26 June, 2019
On 15 May 2018, ASIC published a consultation paper (CP 311) seeking feedback on the proposed updates to Regulatory Guide 165 – Licensing: Internal and external dispute resolution (RG165) in relation to the internal dispute resolution (IDR) standards. CP 311 discusses new mandatory IDR data reporting to ASIC that apply to financial firms (including Australian financial services (AFS) licensees, banks, insurers, credit providers, advisors and most superannuation funds).
Background
Updating RG165 was required after the enactment of the Treasury Laws Amendment (Putting Customers First—Establishment of the Australian Financial Complaints Authority) Act 2018 (AFCA Act) at the end of 2018. The AFCA Act introduced key statutory reforms, including a new IDR data reporting regime for all financial firms. The ASIC report on the consumer experience of IDR procedures across financial services sector (Report 603) released in December 2018 made the need to raise the IDR standards even more imminent. Report 603 found that the current IDR standards and capacity across financial firms are often below the customers’ expectations and there is room for improvement of the consumer experience and outcomes.
Upon publication of the new RG165, ASIC also intends to modify relevant sections of the Corporations Act 2001 (Corporations Act) and the National Consumer Credit Protection Act 2009 so all financial firms not only have IDR processes but also to comply with IDR standards and requirements made or approved by ASIC.
Key Proposed Changes to RG165
1. Expansion of IDR requirements to cover superannuation trustees
ASIC do not propose to issue a separate legislative instrument specifically addressing written reasons for complaint decisions made by superannuation trustees however, it does propose to include the content of IDR responses as a core requirement for all financial firms, thus making parts of RG165 enforceable.
2. Definition of "complaint" expanded to cover complaints made on a firm’s social media
ASIC propose to update the definition of "complaint" to require financial firms’ IDR processes to apply to: "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 considers that this should capture complaints made by identifiable customers on a firm’s own social media platform(s) and seeks feedback on this change.
3. Change of definition of "small business" in the Corporations Act
ASIC propose to modify the definition of "small business" in the Corporations Act to align it with the definition in the AFCA Rules to harmonise dispute resolution access for small business complainants through both IDR and external dispute resolution. The current differences of the definitions of "small business" in the Corporations Act and the AFCA Rules are shown as below.
| "Small business" in Corporations Act | "Small business" in AFCA Rules |
|
A business that has:
Consolidated gross assets of less than $12.5 million at the end of the financial year. |
A Primary Producer or other business that had less than 100 employees at the time of the act or omission by the Financial Firm that gave rise to the complaint. |
4. Recording all complaints received with identifier and prescribed data set
ASIC propose to require financial firms to record all complaints, including those that are resolved to a complaint’s satisfaction at the first point of contact. Further, each complaint is proposed to be recorded with a unique identifier or case reference number and a prescribed data set in order to facilitate the IDR data reporting regime.
5. Recurrent IDR data reporting and standards
ASIC will issue a legislative instrument setting out its IDR data reporting requirements. ASIC proposes that all financial firms that are required to report IDR data to ASIC, must:
- for each complaint received, report against a set of prescribed data variables (which includes a unique identifier and a complaint summary)
- provide IDR data reports to ASIC as unit record data (i.e., one row of data for each complaint)
- report to ASIC at six monthly intervals by the end of the calendar month following each reporting period
- lodge IDR data reports through the ASIC Regulatory Portal as comma-separated-value (CSV) files (25 MB maximum size)
6. Reduced maximum IDR timeframes
ASIC propose to reduce the maximum IDR timeframe for:
- superannuation complaints and complaints about trustees providing traditional services from 90 days to 45 days
- all other complaints (excluding credit complaints involving hardship notices and/or requests to postpone enforcement proceedings and default notices which previously allowed approximately 21 days) from 45 days to 30 days
ASIC also propose to introduce a requirement that financial firms can issue IDR delay notifications by exceptions only.
7. Other changes
Other proposed changes that ASIC seek feedback on include:
- setting clear standards about what should be in written reasons for decisions made in relation to complaints
- strengthening the requirement that firms take a systemic focus to complaints handling
Proposed Transitional Periods
It is proposed that financial firms comply with the new requirements immediately on the publication of the updated RG165 (expected to be late 2019), with the exception of the below:
| Requirement | Application Date |
|
To provide an IDR response to a complainant within reduced maximum IDR timeframes |
31 March 2020 |
| To record all complaints received by the financial firm, including those that have been resolved immediately | 30 June 2020 |
| To assign a unique identifier for all complaints received by the financial firm | 30 June 2020 |
| To record prescribed complaint data for every complaint received by the firm | 30 June 2020 |
| To report IDR data to ASIC in accordance with ASIC’s data reporting requirements | 30 June 2021 |
Next steps
Feedback on CP 311 is to be submitted by 9 August 2019. ASIC aim to release the updated RG165 by the end of 2019.
Given that some of the IDR reforms represent significant change for financial firms including the requirement to develop processes and systems and to upskill staff who are responsible for dealing with complaints, we encourage you to contact us if you have any questions. We are happy to provide assistance in drafting a submission on your firm's behalf to ASIC in relation to the proposed updates to RG165 or if you have any concerns with the proposed updates.
For further information, please contact:
Bill Fuggle, Partner, Baker & McKenzie
bill.fuggle@bakermckenzie.com
