ASIC releases final updated requirements for complaints handling

Overview

ASIC has registered ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98 containing updated requirements for how financial firms deal with consumer and small business complaints under their Internal Dispute Resolution (IDR) procedures, including reduced timeframes for responding to complaints. The instrument applies in relation to complaints received on or after 5 October 2021 by a financial firm.

ASIC has also issued Regulatory Guide RG 271 Internal dispute resolution for Australian financial services (AFS) licensees, Australian credit licensees, unlicensed product issuers, unlicensed secondary sellers, trustees of regulated superannuation funds (other than self-managed superannuation funds (SMSFs)), trustees of approved deposit funds, retirement savings account providers and unlicensed carried over instrument lenders.

Background.

Summary of changes

The instrument:

  • sets out new standards and requirements that ASIC has made and approved for the internal dispute resolution procedures (IDR procedures) of financial firms;
  •  specifies requirements for written reasons for decisions about complaints in relation to regulated superannuation funds, approved deposit funds and retirement savings accounts;
  •  clarifies that financial firms must comply with their IDR procedures, and
  • modifies the definition of “small business” in relation to IDR in Chapter 7 of the Corporations Act so it aligns with the definition of “small business” in the Rules of the Australian Financial Complaints Authority in relation to external dispute resolution. Under AFCA, a small business is defined as an organisation with less than 100 employees.

RG 271:

  • introduces reduced timeframes for responding to complaints, including superannuation complaints;
  • sets out what information firms must include in written IDR responses to allow consumers to decide whether to escalate their complaint;
  • sets new timeframe requirements for customer advocate reviews of appeals against IDR decisions;
  • gives guidance about how firms can deal with representatives who are not acting in consumers’ best interests.

Transition

Complaints that are made to financial firms before 5 October 2021 will continue to be dealt with under the requirements in RG 165.

What is a complaint?

ASIC has adopted the AS/NZS 10002:2014 definition of ‘complaint’ as:
“[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.”

ASIC says it is unable to provide an exhaustive list of what is and is not a complaint.

A consumer or small business is not required to expressly state the word ‘complaint’ or ‘dispute’, or put their complaint in writing, to trigger a financial firm’s obligation to deal with a matter according to ASIC’s IDR requirements.

ASIC’s IDR obligations do not apply only to those matters that can be escalated to AFCA. ASIC notes that the existing definition of complaint is likely to extend beyond complaints that are within AFCA’s jurisdiction

A complaint about the refusal of a firm to grant credit is a complaint. If these complaints can be immediately resolved by explanation of a firm’s reasonable commercial judgement, then further requirements will not apply.

Social media complaints

ASIC interprets the words ‘or about an organization’ in the definition of complaint covers expressions of dissatisfaction made via social media.

ASIC says that the definition of complaint should only include complaints made on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable.

It says complaints made to a firm on their social media channel or account should not be ‘played out’ publicly. Firms should redirect these complainants to an appropriate, private complaints process in a way that reduces additional friction as far as possible. This should alleviate any privacy concerns or issues with identifying complainants. Where the consumer fails to respond or cannot be identified, this may mean that the complaint cannot be reasonably dealt with.

Timeframes

ASIC has reduced the times allowed for responding to complaints: see Table below.

ASIC expects that firms will acknowledge a complaint within 24 hours (or one business day) of receiving it, or as soon as practicable.

A financial firm must provide an IDR response to a complainant no later than 30 calendar days after receiving the complaint. However, in some cases, a different timeframe applies or there are exceptions.

Different timeframes apply to:
(a) complaints about a traditional trustee
(b) complaints about superannuation trustees
(c) complaints about superannuation death benefit distributions
(d) certain types of credit complaints.

There are also different requirements for complaints closed within five business days of receipt.

Complaint type Maximum timeframes for IDR response
Standard complaints No later than 30 calendar days after receiving the complaint.
Traditional trustee complaints No later than 45 calendar days after receiving the complaint.
Superannuation trustee complaints, except for complaints about death benefit distributions No later than 45 calendar days after receiving the complaint.
Complaints about superannuation death benefit distributions No later than 90 calendar days after the expiry of the 28 calendar day period for objecting to a proposed death benefit distribution referred to in s1056(2)(a) of the Corporations Act.
Credit-related complaints involving default notices No later than 21 calendar days after receiving the complaint.

Credit-related complaints involving hardship notices or requests to postpone enforcement proceedings

No later than 21 calendar days after receiving the complaint. Exceptions apply if the credit provider or lessor does not have sufficient information to make a decision, or if they reach an agreement with the complainant.

Insufficient information
If the credit provider or lessor does not have sufficient information about a hardship notice to make a decision, they must request the information no later than 21 calendar days after receiving the complaint. The complainant must provide the information within 21 calendar days of receiving the request.

Once the credit provider or lessor has received the requested information, the credit provider has a further 21 calendar days to provide an IDR response.

If the credit provider or lessor does not receive the requested information within 21 calendar days of requesting the information, the credit provider or lessor has 7 calendar days to provide an IDR response.

Agreement reached
If agreement is reached about a hardship notice or request to postpone enforcement proceedings, the credit provider or lessor has 30 calendar days to confirm the terms or conditions in writing.

Contents of IDR Response

When a financial firm rejects or partially rejects a complaint, the IDR response must clearly set out the reasons for the decision by:

(a) identifying and addressing the issues raised in the complaint;
(b) setting out the financial firm’s findings on material questions of fact and referring to the information that supports those findings; and
(c) providing enough detail for the complainant to understand the basis of the decision and to be fully informed when deciding whether to escalate the matter to AFCA or another forum.

Role of customer advocates

ASIC is concerned that customer advocate models may delay consumers’ access to AFCA.

ASIC is also concerned that consumers may interpret the customer advocate as an additional or mandatory step before they can make a complaint to AFCA.

When a customer advocate reviews a complaint following an IDR response, the total time spent dealing with the complaint must not exceed the relevant maximum IDR timeframe. The total time includes both the IDR process and the customer advocate review.

Role of frontline staff and IDR teams

RG 271 requires firms to:

• encourage and enable staff to escalate possible systemic issues they identify from individual complaints;
• regularly analyse complaint data sets to identify systemic issues; and 
• promptly escalate possible systemic issues to appropriate areas within the firm for investigation and action.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
Email:
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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