ASIC nudges banks to pay outstanding $1.6bn in remediation

Over the past six years, the Australian Securities and Investments Commission (ASIC) has overseen at least $5.6 billion in remediation for an estimated 7 million Australian consumers for failures identified across the financial system.

However, the regulator is reminding the sector a further $1.6 billion is yet to be paid to an estimated 2.7 million consumers in remediations.

In a bid to help financial firms remediate their customers quickly and effectively, ASIC published updated and expanded regulatory guidance.

It comes following industry requests for clearer guidance on remediations and draws on six years of oversight.

Deputy chair Karen Chester said the guidance puts the onus on industry to “get on with fair and timely remediations” and return the money they owe to “wronged consumers”.

ASIC monitors remediations, as part of its legal obligations and has needed to oversee large-scale remediations to ensure affected consumers were treated fairly and received the compensation they were entitled to.

In the past six years remediation for fees-for-no-service misconduct or non-compliant advice has seen payments of $3.6 billion in compensation to over 1.4 million consumers.

In addition, remediations in the insurance industry totalled more than $1.3 billion for mis-selling junk insurance, failing to deliver on price discount promises and poor sales practices, as was the recent case with AMP’s $14 million fine, as well as Westpac for its Credit Card Repayment Protection and Flexi-Loan Repayment Protection policies.

The updated Regulatory Guide 277 Consumer remediation (RG 277) applies to both Australian Financial Services (AFS) licensees and Australian credit licensees and delivers licensees “all they need to achieve” the right remediation outcomes on their own, Ms Chester said.

“The guide has been subject to an extensive two-year public consultation process with consumer and industry stakeholders,” Ms Chester said.

“It explicitly allows the use of assumptions, to help firms address knowledge gaps and accelerate remediation programs in a way that does not disadvantage consumers.”

Given licensees have all the tools to remediate customers quickly, Ms Chester said they must “do better at identifying and remediating problems earlier” to avoid the costly lag and drag of remediation.

“The common stumbling block we have seen across remediations is underinvestment in systems. This underinvestment has led to a trifecta of failures,” added Ms Chester.

“First and foremost, in delivering on promises to consumers, second in identifying the failures and third in being able to remediate consumer loss in a timely way.

“Going forward, while ASIC may need to intervene in some isolated cases, the regulator ‘should not’ oversee remediations in order for consumers to receive fair and timely outcomes.”

As at June 2022, ASIC was monitoring 36 remediation activities across superannuation, advice, credit and banking and insurance whereby $3.25 billion has been paid or offered to over 3.4 million consumers, and a further estimated $1.6 billion is yet to be returned to around 2.7 million consumers.

[Related: Westpac slapped with $1.5m fine for mis-selling CCI]