ASIC’s new Regulatory Guide 271 comes into effect on 5 October, covering new expanded IDR requirements that seek to address ASIC’s long-standing concerns regarding deficiencies and delays in the banks’ processes including in the identification, investigation and resolution of potential systemic issues raised by complaints.

In this article, Sonia Apikian and Trish Kastanias explore the key changes between RG165 and RG271 and set out recommendations for the financial services sector ahead of 5 October implementation.

New Internal Dispute Resolution (IDR) requirements to reduce IDR timeframes and improve internal reporting

ASIC’s new Regulatory Guide 271: Internal Dispute Resolution (RG271) comes into effect on 5 October 2021. Download the guide here (PDF 701 KB)

Background

These new expanded IDR requirements seek to address ASIC’s long-standing concerns regarding deficiencies and delays in the banks’ IDR processes including in the identification, investigation and resolution of potential systemic issues raised by complaints. RG271 replaces RG165: Internal and External Dispute Resolution and sets out new enforceable standards that will apply to IDR procedures for financial firms. Failure to comply with the enforceable paragraphs could lead to ASIC pursuing civil action against the financial firm.

Key changes

The key changes between RG165 and RG271 are:

 

  1. The expanding of the definition of a complaint to be an expression of dissatisfaction made to or about an organisation, 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.
  2. The reduction of time for financial firms to respond to IDR complaints to 30 days after receiving standard complaints, 45 days after receiving trustee complaints and 45 days after receiving superannuation trustee complaints, except for complaints about death benefit distributions.
  3. If the complainant escalates the complaint to the customer advocate, the total time spent dealing with the complaint must not exceed the relevant maximum IDR timeframe. The total time includes both the IDR process and the customer advocate review.
  4. Where the financial firm rejects or partially rejects the complaint, the firm’s IDR response must set out the reasons for the decision by identifying and addressing the issues raised in the complaint, setting out the financial firm’s findings on material questions of fact and referring to the information that supports those findings, providing enough detail for the complainant to understand the basis of the decision and to be fully informed when deciding whether to escalate the matter to AFCA or another forum.
  5. Where financial firms outsource the IDR processes they must have measures in place to ensure that due skill and care is taken in choosing suitable service providers, monitor the ongoing performance of service providers; and appropriately deal with any actions by service providers that breach service level agreements or fall short of their obligations under RG271.
  6. New resourcing requirements setting out that various staff (eg. chief executive, managers, frontline staff etc.) are expected to have roles and responsibilities in the firm’s IDR processes. Staff numbers must be sufficient to deal with complaints in a fair and effective manner within maximum IDR timeframes, and staff must have appropriate delegations in place to resolve complaints and approve/pay complaint outcomes.
  7. Boards must set clear accountabilities for complaints handling functions, including the management of systemic issues identified through consumer complaints. Further, if a financial firm provides reports to the board and/or executive committees, the reports must include metrics and analysis of consumer complaints including about systemic issues identified through those complaints.
  8. The expectation that firms develop and maintain a positive complaint management culture that welcomes and values complaints, and treats complainants with respect. Boards are to have oversight of the IDR process and the culture of the firm should recognise that everyone has a right to complain.

Next steps and practical guidance

It is clear that ASIC is keen to see a shift in business culture through all levels of management of the financial firm becoming involved in IDR. Business culture around IDR should transform to one that is proactive, valuing of complaints and empowering for staff through their delegation to respond to complaints and having processes in place for them to escalate systemic issues.

We think that a clear upside for financial firms is the opportunity for enhanced IDR processes to lead to higher customer satisfaction and loyalty, a more customer centric culture and experience, and therefore a lower likelihood of complaints being commenced in other forums.

We recommend the following for financial firms to prepare for RG271:

  • Increased and regular involvement from Boards and senior management into setting and reviewing robust IDR policies and procedures and establishing accountabilities for the management of complaints.
  • Continuing to develop user-friendly IT systems and processes that are capable of reporting on metrics and analysis of consumer complaints so staff are able to identify, investigate and escalate systemic issues to Boards or executive committees. Firms can then meet their obligations to promptly identify other impacted customers and remediate them.
  • Invest in larger IDR teams so they have capacity to proactively monitor for and respond to complaints that are made on social media channels (as well as traditional channels) in the shortened timeframes.
  • Upskilling staff so they are able to take a nuanced approach when responding to complainants as the level of detail should reflect the complexity of the complaint and the nature and extent of any investigation conducted.
  • Staff training schemes and resources should be reviewed for staff so staff are able to deal with complaints in a fair, respectful, and timely way.

Further, as new design and distribution obligations are also coming into effect on 5 October 2021, we think that as financial firms bolster their IDR processes in line with RG271, and increase their emphasis on data collection, analysis and internal reporting of complaints, there will be opportunity for IDR reports to become a valuable tool in a firm’s regular evaluation of target market determinations, its product design, and to help drive the continuous improvement of financial product offerings.