Optus self-reported financial services law breaches to ASIC relating to its failure to provide a Product Disclosure Statement (PDS) and a Financial Services Guide to some of its customers who purchased mobile phone insurance in store or by telephone.
Following a subsequent investigation by ASIC, further breaches were identified including:
- failures to provide customers with benefits under promotional offers;
- incorrectly charging premiums during a ‘rain-check period’;
- failure to provide information during telephones sales including in respect of excesses and cooling-off rights;
- issuing incorrect (less favourable) cover.
ASIC was concerned that these breaches indicated that Optus had inadequate compliance systems and processes, such as training, monitoring and supervision of staff.
ASIC announced on 12 June 2016 that Optus has agreed to a voluntary ‘review and remediation’ package which includes:
- refunding approximately $2.4 million in premiums and interest to around 175,000 affected Optus mobile customers;
- writing to a further estimated 500,000 customers to determine whether those customers may also have been adversely affected;
- providing further compensation to customers found to have been adversely affect (by way of credit to customers’ accounts);
- where affected customers cannot be located making donations, in lieu of refunds, to charities assisting financial literacy;
- appointing an independent external firm to conduct a comprehensive review of its compliance functions to ensure ongoing compliance with its Australian financial services licence obligations.
This is yet another example of ASIC’s current focus on financial service compliance in relation to mis-selling of add-on insurance and the increasing use by ASIC of the ‘review and remediation’ model of addressing financial services non-compliance.
A review and remediation program is a project set up within an advice licensee to review personal advice, where a systemic issue in relation to the advice has been identified, and then to remediate those clients who have suffered loss as a result. It is expected that ASIC will shortly release a regulatory guide on review and remediation programs conducted by AFS licensees that provide personal advice to retail clients. This follows AISC’s December 2015 Consultation Paper in respect of which stakeholder submissions closed on 26 February 2016.
For a copy of ASIC’s Consultation Paper click here.