. 1.2 What does the Credit Ombudsman do? The Credit Ombudsman is COS's decision maker and the person who can make: any decision allowed for under the Rules, including a decision about whether or not a complaint is within COS jurisdiction; any order allowed for under the Rules; a determination; and a binding Award. The Credit Ombudsman: has the powers, functions and duties conferred by the Company's Constitution and these Rules, and as conferred and delegated by the Board from time to time; has overall management responsibility for COS; establishes systems and procedures to ensure COS's efficient and effective operations in accordance with the Rules. 1.3 About these Guidelines These Guidelines explain: how the Credit Ombudsman Service Rules apply to a complaint; and the policies COS applies in exercising the discretions COS has under the Rules. They need to be read with the Rules, and if there is any inconsistency the Rules override these Guidelines. 6

Many words and phrases used in the Rules and in these Guidelines have a special meaning. These are set out in the Dictionary at Rule 142 of the Credit Ombudsman Service Rules. 1.4 What if the Consumer only wants some disciplinary action taken against the Member? If the Consumer is not claiming compensation or is not seeking orders against a Member, they cannot make a complaint to COS. If what the Consumer wants is some disciplinary action against the Member and that Member is a member of the Mortgage & Finance Association of Australia (MFAA) or another Recognised Industry Body or is otherwise subject to disciplinary action by a Recognised Disciplinary Process, then the Consumer should send their complaint to the MFAA, that Recognised Industry Body or that Recognised Disciplinary Process. In the case of a MFAA member, the MFAA Tribunal will deal with the Consumer's complaint under the MFAA s own Disciplinary Rules. In the case of a member of a Recognized Industry Body, that Recognized Industry Body will deal with the Consumer's complaint through its own disciplinary tribunal or process. In the case of a Member who is subject to the rules of a Recognized Disciplinary Process, then that body will deal with the Consumer's complaint under its own rules. 1.5 Trying to resolve the Consumer's complaint directly with the Member is an essential preliminary step before COS considers a complaint The underlying principle A fundamental principle underlying the operation of the Credit Ombudsman Service Rules (the Rules) is that the Consumer must first of all try to resolve their complaint directly with the Member concerned before referring their complaint to Credit Ombudsman Service (COS). Rule 41 of the Rules provides: "Before taking a complaint to COS the Consumer must first of all try to resolve their complaint with the Member concerned using the Member's Internal Dispute Resolution (IDR) procedures. COS will not consider the complaint unless the Consumer has first attempted to resolve it with the Member." Rule 41 imposes a positive obligation on COS to satisfy itself that the Consumer has made a genuine attempt to resolve the complaint directly with the Member concerned. The Rules require every Member to have in place procedures called IDR Procedures. The Member 7

must give the Consumer a copy of the Member's IDR Procedures promptly if the Consumer asks for them. However, neither the Rules nor the Member's IDR Procedures require face-to-face dealing between the Consumer and the Member. The Consumer must make a genuine attempt to resolve their complaint directly with the Member, for example by the Consumer providing to the Member all essential information and documents and written statements that may properly and reasonably be requested by the Member in attempting to resolve the complaint. How will COS work out if the Consumer has attempted to resolve their complaint? Before dealing with a complaint, COS will take steps to satisfy itself that the Consumer has in fact genuinely attempted to resolve their complaint directly with the Member. When COS receives a complaint COS will ask the Consumer to confirm that they have tried to resolve their complaint directly with the Member. COS will also contact the Member concerned to determine whether or not the Consumer has tried to resolve their complaint directly with that Member. If: the Consumer does not confirm that they have tried to resolve their complaint directly with the Member; or if other circumstances indicate that the Consumer has not tried to resolve their complaint directly with the Member; the complaint will not be dealt with by COS until the Consumer has done so. However, if at any time COS is satisfied that the Consumer has genuinely attempted to resolve their complaint directly with the Member, but that the Member has failed to respond to the Consumer, COS may: decide that the Consumer has satisfied the requirement for preliminary IDR; and if the Consumer has not already sent a written complaint to COS, invite the Consumer to do so. Without limiting the circumstances in which COS may decide that the Consumer has tried to resolve the matter with the Member, COS may consider whether: the Consumer contacted the Member in relation to their complaint; the Member failed to acknowledge the Consumer's complaint - for example, did the Member return the Consumer's phone calls within a reasonable time? the Member did not respond to the Consumer's complaint more than 45 days have passed since the Consumer lodged their complaint with the Member. in all the circumstances, the Consumer's actions were a genuine attempt to tell the Member about the complaint or that the Consumer wanted to make a complaint. 8

