Holley Nethercote’s Rachel Erlich guides licensees through the complex new internal dispute resolution changes that are due to hit the industry in October.
ASIC released Regulatory Guide 271: Internal Dispute Resolution (RG 271) on 30 July 2020. ASIC’s internal dispute resolution (IDR) reporting requirements will come into effect at a later date.
Who does RG 271 apply to?
RG 271 explains what certain financial firms (including Australian financial services licensees and Australian credit licensees) must do so that they have an IDR system in place that meets ASIC’s standards and requirements.
It is ASIC’s expectation that consumer and small businesses will have “access to fair, timely and effective dispute resolution.”
When does RG 271 commence?
RG 271 commences on 5 October 2021, and will apply to complaints received by financial firms on or after 5 October 2021.
This means that there is much work to be done by financial firms to ensure that their IDR processes and systems are updated and comply with RG 271 before 5 October 2021.
Regulatory Guide 165: Internal and External Dispute Resolution will continue to apply to complaints received up to and including 4 October 2021, and will be withdrawn on 5 October 2022.
RG 271 was issued at the same time as ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/95 (instrument).
The instrument sets out the new enforceable standards that will apply to IDR procedures from 5 October 2021. Under paragraph 5 of the instrument, certain paragraphs of RG 271 are enforceable. A breach of an enforceable paragraph may result in civil penalty proceedings.
Expanded definition of ‘complaint’
RG 271 contains an expanded definition of ‘complaint’.
Financial firms must apply their IDR processes to all expressions of dissatisfaction made by a consumer or small business that meet the expanded definition of a complaint.
RG 165 definition of ‘complaint’
“An expression of dissatisfaction made to an organisation, related to its products or services, or the complaints handling process itself, where a response or resolution is explicitly or implicitly expected”.
RG 271 definition of ‘complaint’
“[An expression] of dissatisfaction made to or about an organisation, 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”.
Under the expanded definition of a “complaint”, expressions of dissatisfaction that are made about an organisation and its staff will constitute a complaint.
ASIC has stated that it expects a financial firm to take a proactive approach to identifying complaints. Further, ASIC states that a consumer or small business should not be required to put their complaint in writing or use the words “complaint” or “dispute” in order to trigger a financial firm’s IDR process.
RG 271 provides that certain expressions of dissatisfaction will meet the definition of a complaint including “posts (that meet the definition of ‘complaint’….) 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.”
Accordingly, financial firms will need to monitor any social media channels that they own or control so as to identify and manage complaints made by consumers and small businesses in that way.
ASIC has noted that it does not consider feedback provided in surveys or reports that are intended only to bring a matter to the financial firm’s attention to be complaints.
Outsourcing IDR processes
Financial firms are permitted to outsource all or part of their IDR process whether to another entity within a related corporate group or to an external third party.
If a financial firm chooses to outsource all or part of its IDR processes, it remains responsible for ensuring that the outsourced provider complies with all of the requirements set out in RG 271.
A financial firm must also:
- Have measures in place to ensure that due care and skill are used in selecting suitable service providers.
- Monitor the ongoing performance of the outsourced service provider.
- Deal appropriately with any actions of the outsourced service provider that breach relevant service level agreements or that fall short of the requirements of RG 271.
All complaints must be recorded
Financial firms are required to have an effective system for recording information about complaints so as to enable the financial firm to keep track of the progress of each complaint it receives.
A financial firm is also required to provide reports about complaint data on a regular basis to senior management and the board.
Whilst not an enforceable provision of RG 271, ASIC states its expectation that financial firms will acknowledge receipt of all complaints within 24 hours (or one business) day of it being received, or as soon as practicable.
ASIC says that a financial firm should take into account the method by which the complainant chose to make their complaint and any preferences expressed by the complainant when deciding whether to acknowledge the complaint verbally or in writing.
Reduced time frames for responding to complaints
RG 271 provides financial firms with reduced time frames for providing an IDR response to a complainant.
For standard complaints, this means that for complaints received on or after 5 October 2021, an IDR response must be provided within 30 days of the complaint being received rather than within the previously allowed 45 days.
Different time frames apply for other types of complaints including complaints that relate to superannuation death benefit distributions, credit-related complaints involving default notices and credit-related complaints involving hardship notices or requests to postpone enforcement proceedings.
