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ASIC tightens dispute resolution guidance

by Annie Kane13 minute read
ASIC tightens dispute resolution guidance

New regulatory guidance has been issued for financial firms, including ACL businesses, relating to how they deal with complaints and how quickly they should do so.

ASIC has updated its requirements for how financial firms deal with consumer and small-business complaints – under their Internal Dispute Resolution (IDR) procedures.

Covering the financial advice and credit advice sectors – including Australian credit licensees – Regulatory Guide 271 Internal dispute resolution (RG 271) outlines what these financial firms need to do to have an IDR system in place that meets ASIC’s standards and requirements.

The new guidance will take effect on 5 October 2021 and is enforceable. Complaints received by financial firms before that date will be subject to the guidance outlined in Regulatory Guide 165.


Reduced time frames

Among the key changes in the new guidance is a reduction in the maximum time period in which complaints will need to be handled.

Following consultation with industry, stakeholder roundtables and “on-site visits at NAB, ANZ, CBA, Westpac and AMP during 2019 as part of ASIC’s enhanced supervision program”, ASIC has updated its time frames.

Under the new rules, a financial firm must provide an IDR response to a complainant no later than 30 calendar days after receiving the complaint (down from 45 days).

Different time frames apply to complaints about superannuation (for example, superannuation trustee complaints).

Further, credit-related complaints involving default or hardship notices must be responded to no later than 21 calendar days after receiving the complaint.

The guidance also states that, at a minimum, an IDR process for credit must be able to handle complaints made about the credit activities engaged in by the credit licensee or its credit representatives, or an unlicensed COI lender. 

This will involve covering complaints made by consumers of credit, lessees and guarantors as defined under the National Credit Act. 

Notably, the regulator is also “encouraging” firms to develop IDR processes that have broader coverage than outlined and that are “consistent with the nature of their business and their dealings with consumers and investors. 

“In particular, we encourage all credit licensees to deal with complaints from small businesses – as defined in the AFCA Rules – under their IDR processes,” it said.

ASIC noted that credit representatives do not need to have IDR processes that meet the standards and requirements made or approved by ASIC, as they are covered by their credit licensee’s IDR process. However, most credit representatives are required to be separate members of AFCA.

The guidance also sets out:

  • what information firms must include in written IDR responses to allow consumers to decide whether to escalate their complaint;
  • new time frame requirements for customer advocate reviews of appeals against IDR decisions; and
  • how firms can deal with representatives who are not acting in consumers’ best interests.

Complaints handling approach a ‘meaningful measure of how a business treats its customers’ 

Speaking of the decision to reduce maximum time frames, ASIC said: “The evidence shows that delays in resolving complaints can contribute to poor consumer outcomes. We consider that reducing the maximum IDR time frames will prompt necessary action by firms to make improvements that reduce complaint handling delays where required, and thus improve consumer experiences and outcomes.”

ASIC Deputy Chair Karen Chester added: “Complaints handling is the first step in the dispute resolution framework and plays a critical role for firms to restore consumer trust when things have gone wrong. 

“A financial firm’s approach to complaints handling is a meaningful measure of how it treats its customers and listens to their voice.”

She continued: “Most financial firms, like us, want to see positive complaint management cultures that welcome complaints and focus on fairness, quality and timeliness in how they are handled. 

“Better IDR not only benefits consumers and small business, it arms the boards of financial firms with rich and real time data on the customer experience and whether their needs are being met or not’, Ms Chester said.

ASIC also noted the need for more timely complaints handling, given the coronavirus pandemic and its associated economic impacts.

“At this time of economic uncertainty, consumer access to fair and timely complaints handling is more important than ever,” Ms Chester said.

“Making it right when consumers have suffered loss is an important way to stimulate ongoing consumer participation and trust in the financial system. New requirements recognising the harm that can be done by some debt management firms will also assist in addressing long-standing concerns about their behaviour which are shared by industry and consumer representatives’, Ms Chester said.

However, noting the impacts of COVID-19 on businesses, ASIC has given industry until 5 October 2021 to comply with the new IDR standards and requirements. 

“While this extended timeframe reflects the impacts of COVID 19, publishing RG 271 now gives affected firms certainty and enough time to make systems and other changes necessary to meet the updated regulatory guidance”, Ms Chester said.

In the coming months, ASIC will conduct further consultation on the IDR data reporting regime.

AFCA CEO and Chief Ombudsman David Locke welcomed the new measures that speed up the complaints-handling processes, stating: “AFCA firmly believes that IDR plays a crucial role in the framework to resolve complaints about financial services…

“IDR is the key to early resolution, which benefits consumers, financial firms and the financial sector broadly. 

“In our view, IDR should focus on helping financial firms to improve internal practices to avoid and resolve disputes. 

“The updated guide will not only improve the quality of internal complaint resolution but will enable financial firms to deliver better outcomes for consumers and reduce the need to escalate complaints to external dispute resolution.”

[Related: ASIC consults on new complaints-handling rules]

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