Credit Union Dispute Resolution Centre Credit Union Dispute Resolution Centre Pty Ltd ABN 64 075 629 391 GPO Box 3, Melbourne, Vic, 3001 Telephone: 1300 78 0808 Facsimile: (03) 9620 4446 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.
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Credit Union DispuCredit Union Dispute Resolution C
GPO Box 3, MeTelephone: Facsimile: (
REVIEW OF THE CDISPUTE RESOLU
BACKGROUND
June 200
This Paper has been produced by CUDbackground information for the assistaninterested in the review or in CUDRC. Aviews or conclusions and do not necessreviewer.
te Resolution Centre entre Pty Ltd ABN 64 075 629 391
lbourne, Vic, 3001 1300 78 0808 03) 9620 4446
REDIT UNION TION CENTRE
PAPER
5
RC. Its purpose is to provide ce of the reviewer and for those ny views expressed are internal arily represent the views of the
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION 4
1.1 Background to the Review 4
1.2 Purpose and Content of the Background Paper 5
CHAPTER 2: BACKGROUND TO CUDRC 7
2.1 Background 7
2.2 How CUDRC developed 8
2.3 Change in Dispute Manager 11
2.4 ASIC Approval of CUDRC 12
2.5 Present Position 13
CHAPTER 3: THE STRUCTURE OF CUDRC 14
3.1 The powers and role of the Manager 14
3.2 The structure and role of the Board 14
3.3 Membership of CUDRC 16
3.4 The funding of the scheme 16
3.5 The people 16
CHAPTER 4: THE JURISDICTION OF CUDRC 18
4.1 Introduction: the Terms of Reference of CUDRC 18
4.2 The jurisdiction of CUDRC in summary 18
4.3 Matters outside the jurisdiction of CUDRC 19
4.4 The monetary limit: its rationale, past increases and future considerations 21
4.5 Remedies available 24
CHAPTER 5: DISPUTE RESOLUTION AND DECISION-MAKING PROCESSES 26
5.1 Accessing CUDRC 25
5.2 After receipt of a written dispute 27
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5.3 Stages of Resolution: referral to and response by the member 28
5.4 Stages of Resolution: Investigation 29
5.5 Stages of Resolution: Determination 32
5.6 Procedural fairness in practice 33
5.7 Fairness in outcomes 34
CHAPTER 6: RAISING STANDARDS: ANCILLARY ROLES OF AN EDR SCHEME 36
6.1 Identifying and resolving systemic issues 36
6.2 Member and external education 38
CHAPTER 7: SYSTEMS, DATA COLLECTION AND REPORTING 39
7.1 The use of technology in CUDRC processes 39
7.2 Collecting and recording of case information 40
7.3 Reporting to stakeholders and the public 41
7.4 Monitoring members’ compliance 43
7.5 Performance targets 44
7.6 Recording and reporting systemic issues 44
CHAPTER 8: FUTURE PLANNING FOR THE BOARD OF CUDRC 46
8.1 Issues for the future 46
LINKS FOR FURTHER INFORMATION 48
APPENDIX 1: ASIC POLICY STATEMENT 139.151
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Chapter 1: Introduction
1.1 Background to the Review
1.1.1 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.
1.1.2 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.
1.1.3 CUDRC was approved by ASIC in September 2002. Some 143 Australian
Credit Unions have joined CUDRC.
1.1.4 Clause 9.3(c) of the Constitution of Credit Union Dispute Resolution Centre
requires the Directors to commission an independent
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review of the operations and procedures of the scheme every three years or
more frequently if the Directors consider this to be appropriate.
1.1.5 The requirement of the Constitution is consistent with ASIC Policy
Statement 139, ‘Approval of external complaints resolution schemes’,
paragraph PS 139.92:
‘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.’
1.1.6 Pursuant to this requirement, the Board of CUDRC has commissioned an
independent review of the operations and procedures of CUDRC to take
place in 2005.
1.2 Purpose and Content of the Background Paper
1.2.1 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.
1.2.2 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
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or otherwise inform themselves about CUDRC.
1.2.3 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.
1.2.4 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.
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Chapter 2: Background to CUDRC 2.1 Background
2.1.1 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.
2.1.2 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.
2.1.3 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 1994.
2.1.4 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
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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.
2.1.5 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
2.2.1 CUDRC (then named the Credit Union Dispute Reference Centre)
commenced operations in November 1996. 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.
2.2.2 The Directors of that company consisted of an independent Chair and four
nominated representatives of CUSCAL’s Board.
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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.
2.2.3 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.
2.2.4 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.
2.2.5 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.
2.2.7 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.