If COS receives a written complaint from the Consumer where it would appear that no attempt has been made by the Consumer to resolve the complaint, COS may still send the written complaint to the Member to facilitate resolution of the Consumer's complaint through the Member s IDR Procedures. COS will exercise this discretion in the limited circumstances where: any attempt to resolve the complaint through the Member s IDR procedures would be unsuccessful because COS is satisfied that the Member does not have complying IDR Procedures in place; or the Consumer is unable reasonably to submit the written complaint to the Member. What if the Consumer is not sure of the procedure to follow? If the Consumer is uncertain about the procedure to follow, COS will, if it thinks it appropriate, tell the Consumer what they need to do to have their complaint dealt with under the Member's IDR Procedures. What if the Member says the Consumer has not attempted to resolve the Consumer's complaint with the Member? In order to avoid delays in dealing with a Consumer's complaint, any Member who proposes to dispute the fact that the Consumer has tried to resolve the complaint directly with the Member must do so by written notice to COS within 14 days of the Member being notified of the Consumer's complaint ("IDR Non-compliance Notice"). Where appropriate COS will refer the Member's IDR Non-compliance notice to the Consumer for comment and the Consumer's response, if any, must be received by COS within 14 days. COS will make a determination on the IDR Non-compliance Notice as soon as practicable. A finding by COS that the Consumer has tried to resolve their complaint directly with the Member, notwithstanding the Member's IDR Non-Compliance Notice, is without prejudice to the Member's rights under the Rules. If COS is satisfied that the Consumer has not tried to resolve their complaint directly with the Member, COS will: tell the Consumer this invite the Consumer to try to resolve their complaint directly with the Member if appropriate, tell the Consumer what needs to be done to have their complaint dealt with under the Member s IDR Procedures; and defer taking any action in relation to the complaint other than to record the fact of its receipt and to retain on file correspondence and documents received from both the Consumer and the Member in relation to the matter. 9

2. COS Procedures The procedures COS follows in dealing with complaints are detailed in a separate document called "Credit Ombudsman Service Procedures" which is published on the Company s web site at www.creditombudsman.com.au. 2.1 Procedural Fairness COS's procedures are designed to give both the Consumer and the Member (party or parties) a reasonable opportunity to present their case before COS makes any: Determination (COS's decision about the merits of a complaint); or Award (a Determination that is binding on a Member). This means that COS: keeps each party informed of the matters it is considering; allows each party a reasonable time to respond to those matters; and discloses to each party the substance of information that it relies upon in making any Determination and gives the party affected the opportunity to respond to that information. 2.2 COS's approach to dispute resolution COS adopts an investigative approach to Dispute Resolution. Therefore COS: actively seeks out relevant information by asking questions of the parties; and requires the parties to provide relevant information to COS. COS expects parties to act in good faith in presenting all information that is relevant to resolving the complaint. A party is required to present all relevant information to COS even if that information: is not; or the party believes or suspects that the information is not; favourable to their case. 10

Parties are required to comply with all reasonable requests from COS to provide information. 2.3 Example of investigative approach How will COS deal with a Consumer's complaint about costs they have been charged for early termination of their Fixed Rate Loan ( Break Costs ) COS regards a complaint concerning early termination payments for Fixed Rate Loans otherwise known as a Break Costs Complaint as a complaint requiring a rigorous process of information gathering. Often, a complaint against a Broker Member concerning Break Costs will not fall within COS jurisdiction because: Break Costs are determined by the Lender, and the Broker Member has no control over that process full disclosure has been made to the Consumer in the Lender s Credit Contract, and the Broker Member has adequately warned the Consumer about the Break Costs formula set out in the Lender's Credit Contract. Despite this, a Consumer's complaint may fall within COS jurisdiction if in fact the complaint is that the Broker Member misrepresented to the Consumer the operation and effect of the Break Costs formula set out in the Lender's Credit Contract. In all cases of a complaint to COS, COS will initially seek to establish whether or not the complaint is within COS jurisdiction. However, a complaint that initially may appear to be within COS jurisdiction may on closer examination be found to fall outside COS jurisdiction. Conversely, a complaint that initially on its face was not within COS jurisdiction may on further investigation be identified as one coming within COS jurisdiction. Therefore upon receipt of a Break Costs Complaint, COS will inform the Consumer that their complaint will be received provisionally until the matter of jurisdiction can be finally determined. COS will, in addressing both the issue of jurisdiction and the need to secure full relevant details of a Break Costs Complaint, address the following inquiries to the parties concerned: To the Consumer: what does the Consumer say that the Broker Member said to the Consumer about the consequences of early termination of their Fixed Rate Loan? what documents where shown to or handed to the Consumer which the Broker Member said related to the consequences of early termination of a Fixed Rate Loan? 11

