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ASIC concerned over IDR ‘obstacles’ in financial sector

ASIC concerned over IDR ‘obstacles’ in financial sector

The corporate regulator has released a report highlighting the challenges faced by customers in the dispute resolutions process and has warned firms that it will be monitoring their compliance with its guidelines.  

The Australian Securities and Investments Commission’s (ASIC) review into the internal dispute resolution (IDR) process for consumers in the financial services sector has identified the “barriers and difficulties” faced by consumers in the financial sector in “approaching and navigating the complaints process”.

The ASIC research found that:

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  • 17 per cent of Australians aged 18+ considered making a complaint to a financial firm in the preceding 12 months (“the considerers”)
  • 8 per cent went on to make a complaint (“the complainants”)
  • almost half of those who did not make a complaint reported that “they did not think it would make a difference or it was not worth their time”
  • 18 per cent of complainants dropped out or withdrew their complaint before it was concluded

Further, ASIC found that the common obstacles that were encountered by complainants that directly affected their satisfaction and/or confidence in the complaints process included:

  • Structural obstacles: one in seven complainants found it difficult to find the firm’s contact details to make a complaint
  • Transparency obstacles: Almost a quarter of complainants did not have the IDR process explained well at first contact and 27 per cent of complainants were unsure of how long they would need to wait for a decision
  • Customer service obstacles: 28 per cent of complainants reported feeling that they had not been listened to or heard and 22 per cent felt they had been passed around to too many people or strung along

The review also found that almost half (45 per cent) of complainants who received an unfavourable outcome received an explanation of the decision made against them by the firm, with only 21 per cent of complainants having the external dispute resolution (EDR) process explained to them.  

The corporate regulator said that it was “particularly concerned” with such findings since “each of these steps is essential to assist consumers to effectively escalate their complaint to an independent and external forum”.

ASIC commissioner Danielle Press observed: “As the first step in the financial dispute resolution system, IDR plays a vitally important role in Australia’s consumer protection framework.

“Consumers and small businesses should have access to transparent, fair and timely complaints processes. Our research shows the strong connection between consumer satisfaction in how a firm deals with a problem and their confidence in that financial firm.

“Making a complaint can be a stressful exercise for many people and that there are clear opportunities for financial services firms to improve consumer experience and outcomes.”

ASIC issues warning to firms

ASIC urged financial services firms to “closely review the research” and consider whether their complaints procedures need to be reformed to “improve the experience for consumers and to ensure that identified problems are remedied effectively and promptly”. 

The regulator also warned that firms should prepare to engage with ASIC about its review of the complaints handling standards and requirements, noting that a specialist ASIC team has been set up under ASIC’s Close and Continuous Monitoring Program to conduct on-site monitoring of the IDR functions at NAB, the Commonwealth Bank of Australia (CBA), Westpac, ANZ and AMP. 

ASIC said that its team will review and assess target firms’ IDR arrangements – including processes, practices, resourcing, communications, governance and reporting – and will map and evaluate their systems capabilities.  

ASIC’s first on-site review commenced in November, with its monitoring of the CBA.

Moreover, ASIC said that all financial firms that deal with retail clients and all superannuation trustees must have IDR procedures that meet its standards and requirements.

The corporate watchdog revealed that from February 2019, it will be consulting publicly on a review of existing IDR guidance set out in Regulatory Guide 165, Licensing: Internal and external dispute resolution. 

ASIC said that its review will consider, among other matters:

  • the definition of complaint, i.e., what triggers the IDR process
  • requirements for complaints that are resolved immediately or within five business days
  • maximum IDR time frames across all complaints including superannuation related complaints
  • written reasons for decisions made by superannuation trustees about complaints

The regulator also noted that the legislation establishing the Australian Financial Complaints Authority (AFCA) introduced specific IDR-related reforms, including the requirement for financial firms to report IDR performance data to ASIC on an ongoing basis, with ASIC also given new powers to publish the IDR data on a firm-by-firm basis.

ASIC added that it will be consulting on the proposed data collection and reporting framework as part of the broader policy consultation mentioned above, and that both the broad IDR policy reforms and the proposed data collection framework will be informed by insights from the consumer research and findings of the IDR on-site program.

 [Related: AFCA officially opens for business]

ASIC concerned over IDR ‘obstacles’ in financial sector
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