Tightened complaint handling procedures aimed at ensuring “fair, timely and effective dispute resolution” ASIC Regulatory Guide 271: Internal Dispute Resolution

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By Gina Tilley, Senior Associate

From 5 October 2021 new standards and requirements will apply to financial firms when dealing with consumer and small business complaints.

The aim of the updated standards and requirements is to ensure that all complaints are being dealt with by financial firms in a fair, timely and transparent manner, and to “encourage all financial firms to cultivate an organisational culture that welcomes feedback and values complaints”.

Australian Securities and Investments Commission (ASIC) has just released Regulatory Guide 271: Internal Dispute Resolution (RG 271), its updated internal dispute resolution (IDR) process that financial firms need to adopt from 5 October 2021 when dealing with consumer and small business complaints.

At the same time, ASIC registered ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98.
The new standards and requirements under Instrument 2020/98 and the highlighted sections of RG 271 are enforceable from 5 October 2021.

Until that date, Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165) continues to apply.

The aim of the updated standards and requirements is to ensure that all complaints are being dealt with by financial firms in a fair, timely and transparent manner, and to “encourage all financial firms to cultivate an organisational culture that welcomes feedback and values complaints” (RG 271.15).

The major pressure for financial firms, especially larger ones with a multi-tiered IDR process, will be to ensure that all complaints are being dealt with in the timeframes stipulated, as the clock starts running from the time the complaint is made and not the time that it is escalated to a specialist complaints officer or IDR team.

Key Points

  1. Australian financial services (AFS) licensees must have in place a dispute resolution system that consists of:
    a. an IDR procedure that meets the standards or requirements made or approved by ASIC; and
    b. membership of the Australian Financial Complaints Authority (AFCA).
  2. The definition of ‘complaint’ (which is set out in in AS/NZS 10002:2014) is:
    [An expression] of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required.
    It includes posts made on any of the firm’s social media platforms, complaints about an existing remediation program, complaints about the handling of insurance claims, complaints made by superannuation product holders and beneficiaries with an interest in a death benefit, and complaints made by retail clients in relation to the financial services provided.
  3. The definition of small business has also been widened to attempt to have consistent dispute resolution access for small business complainants.
  4. The maximum IDR timeframes and responses have been considerably shortened.
    Complaints should be acknowledged within 24 hours of receipt, this is an expectation and not enforceable.
    An IDR response must be provided within 30 days from the time the complaint was first made (unless there is an exception, of which these are limited) and must contain certain information including but not limited to the outcome, reasons and the right for the consumer to take the complaint to AFCA (with their details to be provided).
  5. Financial firms can outsource (part or all of) their IDR process. However, the firms will still remain responsible for ensuring that their IDR process complies with all of the standards and requirements set out in Instrument 2020/98 and RG 271.
  6. There are new standards and requirements related to data collection, analysis and internal reporting, and the need for this information to be regularly provided to Boards and senior management.
  7. Systematic issues, which are matters that affect, or have the potential to affect, more than one consumer (i.e. inadequate or misleading disclosure documents or procedural weaknesses that could reoccur), is a main focus.
    In response to findings of the Hayne Royal Commission that “there can be no doubt that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities: their boards and senior management,”, ASIC has made it a requirement that Boards of financial firms are to set out clear accountabilities for complaints handling functions, including the management of systematic issues.
    The rationale is that this will lead to a more timely response to systematic issues being reported on, escalated and resolved, and regular data analysis of complaints to avoid future instances.
  8. Financial firms will need to regularly review the competence of their IDR process to ensure that they gave adequate resources.
  9. Consumers will have further accessibility through a representative and there is guidance provided to firms on how to deal with representatives not acting in the best interests of the consumer.

The full version of RG 271 can be found here.

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TPD alert: Newling v Metlife Insurance Limited [2019] NSWCA 149