the consumer will be asked to provide to COS a full copy of each of these documents. To the Broker Member: is there any written record of the discussions about the Loan or Break Costs? provide a full copy of each such written record does the Broker Member specifically recall the Consumer's Loan? what does the Broker Member say he or she said to the Consumer about the consequences of early termination of the Fixed Rate Loan? if the Broker Member can t recall the Consumer's specific Loan what was the Broker Member s usual practice and what was usually said to customers about the consequences of early termination of Fixed Rate Loans? obtain full details of the Broker Member's experience with Fixed Rate Loans at the time that the Consumer's Credit Contract was signed obtain full details of training sessions provided by the Lender to the Member Broker in respect of the Fixed Rate Loan entered into by the Consumer obtain a full copy of relevant extracts from Lender's promotional brochures, training manuals etc how long has the Fixed Rate Loan product taken up by the Consumer been on the market? General Information to be provided: were any what if scenarios discussed between the Consumer and the Broker Member? was any sample calculation carried out? produce a copy of any sample Break Cost calculation carried out was any publication provided to the Consumer dealing with Break Costs generally or explaining the formula for calculation for Break Cost? Clarity of calculation: how clear is the documentation made available to the Consumer by the Broker Member Opportunity: did the Consumer have reasonable opportunity to obtain advice about Break Costs? did the Broker Member recommend that the Consumer take the opportunity of taking independent advice of the consequences of early termination of Fixed Rate Loans? 12

Previous Experience with Fixed Rate Loans: has the Consumer previously had a Fixed Rate Loan? has the Consumer previously paid an amount for early termination of a Fixed Rate Loan? Good Industry Practice: what was the practice of other Broker Members in the Credit Industry at the time regarding drawing attention to or explaining the consequences of early termination of Fixed Rate Loans? 2.4 What evidence does COS have regard to? COS is not bound by any legal rules of evidence. COS tries to resolve the complaint with as little formality and technicality as possible but consistent with achieving procedural fairness as regards both the Consumer and the Member. The procedures followed by COS are not the same as those of a Court. Although COS may convene a Hearing or a Conciliation Conference which the parties attend, COS does not have the power to take any evidence on Oath nor to cross-examine any of the parties. Therefore in practice, COS deals with information rather than formal evidence which is supplied by the parties. COS is entitled to draw inferences and conclusions based on information supplied by the parties. Information supplied by the parties is assessed on the balance of probabilities. If a party presents a Statutory Declaration or other document purporting to be sworn testimony, COS may give some additional weight to the matters set out in that document. However COS is cautious of such information because it is not in a position to impose any penalty on a person who provides a false Statutory Declaration and of course COS cannot test information provided by examining the person under oath. 2.5 Status of previous COS decisions No COS decision creates or should be taken as creating a binding precedent when it deals with another complaint. However, COS will give each party a copy of any COS policy that is relevant to the type of complaint made by the Consumer. 13

3. Principles considered by COS in determining a complaint - Rules 49 to 51 3.1 The Benchmarks - Rule 49 In dealing with a complaint COS considers these factors or "benchmarks": relevant legal requirements; the Mortgage & Finance Association of Australia (MFAA) Code of Practice or other Recognised Code of Practice; good practice in the Credit Industry; and fairness in all the circumstances. These benchmarks apply at all stages of COS dealing with a complaint. This includes: determining if the complaint is covered by COS; assessing the merits of the complaint; making recommendations to the parties about resolving it; making a Determination; making an order; and making an Award. 3.2 Good Industry Practice In considering what is good practice in the Credit Industry, COS: may consult within the Credit Industry; and may have regard to, but is not bound by, advice from other persons (including but not limited to those in the Credit Industry) COS regards as suitably qualified to give that advice; and has regard to, but is not bound by: Practice Standards set out in the MFAA Code of Practice; or the relevant provisions of another applicable Recognised Code of Practice; and does not apply its own subjective assessment, but applies an objective assessment having regard to: relevant Codes of Practice; and evidence about what the Credit Industry regards as good practice. If it is appropriate, COS obtains expert advice on matters of a technical nature that arise in relation to any complaint. 14

