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What Boards need to know about ASIC’s updated guidance for handling complaints – RG271

handing complaints under ASIC's RG271

With effect from 5 October 2021, all complaints made by a customer or small business to or about a financial firm, such as an Australian financial service licence holder or an Australian credit licensee, must be dealt with in accordance with ASIC’s new Regulatory Guide 271: Internal Dispute Resolution (RG 271).

Accordingly, financial firms must ensure that their complaints policies and internal dispute resolution (IDR) processes are updated to incorporate ASIC’s enforceable requirements and new standards set out in RG 271 in advance of the fast-approaching 5 October 2021 deadline.

The key takeaways:

  • ASIC has given financial firms until 5 October 2021 to comply with the new IDR standards and guidelines set out by Regulatory Guide 271.
  • ASIC has brought in a number of updated IDR requirements, including a broader definition of ‘complaint’, reduced timeframes for responding to complaints, new requirements regarding the content of responses, a focus on the identification of systemic issues, and mandatory reporting requirements.
  • A number of the standards and requirements set out in RG 271 are enforceable provisions carrying civil penalties for non-compliance.

RG 271 is intended to replace the existing Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165) which is to be repealed 5 October 2022.

This article outlines a number of the increased obligations introduced by RG 271 of which financial firms should be aware ahead of 5 October 2021.

A broader definition of ‘Complaint’

Financial firms must have implemented IDR process that adopts the definition of a ‘complaint’ set out below:

[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’.

This expands upon the definition of ‘complaint’ set out in RG 165, to include expressions of dissatisfaction made about an organisation as well as about an organisation’s staff.

Firms will be expected to take a proactive approach to identifying complaints. RG 271 notes that the mere fact a consumer or small business does not expressly state the word ‘complaint’ or dispute, or put their complaint in writing does not excuse a financial firm from it’s obligations to deal with the matter in accordance with their IDR requirements.

ASIC also cautions firms against relegating an expression of dissatisfaction that meets the above definition as ‘feedback’, an ‘inquiry’ or a ‘comment’, so that it is not captured by RG 271, merely because the complainant expresses their dissatisfaction verbally, a goodwill payment is made, or otherwise the firm considers that the matter has no merit.

Notably, RG 271’s expanded definition of ‘complaints’ now includes ‘posts on a social media channel or an account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable (where the post meets the above definition of a complaint)’.

In view of this, financial firms will need to monitor any social media channels or accounts that are owned or within their control so that they may identify and manage complaints accordingly.

Proscriptive requirements on the content of responses

Preparing an ‘IDR Response’

RG 271 has introduced enforceable requirements for the form in which a financial firm’s response to a Complaint must take, this is referred to as an ‘IDR response’.

An IDR response must take the form of a written communication from the financial firm to the complainant, informing them of:

  1. the final outcome of their complaint pursuant to the IDR process(es) (either confirmation of actions taken by the firm to fully resolve the complaint or reasons for rejection or partial rejection of the complaint);
  2. their right to take the complaint to the Australian Financial Complaints Authority (AFCA), where the complainant is not satisfied with the IDR response or outcome; and
  3. the contact details for AFCA.

Exception: complaints resolved in 5 business days:

Where any complaint is resolved within 5 business days of its receipt, firms are not required to provide an IDR response provided that the firm has resolved the complaint to the complainant’s satisfaction or given the complainant an explanation or apology where no further action can be taken.

For the exception to be enlivened, complainant satisfaction must either be confirmed in writing or verbally, or otherwise in a manner where a firm might reasonably infer that the complaint has been resolved to the complainant’s satisfaction.

Reduced timelines for managing and responding to complaints

Acknowledging complaints

ASIC outlines its expectation that financial firms will provide an acknowledgement of a complaint (verbally or in writing (email, post or social media channels) within 24 hours (or one business day) of receiving it, or as soon as practicable.  However, this is not an enforceable requirement.

Maximum timeframes for responding to complaints

For standard complaints, firms should be aware that they are required to provide an IDR response to a complainant no later than 30 calendar days after receiving the Complaint. This represents a marked reduction from the 45 day timeline set out in RG 165.

There are some variations to this maximum timeframe according to complaint type and complexity – for example different timeframes apply to complaints that relate to superannuation death benefit distributions and credit related complaints involving default notices, hardship notices or requests to postpone enforcement proceedings.

Given that the maximum timeframes for financial firms to provide an IDR response range from anywhere between 21 days up to 90 days from receipt, firms must familiarise themselves with the timeframes set out in Section C of RG 271 to ensure they are complaint.

Whilst RG 271 is not overly proscriptive with what kind of complaint management systems a financial firm need to have in place, in view of the impending deadline for compliance and reduced timeframes, firms should ensure that they are adequately resourced and have the appropriate mechanisms in place to meet ASIC’s increased expectations.

Identifying and managing systemic issues:

ASIC has identified that one of its key aims behind RG 271 is to “sharpen industry’s focus on systemic issues.” In turn, RG 271 recognises that consumer complaints are a key risk indicator of a systemic issues within a financial firm. A systemic issue is defined at RG 271.117 as a ‘matter that affects, or has the potential to affect, more than one consumer’. ASIC includes examples such as a misleading or inadequate disclosure document or a unit pricing error.

In view of this, RG 271 creates enforceable obligations on the Board of financial firm’s to set out clear accountabilities for complaint handling functions, including the management of systemic issues identified through consumer complaints. In particular, any reporting on complaints must include metrics and analysis of systemic issues identified through consumer complaints. Financial firms will also be obliged to encourage and facilitate the escalating of possible systemic issues that might be identified from individual complaints.

If an investigation confirms that a systemic issue exists, ASIC expects that a financial firm will take prompt action to identify affected consumers and provide fair remediation.

Mandatory reporting, recording complaint data and continuous improvement

ASIC’s RG 271 emphasises the reporting and recording of complaints by financial firms. From 5 October 2021 onwards, firms will be required to establish an effective system for recording information about complaints. The system must enable firms to keep track of the progress of each complaint.

Further, financial firms must provide reports on complaints data regularly to senior management and the firm’s board (or equivalent). These reports must include information including, but not limited to, the number of complaints received, the number of complaints closed, the circumstances that give rise to complaints, and the time taken to acknowledge and handle complaints.

With a goal of continuous improvement in IDR processes, ASIC also encourages firms to monitor and review the performance of their IDR processes by undertaking ongoing monitoring of complaint metrics, ongoing quality assurance and regular reviews of their processes.

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