2.2.8 CUDRC was established under a funding formula whereby participating
credit unions contributed annual levies and separate charges for variable
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costs associated with individual disputes. This funding arrangement
continues through to CUDRC’s operations today.
2.2.9 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.
2.2.10 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.
2.2.11 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:
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ADR Scheme/Process Number of Credit Unions CUDRC 163 Credit Union Ombudsman1 22 Endispute2 6 Both CUDRC & CUO2 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
2.3.1 During 2001/2002, following a review of CUDRC’s operations and Terms
of Reference, the provision of Dispute Management services was re-
tendered 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.
2.3.2 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,
7.1.1 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.
7.1.2 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.
7.1.3 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).
7.1.4 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.
7.1.5 Online subscription research resources and selected Internet sites are
available to all staff from their desktop computers and are used not only for
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research on cases but also by case managers to enable appropriate and
accurate referral information to be provided while on the telephone to
callers. For security reasons, general Internet access is limited to one PC
located in the library. A Lotus Notes based Knowledge Management
System has been developed and was implemented in May 2004. Use of
technology is subject to an e-mail, telephone and Internet policy document
that was developed in consultation with staff.
7.2 Collecting and recording of case information
7.2.1 All telephone enquiries received by CUDRC case officers are logged into
CIMS, recording the following data:
• Basic demographics of the caller (gender, postcode, whether member
is an individual or a small business);
• Name of credit union being complained about;
• The financial product category being complained about and the
problem category raised;
• How the caller found out about the scheme.
7.2.2 All written disputes are entered into CIMS. CUDRC records the following
addition information for written disputes:
• Name and address;
• A summary of the issues raised by the member;
• Amount of compensation sought (and at the closure of the file the
amount of any compensation paid, if known);
• Detailed codes for each product/problem combination raised by the
member;
• Details of any systemic issue raised by the dispute; and
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• Details of any alleged breach of the Code of Practice.
7.2.3 In addition to the above core information, CIMS also provides diary
recording of contact with the parties, actions taken or requested, or action
to be taken at a future date. CIMS records the relevant dates and the
current status of the case; and facilitates the generation of all outbound
correspondence by connecting with a set of standard letter templates.
7.2.4 Status codes record where the case is in the process and the level of
complexity of the case and facilitate the monitoring of time performance
targets for each stage. Problem and product codes enable the relative
proportion of disputes about particular products and problems to be
identified.
7.2.5 Case officers and managers also record keywords for cases describing the
legal or industry practice issues raised. Keyword searches can be made by
staff to find other cases raising similar issues and to facilitate consistency of
approach and the efficient use of legal or industry practice advice.
7.3 Reporting to stakeholders and the public
7.3.1 Credit unions can obtain regular reports on the number and status of all
cases received.
A more extensive statistical summary is provided to each credit union
annually.
A quarterly report is provided on the CUDRC website.
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7.3.2 To management and staff:
• Monthly Summary Statistics for Open, Provisional and Closed cases
at the different levels, including performance against Key
Performance Indicators (KPIs – see 7.5.1). Some reports are run on a
daily basis to enable close supervision by management of selected
KPIs. The Monthly Summary Statistics reports are provided to all
staff;
• Separate reports for individual case officers and case managers are
produced to enable management of individual staff performances.
Each case officer and case manager is provided with their own
statistical summary, which includes some comparative data to
enable them to benchmark against their peers;
• Exception reporting is regularly undertaken to ensure that any
anomaly in case processing is identified early.
7.3.3 To the Board of CUDRC:
A statistical summary is provided to all Board members prior to each
quarterly meeting, accompanied by an explanatory memorandum.
7.3.4 To ASIC:
ASIC receives a quarterly statistical summary report and a quarterly
systemic issues report (referred to in more detail in 8.6).
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7.3.5 To external stakeholders and the public:
CUDRC publishes an Annual Report, also available on its website, which
includes extensive statistical and prior year comparative information
covering such matters as:
• demographics of users;
• analysis of telephone calls received;
• new cases received;
• outcome of closed cases and relative levels of closed cases;
• case resolution times;
• analysis of products and problems; and
• disputes outside the Terms of Reference.
The Annual Report also contains illustrative case studies and a summary of
systemic issues with case studies.
7.3.6 Statistical information is also regularly provided to other interested parties
(for example, consumer groups).
7.3.7 Copies of reports made to the Board of CUDRC and credit unions will be
made available to the consultant appointed to conduct the Review.
7.4 Monitoring members’ compliance
7.4.2 To ensure credit unions comply with their obligations to the scheme and to
enable exceptions to be addressed promptly, an automated follow-up diary
system is integrated into CIMS which case officers and case managers use
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to follow up any response that has not been received by the due date.