When COS asks for outside advice, COS doesn't reveal the identity of the parties unless: COS believes it is necessary to do so to ensure that the complaint can be properly dealt with; and each of the parties consents. See section 12 for more information on persons giving advice to COS. When COS considers a complaint against a Member who is not a member of the Mortgage & Finance Association of Australia (MFAA) or any other Recognised Industry Body (eg. Finance Brokers Association of Australia (FBAA)) and the question of what is good practice in the Credit Industry arises, COS has regard to, but is not bound by, the Codes of Practice of the MFAA and the FBAA to the extent to which COS regards them as applicable. 3.3 Fairness COS is also obliged to have regard to fairness in all the circumstances. In considering this benchmark COS does not disregard the law, relevant Codes of Practice or established good practice in the Credit Industry. The benchmark of fairness in all the circumstances allows COS to modify the strict application of relevant legal principles with a consideration of principles of equity and good conscience. COS regards the benchmark of fairness in all the circumstances as being equally applicable to both the Consumer and the Member. 3.4 Flexibility In applying the four benchmarks COS may: consider that a Member s conduct should meet a higher standard than that set by strict application of the law because of the requirements relating to: industry codes of practice; and good practice in the Credit Industry; adopt a degree of flexibility in decision making where the true facts may be uncertain - as COS cannot cross examine people on the statements they have given or the documents they have provided, COS will draw whatever conclusions as to the facts of the matter it thinks are reasonable having regard to the statements given and all the information available to COS. 15

4. Who can make a complaint to COS? 4.1 Who can make the complaint? - Rule 24 Rule 24 provides: A complaint can be made to COS about Member Services provided by a Member if: (a) the complainant is a Consumer; and (b) in relation to those Member Services, the Consumer has dealt with a Member: (i) as a Borrower or prospective Borrower; or (ii) as a Loan Guarantor or prospective Loan Guarantor. 4.2 Individuals COS can only consider a complaint that is lodged by, or on behalf of the Consumer who meets the criteria in Rule 24. If 2 or more Consumers want to lodge a complaint about the same subject matter in respect of the same Member, all those Consumers must sign the complaint and all other consents and authorities required by COS. If COS is uncertain whether or not all Consumers have lodged the complaint, or if a Consumer refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person or persons lodging the complaint are legally entitled to do so; and there is no legal impediment (such as pending or current proceedings before a court or tribunal or other legally qualified body) to COS accepting and dealing with the complaint. 4.3 Small Businesses If the complaint is being lodged by a Small Business that is a corporation (ie. an incorporated company) the complaint and all other consents and authorities required by COS must be signed by: a director; or the company secretary; with the authority of a Board resolution or otherwise as permitted by the corporation's Constitution. COS will not accept the complaint until it is given a true copy of the Board resolution or Constitution. If the Small Business is not a corporation, all proprietors must sign the complaint and all other consents and authorities required by COS. However, COS will not require all to sign if COS is satisfied that where only 1 proprietor has signed, all proprietors have authorised the 16