Where a financial firm offers a complainant the option of escalating their complaint to a customer advocate, the total time spent dealing with the complaint both at IDR and the customer advocate, must not exceed the maximum IDR time frame (i.e. 30 days for standard complaints). Escalating a complaint to a customer advocate must not be a compulsory step of a financial firm’s IDR process.
Given the reduced time frames for responding to a complaint, financial firms will need to ensure that they are adequately resourced prior to the commencement of RG 271 on 5 October 2021 and have processes and systems in place to ensure that time frames are met.
A financial firm is not required to provide an IDR response if the financial firm closes the complaint within five business days of receiving the complaint because the financial firm has:
- Resolved the complaint to the complainant’s satisfaction.
- Given the complainant an explanation and/or apology where the financial firm can take no further action to reasonably address the complaint.
However, a written IDR response must be provided even if the financial firm closes the complaint within five business days where:
- The complainant requests a written response.
- The complaint is about hardship.
- The complaint is about a declined insurance claim.
- The complaint is about the value of an insurance claim.
- The complaint is about a decision of a superannuation trustee.
IDR response delay notification
Sometimes, despite a financial firm’s best efforts, additional time is required in order to provide a complainant with an IDR response that meaningfully addresses their complaint.
RG 271 provides that a financial firm may have additional time to provide an IDR response but only where there is no reasonable opportunity for the financial to provide the IDR response within the prescribed timeframe because:
- Resolution of the complaint is particularly complex.
- Circumstances beyond the financial firm’s control are causing delays in the management of the complaint.
In such cases, before the prescribed time frame for responding to a complaint expires, the financial firm must provide the complainant with a delay notification that sets out the reasons for the delay, the complainant’s right to escalate the complaint to the Australian Financial Complaints Authority (AFCA, formerly the Financial Ombudsman Service) and AFCA’s contact details.
Prescribed contents of an IDR response
RG 271 sets out the information that must be contained in an IDR response. This information includes:
- The final outcome of the complaint at IDR.
- Where the financial firm has rejected or partially rejected the complainant’s claims, the IDR response must set out the reasons for the financial firm’s decision by identifying and addressing the issues raised in the complaint, setting out the financial firm’s findings on material questions of fact and referring to the information that supports those findings and providing enough detail so that the complainant is fully informed when deciding whether to escalate the complaint to AFCA.
- That the complainant has the right to escalate their complaint to AFCA if they are not satisfied with the financial firm’s IDR response.
- AFCA’s contact details.
A systemic issue may be identified via a financial firm’s IDR process. A systemic issue is an issue (for example, of a systems or process nature) that affects, or has the potential to affect, more than one consumer.
RG 271 requires the board of a financial firm to set clear accountabilities for complaints handling functions, including the management of systemic issues that are identified through the IDR process. It also requires that reports provided to the board (or executive committees) include metrics and analysis consumer complaints including systemic issues identified via those complaints.
Whilst not an enforceable paragraph of RG 271, ASIC sets out its expectation that where a systemic issue is identified via the financial firm’s IDR process, that the financial firm will take prompt action to address the issue identified, and initiate a remediation process for affected consumers.
A financial firm’s IDR process must be free to consumers, and a financial firm must provide a complainant with information explaining its IDR process at no cost. This includes having a publicly available and readily accessible, complaints policy, and an internal complaints management procedure.
A financial firm must ensure that its IDR process is easy to understand and use, including by those with a disability or language difficulty.
A financial firm’s IDR process must also be adequately resourced at all times (including where there are spikes in complaint volumes) so that it operates fairly, effectively and efficiently, and so that complaints can be dealt with within the maximum prescribed IDR time frames.
Complaint staff must be appropriately authorised to resolve complaints and implement the complaint outcomes. In addition, complaint outcomes must be implemented in a timely fashion where a complaint is closed.
Health and safety of complaint staff
Staff dealing with complaints may, at times, face challenging complainant behaviour.
Whilst not an enforceable provision of RG 271, ASIC states that financial firms should put in place health and safety policies to support their staff who are involved in the management of complaints. ASIC suggest that such policies may include:
- Policies and procedures for managing unreasonable conduct by complainants.
- Protecting staff identity where necessary.
- Providing access to debriefing sessions or employee assistance programs.
Financial firms will need to ensure that they spend the next four months wisely in order to ensure that they are ready to comply with the requirements of RG 271 by 5 October 2021. For some financial firms this will mean ensuring that they have additional resources available to deal with complaints and the reduced time frame for responding to those complaints.
Rachel Erlich, senior associate, Holley Nethercote Lawyers
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