Industry remediation costs blow out to over $3.5bn

The regulator has said it is currently monitoring remediation programs worth more than $3.5 billion, as it released a new consultation paper seeking industry guidance on updated remediation standards.

In a statement, ASIC said it was currently monitoring over 100 remediations that, when finalised, could see the return of at least $3.55 billion to over 3.6 million consumers.

"There are many other remediations that are dealt with by firms without any ASIC involvement," the regulator said.

ASIC said the programs it had been involved in across financial services over the past four years included fee for no service remediations across the major banks and "smaller remediations arising out of systems errors and failures by licensees to deliver on their contractual promises to consumers".

Advertisement
Advertisement

"While ASIC has seen some good practices by licensees, we have also seen many remediations caused – or blown out – by ongoing systems failures, ultimately resulting in significant costs to licensees and further harm to consumers," the regulator said.

“There are opportunities for firms to not only identify the issues that can lead to remediations earlier, but also to make sure that they have arrangements and systems in place to return money to affected consumer as fast and as fairly as possible,” ASIC acting chair Karen Chester said.

“We are also seeing some positive signs from firms who are looking at ways to fast track remediations, including through the use of beneficial assumptions.”

In its Consultation Paper 335, which provided an update to previous regulatory guidance on remediation, ASIC has proposed licensees use "only beneficial assumptions" when making assumptions in a remediation program.

ASIC said an assumptions-based program could speed along a remediation process rather than relying on individual file reviews, and should also be used where records may be absent. However there were issues to consider in the way assumptions were used, such as average-based assumptions that may not meet a licensee's obligations, the regulator said.

ASIC also acknowledged that beneficial assumptions may not be "reasonable or possible beyond the seven-year record-keeping period [and] may vary according to each remediation and a licensee’s capabilities, including data management capabilities and resources".

"For example, we do not expect that a small financial advice firm will have the same capabilities or resources as a larger firm," the regulator said.

The regulator's paper also suggested that licensees should apply "best endeavours to find and automatically pay consumers" affected by a remediation program, and that "cheques should generally be issued as a last resort".

Industry remediation costs blow out to over $3.5bn
default
ifa logo

Subscribe to the ifa bulletin

Receive daily online news,analysis, reports and business strategies
By signing up you agree to our Terms of Use and Privacy Policy

from the web

Website Notifications

Get notifications in real time and stay up to date with content that matters to you.