proprietor to sign and have consented to COS conducting the COS process in relation to the complaint. If COS is uncertain whether or not all directors (where a corporation) or all proprietors (where not a corporation) have authorized the lodging of the complaint and consented to COS conducting the COS process in relation to the complaint, or if a director or proprietor refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person lodging the complaint is legally entitled to do so; and there is no legal impediment (such as pending or current proceedings before a court or tribunal or other legally qualified body) to COS accepting and dealing with the complaint. 4.4 Representatives COS accepts and will deal with a complaint lodged by another person on behalf of the Consumer if and only if: the Consumer in writing signed by the Consumer: authorizes the person to lodge the complaint on the Consumer's behalf and to act on the Consumer's behalf in dealing with the complaint; and consents to COS conducting the COS process in relation to the Consumer's complaint; or that other person is the duly appointed legal representative of the Consumer. Specific situations where other persons can lodge a complaint on behalf of a Consumer are as follows: Spouse / partner / friend:- COS accepts the complaint only if COS is given: a written authority signed by the Consumer - authorizing the spouse / partner / friend to lodge the complaint on the Consumer's behalf; and a written consent signed by the Consumer - consenting to COS conducting the COS process in relation to the Consumer's complaint. Parent / Child:- If the Consumer is a child under 18 years, COS accepts that child's complaint lodged by his or her parent or legal guardian. If the child has 2 living parents or 2 or more living legal guardians, then both those parents, or all those guardians, must lodge the complaint. If COS is uncertain whether or not all parents and legal guardians have lodged the complaint, or if a parent or legal guardian refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person or persons lodging the complaint are legally entitled to do so; and 17

there is no legal impediment (such as pending or current proceedings before a court or tribunal or other legally qualified body) to COS accepting and dealing with the complaint. If the Consumer is over 18 years, COS accepts the complaint only if COS is given: a written authority signed by the Consumer - authorizing his or her parent or parents to lodge the complaint on the Consumer's behalf; and a written consent signed by the Consumer - consenting to COS conducting the COS process in relation to the Consumer's complaint. If COS is uncertain whether or not all parents have lodged the complaint, or if a parent refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person lodging the complaint is legally entitled to do so; and there is no legal impediment to COS accepting and dealing with the complaint (such as pending or current proceedings before a court or tribunal or other legally qualified body). Professional persons:- COS accepts a complaint lodged by a legal practitioner acting on the instructions of the Consumer, or if the Consumer is a child, on the instructions of his or her parents or legal guardians. The same guidelines as discussed above apply in this situation as if the complaint were lodged by a parent or legal guardian. Provided COS receives the authority and consent discussed above, COS will accept and deal with a complaint lodged by an accountant, financial adviser, Member of Parliament or other advocate. Trusts:- A complaint by a trust has to be made by the trustee (if a corporation) or by all trustees (if natural persons). If COS is uncertain whether or not all trustees have lodged the complaint, or if a trustee refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person lodging the complaint is legally entitled to do so; and there is no legal impediment to COS accepting and dealing with the complaint (such as pending or current proceedings before a court or tribunal or other legally qualified body). COS will only accept and deal with a complaint made by a beneficiary if COS is satisfied that the Member could be liable to the beneficiary in that capacity, eg. because of a breach of the Trust Deed. Any such complaint still has to be within COS jurisdiction. 18

Bankrupts:- COS accepts a bankrupt's complaint if and only if: the bankrupt gives COS a written authority signed by the bankrupt's trustee in bankruptcy - authorizing the bankrupt to lodge the complaint; and a written consent signed by the bankrupt's trustee in bankruptcy - consenting to COS conducting the COS process in relation to the bankrupt's complaint; COS is satisfied that the amount of compensation sought from the Member would exceed the total of debts owed in the bankruptcy such that if compensation were awarded, there would be an amount due to the bankrupt personally over and above the amount owed by the bankrupt to creditors. If the bankrupt cannot demonstrate to COS that an award of compensation would result in a net financial personal benefit to the bankrupt, COS may nevertheless accept and deal with the complaint if COS is satisfied that payment of compensation would result in some other specific benefit to the bankrupt personally. A claim by a bankrupt for non-financial loss or disadvantage may be made to COS without the need for the Trustee's consent and authorization. This flows from section 116(2)(g) of the Bankruptcy Act 1966, which excludes claims for personal injury or wrong from forming part of the bankrupt's estate. The above guidelines also equally apply to a person who is subject to a Personal Insolvency Agreement under Part X of the Bankruptcy Act 1966. Persons suffering from mental incapacity or disability:- Persons suffering from mental incapacity or disability may be represented by a legally appointed guardian or administrator, or other person holding a valid Power of Attorney. COS will require a true copy of the instrument appointing the guardian or administrator, or the Power of Attorney, before COS accepts the complaint. If COS is uncertain whether or not all legally appointed guardians or administrators or all attorneys have lodged the complaint, or if a guardian, administrator or attorney refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person lodging the complaint is legally entitled to do so; and there is no legal impediment (such as pending or current proceedings before a court or tribunal or other legally qualified body) to COS accepting and dealing with the complaint. COS may also contact the Public Advocate (or equivalent official) in a State or Territory to ascertain whether or not some order needs to be made in respect of the incapacitated person's complaint. 19

