ASIC gets serious on complaints

Australian Financial Review May 15, 2019 4.10pm

James Frost


The Australian Securities and Investments Commission wants banks, super funds and insurance companies to slash turnaround times for customer complaints.

The regulator believes the opaque and often confusing approach to how complaints are handled inside those institutions discourages customers from lodging complaints and leads to one in five complainants abandoning the process part way through.

Proposed new guidelines contained in consultation paper 311 include a strict set of rules for the acceptance, treatment and reporting of customer complaints, which the regulator expects will help not just consumers but the firms themselves.

ASIC deputy chairman Karen Chester said the need for effective systems of redress was a key finding of the banking royal commission. She described the revised regulatory guide for internal and external dispute resolution as a game-changer.

"It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system,” Ms Chester said.

“Consumers expect and need a fair, timely and effective way to have their complaints dealt with.”

The proposals have emerged out of consultation with consumers and observations made during the regulators program of embedding staff at financial services companies, known as close and continuous monitoring.

ASIC’s consumer research found evidence of consumer fatigue with the existing programs noting 18 per cent of those surveyed dropped out of the process before it concluded and 45 per cent of complainants who received an unfavourable outcome saying they did not receive an explanation.

Under the new guidelines financial services firms will be required to provide specific detail about why a particular conclusion was reached and apply a unique identification number for each complaint.

“We are concerned that the quality of IDR [internal dispute resolution] responses provided to complainants across the financial services sector is generally poor, particularly when a complaint is rejected or partially rejected by a financial firm,” the proposal reads.

With total bank compensation from issues inside wealth management arms reaching $8 billion following Monday’s announcement from Commonwealth Bank, it is believed the changes will assist the banks with early detection of systemic and non-financial risks before they crystallise.

David Locke is the chairman of the Australian Financial Complaints Authority (AFCA), the mega ombudsman and dispute resolution body of last resort. He said the new standards would lead to more complaints being resolved quickly and potentially reducing wait times at AFCA.

“We also welcome the idea of requiring firms to provide a standard set of data – this will help companies know how they compare to their competitors and help to inform consumers about the companies they’re dealing with,” Mr Locke said.

Among the likely sticking points for financial institutions are ASIC’s demand that they reduce the maximum time frames for responding to a complaint from 90 days to 45 days for complaints about superannuation and from 45 days to 30 days for every other type of complaint.

ASIC will also require comprehensive reporting of complaints every six months and will have the power to make company level complaint data public.

The guidelines also require financial services companies to take complaints on social media seriously.

Companies are expected to follow up customer complaints made on a bank or financial institution's social media presence when a response has been requested and the complaint can be traced back to a customer.

In practical terms this means that a complaint on the Facebook page of a major bank from a verified user must be followed up while an anonymous spray tagging a bank on Twitter may be ignored.

AFCA’s Mr Locke said the proposal to ensure complaints made on social media were considered as serious as written complaints was sound.

“In this digital age, the move by ASIC to require firms to include complaints made on social media platforms, is entirely appropriate” he said.