7.4.3 The Manager and Case Manager will also follow up with members any
issues or anomalies that appear in the statistical information reports. These
discussions may also include observations about patterns of problems with
particular products or areas of the credit union which have come up at case
officers or case managers regular meetings.
7.5 Performance targets
7.5.2 CUDRC has implemented the following case management KPIs. They are
reviewed regularly to ensure they remain relevant:
• 95% of all cases received to be processed within 7 days;
• 90% of cases identified for investigation to be allocated to a case
manager within 60 days; and
• 90% of all cases to be finalised within 120 days.
7.6 Recording and reporting systemic issues
7.6.2 The identification and resolution of systemic issues is described in 7.1
above. Systemic issues are recorded in two places - the systemic issues
register maintained by the Systemic Issues Manager and by use of the
systemic issues code in the CIMS record of individual cases in which a
systemic issue is raised. A systemic issues code is created for each systemic
issue identified to enable cases raising the same issue to be identified and
monitored as part of the resolution of the particular systemic issue.
7.6.3 The obligation to report to ASIC is an obligation to report all satisfactorily
resolved and rectified systemic issues without identifying the credit union
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but including the nature of the issue and the numbers of instances involved.
In the case of unresolved issues where the credit union has failed to
respond adequately and has been given 10 days notice, CUDRC must
report the identity of the member, the details of the issue, the action taken
by CUDRC and the response by the credit union.
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Chapter 8: Future planning for the Board of CUDRC
8.1 Issues for the future
8.1.1 CUDRC has now been in operation for nine years. It has been approved as
an external dispute resolution service by ASIC within the framework of the
regulation of financial services providers. It has engaged in a regular
process of internal and external review of its operations and procedures,
including the current review, and has evolved both in its jurisdiction and its
processes.
8.1.2 The current review is focussed on the extent to which the operations and
procedures of the scheme are meeting the criteria set out in ASIC Policy
Statement 139. As such it is part of a process of continual review and
improvement undertaken by the Board.
8.1.3 The issues for consideration by the Board include:
• Procedural or structural changes required to accommodate the
extension of the scheme to non-credit union, financial services
providers.
• Strategies for increasing awareness and understanding of the work
of CUDRC.
• The question of whether CUDRC should remain as a stand alone
scheme, managed by BFSO or should adopt some other strategy.
• The potential for greater use of online dispute resolution techniques.
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• Reviewing the range of services provided and considering what
other services might usefully be provided to credit unions and the
community that are consistent with the independence of CUDRC.
• The potential for and desirability of changes to the monetary limit
and coverage of the scheme.
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Links for further information Credit Union Dispute Resolution Centre: www.cudrc.com.au (The CUDRC Terms of Reference are available on the CUDRC website.) Australian Securities and Investments Commission (for Policy Statement 139 follow links to Financial Services Reform publications and then policy statements): www.asic.gov.au Benchmarks for Industry-based Customer Dispute Resolution, Consumer Affairs Division, Department of Industry, Science and Tourism: www.selfregulation.gov.au/resources.asp Code of Banking Practice: www.bankers.asn.au National Alternative Dispute Resolution Advisory Council: www.nadrac.gov.au Other external dispute resolution schemes in the financial services sector: Banking and Financial Services Ombudsman: www.bfso.org.au Credit Ombudsman Service Ltd: www.creditombudsman.com.au Financial Co-operative Dispute Resolution Scheme: www.fcdrs.org.au Financial Industry Complaints Service Ltd: www.fics.asn.au Insurance Brokers Disputes Ltd: www.ibdltd.com.au Insurance Ombudsman Service: www.insuranceombudsman.com.au Superannuation Complaints Tribunal www.sct.gov.au UK Financial Services Ombudsman: www.financial-ombudsman.org.uk Canada Ombudsman for Banking Services and Investments: www.obsi.ca
Appendix 1: ASIC Policy Statement 139.151 The benchmarks and their underlying principles 1 Accessibility The scheme makes itself readily available to customers by promoting knowledge of its existence, being easy to use and having no cost barriers. 2 Independence The decision-making process and administration of the scheme are independent from scheme members. 3 Fairness The scheme produces decisions which are fair and seen to be fair by observing the principles of procedural fairness, by making decisions on the information before it and by having specific criteria upon which its decisions are based. 4 Accountability The scheme publicly accounts for its operations by publishing its determinations and information about complaints and highlighting any systemic industry problems. 5 Efficiency The scheme operates efficiently by keeping track of complaints, ensuring complaints are dealt with by the appropriate process or forum and regularly reviewing its performance. 6 Effectiveness The scheme is effective by having appropriate and comprehensive terms of reference and periodic independent reviews of its performance.