Deceased estates:- A complaint by a deceased estate has to be made by all duly appointed Executors or Administrators. COS requires a true copy of the Probate or Letters of Administration before it accepts the complaint. If Probate of the Will has not been granted, COS requires a true copy of the Will before accepting the complaint. If COS is uncertain whether or not all legally appointed executors or administrators have lodged the complaint, or if an executor or administrator refuses or fails to lodge the complaint, COS will conduct whatever enquiries it regards as necessary to satisfy itself that: the person lodging the complaint is legally entitled to do so; and there is no legal impediment (such as pending or current proceedings before a court or tribunal or other legally qualified body) to COS accepting and dealing with the complaint. COS accepts and will deal with a complaint lodged by a beneficiary of a deceased estate if and only if all executors or administrators in writing signed by all such persons: authorize the beneficiary to lodge the complaint on behalf of the deceased estate and to act on the Consumer's behalf in dealing with the complaint; and consent to COS conducting the COS process in relation to the complaint. The same guidelines as discussed above apply in this situation as if the complaint were lodged by a parent or legal guardian. 4.5 Obstruction etc. by representative If COS is satisfied that any person representing the Consumer is: obstructing; unreasonably delaying; or abusing; the COS process, COS may warn the representative that: if the conduct of concern to COS continues, or if the representative engages in other conduct that has or might have a similar effect; COS will cease dealing with the complaint. If COS warns the representative, COS will at the same time tell the Consumer what has happened and invite the Consumer to arrange for another person to represent the Consumer and to give COS the required authority and consent. If the Consumer fails within the period specified by COS to assume direct responsibility for the carriage of the complaint through the COS process, or to appoint another representative, COS will declare the complaint closed. 20

If the Consumer having assumed direct responsibility for the carriage of the complaint, or a new representative having been appointed the conduct of concern to COS still continues, or if the Consumer or the new representative engages in other conduct that has or might have a similar effect, COS will cease dealing with the complaint and declare the complaint closed. 4.6 Who is a Consumer? - Rule 142 definition of "Consumer" A Consumer is any member of the public whether: a natural person (ie. an individual); or a Small Business (see 4.8). For COS to deal with a complaint, an individual or a Small Business has to be a Consumer both: at the time of the Member's acts or omissions complained about; and at the time of making the complaint to COS. A Consumer does not include: a Member; or a natural person that COS determines is not a Consumer for the purposes of COS because of the assets, wealth, or both, that that person has, holds or controls (see 4.10) 4.7 What does an individual need to tell and give COS before COS will deal with their complaint? Before COS deals with a complaint from an individual, they need to give COS a signed consent that the Member may disclose to COS information and documents relevant to the complaint. If the individual has approached another EDR Scheme (eg. the Banking and Financial Services Ombudsman) about the subject matter of their complaint, they need to tell COS all about the approach and to give COS a copy of every document they gave to the other EDR Scheme. 4.8 What is a Small Business? - Rule 142 definition of "Small Business" To qualify as a Small Business, a business whether it is a incorporated (eg. a company) or unincorporated must be: any sort of business (but not an inactive corporation eg. a "shelf company"); that: if the business is or includes the manufacture of goods, employs less than 100 people; or 21

otherwise, employs less than 20 people. COS counts full time equivalent employees in applying the test. If there is any dispute about the business's eligibility to lodge the complaint, COS decides whether or not the business is a Small Business and may have regard to, but is not bound by, any representations made by the business and the Member about eligibility to lodge the complaint. 4.9 What does a Small Business need to tell and give COS before COS will deal with its complaint? Before COS deals with a complaint from a Small Business, the Small Business needs to give COS: a written certification that the business meets the test of a Small Business under Rule 142; and a written certification that the business met the test of a Small Business under Rule 142 at the time of the Member's acts or omissions complained about; a notice about who is the individual in the business who is authorised to resolve the complaint on behalf of the business; and a written consent signed by a person authorised by the business that the Member may disclose to COS information and documents relevant to the complaint. If the Small Business has approached another EDR Scheme (eg. the Banking and Financial Services Ombudsman) about the subject matter of its complaint, it needs to tell COS all about the approach and to give COS a copy of every document it gave to the other EDR Scheme. 4.10 When will COS regard an individual as not qualifying as a Consumer? - Rule 142 definition of "Consumer" COS has a discretion to regard wealthy individuals as not qualifying as Consumers for the purpose of making a complaint to COS. COS will exercise its discretion to exclude individuals if it is reasonably satisfied that: the person has net assets of $2.5 million or more; or the person has a gross income for each of the 2 years prior to the date of making the complaint of $250,000 or more; or the person is a professional investor. COS may require an individual to provide COS with information and/or documents to enable COS to determine whether it should exercise its discretion to exclude the individual. If the individual fails to comply fully with COS's requirement, COS may nevertheless exclude the individual. 22

