The Australian Finance Industry Association (AFIA) has slammed ASIC’s proposal to lower the consumer compensation threshold from $20 to $5, arguing that the current threshold is practical.
The corporate regulator suggested the threshold be lowered in an updated and expanded draft regulatory guide on consumer remediation published in November.
Among other things, the new regulatory guide introduced a $5 low-value compensation threshold. This means that for sums over this amount, licensees should “apply reasonable endeavours to contact [customers] and make remediation payments automatically, where possible”.
In its submission to ASIC, the AFIA argued that the operational impost of contacting the customer and potentially issuing cheques for small amounts where a customer bank account is not maintained would not be cost-effective and would likely create significant unclaimed monies across the financial services industry.
“AFIA believes that the existing low compensation threshold of $20 is practical. It balances the needs of customers and financial services providers in returning customers, as near as possible, to the position they would have otherwise been in had the misconduct or other failure not occurred,” the association said.
ASIC also proposed that if a former customer is owed $5 or less (after interest) with no current payment information on file, rather than making reasonable endeavours to pay the money directly to the consumer, it would be “appropriate for the licensee to instead make a residual remediation payment to a charitable or community organisation (known as applying a ‘low-value compensation threshold’)”.
AFIA agreed with this suggestion but recommended that where a financial services provider does not have the customer’s bank account details, that a charitable donation for amounts below $20 per customer be permitted.
“This approach ensures the financial services provider does not derive any benefit from the error and there is a relevant community benefit,” AFIA said.
Moreover, AFIA opposed the corporate regulator’s suggestion to change remediations to include incidents that go back more than seven years.
The association argued that having a “fixed” seven-year threshold will increase certainty around compliance settings and drive more consistency across the industry.
What a joke.
Are ASIC trying to sink the economy with red tape these days? Who cares about $5 or even $20. If a person is worried about that then I suspect they have bigger (financial) issues to worry about.
The bigger question is whether Frydenberg is actively trying to destroy the economy; he the one meant to be in charge of ASIC