ASIC’s Proposed New Standards for Dealing with Complaints

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Editor’s Note: further amendments to Complaints Handling procedures have been made. Please find the latest information on this topic in our recent blog article.

In May 2019, ASIC initiated consultation within the industry in relation to their proposed new standards for dealing with consumer complaints. The new standards are aimed at the internal dispute resolution (IDR) processes of all credit licensees, financial services licensees and APRA regulated superannuation funds.

ASIC is seeking to promote transparency when it comes to Australian Financial Services Licence (AFSL) holders and Australian Credit Licence (ACL) holders dealing with complaints and strengthen the relationship between IDR and the work of the Australian Financial Complaints Authority (AFCA). The proposed reforms are wide ranging and are likely to have a significant impact on the industry as it will be clearer which entities do not perform well when it comes to handling consumer complaints.

Consultation Paper 311 – What is Proposed?

Consultation Paper (CP) 311 covers a range of proposals, including:

  • updates to ASIC’s Regulatory Guide (RG) 165; and
  • a framework for mandatory IDR data reporting to ASIC, including:
  • the reporting of prescribed data about complaints to ASIC on a six-monthly basis via ASIC’s regulatory portal; and
  • publishing of IDR data at an aggregate and firm level, in line with their stated brief to ensure transparency in the handling of financial services complaints.

The proposed updates to RG165 include:

  • requiring AFSL and ACL holders to utilise the definition of complaint in AS/NZS 10002:2014, expanding the definition to include expressions of dissatisfaction;
  • introducing additional guidance around the definition of complaint, including the factors to be considered in determining whether a matter is a complaint and the point at which the complaint must be dealt with via IDR;
  • modification of the definition of small business to align it with the AFCA rules;
  • requiring all AFSL and ACL holders to record all complaints, including those that are resolved at the first point of contact;minimum content requirements in relation to IDR responses issued by AFSL and ACL holders, requiring responses to deal with the identification of the issues, setting out the AFSL and ACL holder’s findings and the provision of sufficient detail for the complainant to understand the rationale behind the decision and to be fully informed as to whether to escalate the complaint to another forum, such as AFCA;
  • reduction of the maximum timeframes from 45 days to 30 days;
  • new requirements in relation to the identification, escalation and analysis of systemic issues; and
  • ensuring the requirements reflect the procedures for complaint management contained in AS/NZS 10002:2014.

ASIC is seeking public consultation on CP311 by 9 August 2019 and aims to release the updated RG165 by the end of 2019.

Background Information

The proposed changes come as a result of ASIC’s research into the industry’s handling of complaints generally. ASIC Report 603: The Consumer journey through the IDR process of financial service providers found serious IDR shortcomings across the industry as a whole. These include:

  • 17% of people identified a reason to make a complaint against a Financial Service Provider, including AFSL, ACL holders and APRA regulated superannuation funds (FSP), however only 8% went on to actually complain;
  • almost 1 in 5 people who considered making a complaint stated they had expressed dissatisfaction to the FSP in person and 6% reported they had messaged the FSP via social media. Whilst these avenues should have triggered the commencement of the IDR process, the complaint for these people was not actioned as a result of this contact;
  • ASIC’s qualitative research also showed that whilst FSPs often referenced their Product Disclosure Statement throughout the IDR process, complainants were not often using this document as a source of information;
  • 1 in 7 complainants found it difficult to locate the FSP’s contact details in order to make a complaint;
  • 29% of complainants found the attitudes of staff within the FSP to be unhelpful;
  • only 1 in 2 complainants felt the IDR process was explained well, with almost 1 in 10 complainants stating there was no explanation of the IDR process at all;
  • only 45% of complainants who received an unfavourable outcome via IDR reported receiving an explanation from the FSP in relation to this outcome.

Further Reading

Should you have any questions in relation the proposed changes to RG165, please contact us.

About The Author

Alicia Pevely

Alicia works across both Sophie Grace Pty Ltd and Sophie Grace Legal Pty Ltd with a particular focus on compliance and legal services. She manages the licensing and compliance aspects of the business. She is responsible for AFSL and ACL applications, variations and assists the compliance team in the implementation of compliance reviews. She provides ongoing compliance support and assists with the preparation of legal advice, commercial agreements and disclosure documents.  

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