4.11 Can someone who is not a Consumer make a complaint to COS? - Rules 25 and 26 Even if someone is not a Consumer, if: the Board gives its approval; the person complies with all conditions the Board imposes in respect of its approval; the person pays whatever fee the Board prescribes for the purpose; and the Member gives its consent; that person can make a complaint to COS. Board approval would generally be given where the Board is satisfied that: the Member has consented to COS considering the complaint and has asked COS to consider it; or the Member has consented to COS considering the complaint and the person has provided satisfactory evidence to COS that the Member has consented; and the subject matter of the complaint, and the information that COS is likely to have to consider in dealing with the complaint, would not impose an unreasonable burden on COS's resources; and the complaint is being made for a proper purpose. The Board would generally regard the purpose as proper if it is reasonably satisfied that the complaint is not being made to avoid, frustrate or impede some proceedings commenced or about to be commenced before a court, tribunal, arbitrator, another ombudsman, or another complaints or dispute resolution body, scheme or procedure. Even if the Board gives its approval, this does not prevent COS deciding that the complaint does not come within COS jurisdiction - see Section 6 below. A person given Board approval has to meet all the other qualifications and conditions that a Consumer has to meet in making a complaint to COS. The Rules apply to the handling of a complaint by a person who has been given Board approval to make a complaint to COS, and who has fully met all COS's other requirements, as if that person were a Consumer. 4.12 What are Member Services? - Rule 142 definition of "Member Services" Member Services are the services provided to a Consumer by certain people and businesses operating in the Credit Industry. These services usually include the following: taking a Consumer's loan application; assessing what loan is appropriate to the Consumer's circumstances; sourcing the loan; negotiating the conditions of the loan with the Credit Provider; 23

arranging for the Consumer to sign the loan application and any associated documents; and actively representing and protecting the Consumer's interests throughout the whole loan process to loan advance and settlement of the transaction. The definition mostly covers: Mortgage Brokers; or Finance Brokers. The definition of Member Services also covers: an Aggregator; any other person who acts as an intermediary in negotiating or arranging Credit for or on behalf of a Consumer - and it does not matter if this person is a principal, employee, agent or an independent contractor; a Credit Provider ie. a lender; and a Mortgage Manager. 4.13 Member Services also covers certain incidental things - Rule 142 definition of "Member Services" The definition of Member Services also covers financial products" and "financial services": provided, made available, suggested or proposed by the Member; or otherwise incidental to the Credit negotiated, arranged, provided or managed by the Member. The expressions "financial product" and "financial service" are defined in the Corporations Act 2001 and generally include things such as shares and other securities or investments, certain insurance products, and advice about shares and other securities or investments and insurance products. For the purposes of considering a complaint, COS disregards the question whether the Member complied with the law in providing, making available, suggesting or proposing the financial product or financial service. COS will deal with a complaint about a Member's conduct in relation to a financial product or a financial service even if: the particular financial product or financial service did not comply with legal requirements; or the Member breached or may have breached the law in any way in connection with: the particular financial product or financial service; or the Member's dealings with the Consumer in relation to that particular financial product or financial service. 24

4.14 When COS will deal with a complaint not lodged by all eligible Consumers COS may accept and deal with a complaint that is not lodged by all eligible Consumers in the following cases: mental or physical incapacity of an eligible Consumer - COS will require an authority and consent from the eligible Consumer's legally appointed guardian, administrator or attorney (under Power of Attorney); or the eligible Consumer cannot with the exercise of reasonable diligence be located by all other eligible Consumers - COS will require evidence to satisfy itself about this. 4.15 Dealing with a complaint once and for all COS expects to deal with a complaint about a particular set of circumstances (the same subject matter and the same Member) once and for all. Therefore, if COS is satisfied that a complaint has not been lodged by all possible Consumers in relation to the same subject matter and the same Member (whether individuals, Small Businesses or other persons approved by the Board or a combination of these), COS will regard a later complaint by a potential Consumer who has not lodged a complaint as excluded from COS jurisdiction under Rule 34 (t) (ie. complaint that is frivolous or vexatious or being pursued in a frivolous or vexatious manner or for an improper purpose). 25

5. Complaints COS will deal with 5.1 What complaints does COS cover? - Rules 27 and 28 Rule 27 provides: A complaint can be made to COS about Member Services provided to a Consumer by a Member so long as those Member Services: (a) (b) directly relate to the Consumer s: (i) being provided with Credit; or (ii) applying to be provided with Credit; or (iii) becoming a Loan Guarantor; or (iv) being a Loan Guarantor; or (v) being invited to become a Loan Guarantor; or were provided or were suggested or proposed to be provided by the Member to the Consumer at the time of or otherwise in connection with the circumstances contemplated in paragraph (a) above. Rule 28 provides: COS will deal with you re the Consumer's complaint if the Member has, in providing Member Services to the Consumer: (a) breached relevant laws; (b) breached the MFAA Code of Practice or other Recognised Code of Practice; (c) not met standards of good practice in the Credit Industry; or (d) acted unfairly towards the Consumer. As to what are Member Services, see section 4.13 above. A Consumer may make a complaint to COS if he or she believes that an act or omission of the Member falls within one or more of the grounds in Rule 28. COS will decide whether or not it can deal with the complaint, ie. whether or not it is within COS's "jurisdiction". See Section 6. If the complaint is within COS's jurisdiction, COS will, if it is appropriate, assist the Consumer in presenting the complaint so that it is comprehensive, ie. covers all the relevant issues. But COS will not do anything to impair its impartiality in the COS EDR process. COS is not restricted to considering complaints about Member Services connected with Credit. COS can also deal with complaints about Member Services such as suggestions or recommendations about investments, advice services (eg. debt management, debt monitoring) 26

and other dealings between the Consumer and the Member in certain situations eg. when they are preparing a loan application or are later discussing it. Example Consumer and Broker Member are discussing a new home loan application at the Consumer's home. The Broker Member tells the Consumer about a property trust investment product he/she knows about. The Consumer signs an application for the new home loan. The Consumer is persuaded by what the Broker Member says about the investment's return potential and signs a contract to invest in the property trust and pays over $10,000 to the Broker Member. The property trust investment does not comply with the law and it was illegal for the Broker Member to suggest the investment to the Consumer. The Credit Provider (who has no connection with the property investment) refuses the Consumer's loan application. The Consumer complains to COS that they were not given all relevant information by the Broker Member about the property trust investment and that they would not have gone into the investment and paid the money if they had been given all relevant information. In this situation, COS will deal with the complaint because in suggesting the property trust investment to the Consumer at the time of discussing the loan application, the Broker Member: provided Member Services to the Consumer; and in providing those Member Services breached a "relevant law" (namely, the Corporations Act 2001) 5.2 Rule 28 - Breach of relevant laws Under Rule 28 COS can deal with a complaint if the Member has "breached relevant laws". COS will not consider any complaint that a Member has been involved in criminal activity - see section 6.17. If the complaint is only that the Member did some act or failed to do some act for which that Member could face a conviction for a criminal offence (whether punishable by fine or imprisonment or both) COS will not consider the complaint. If, however, the complaint covers matters other than criminal activity, COS will consider that part of the complaint. COS will deal with the complaint only to the extent that COS is not called upon to make any finding about criminal activity. Accordingly, the kinds of breaches of the law that COS will consider as coming within its jurisdiction are essentially only those that involve civil outcomes, eg. damages or nonrecoverability of a Member's commission. Also, any complaint that a Member has breached a law must be a law that is "relevant". COS regards a law as "relevant" if it relates in some significant way to "Credit" (ie. loans, potential loans, guarantees, potential guarantees and Member Services) and those persons who operate in the Credit Industry and are Members. 27