“Solving some problems requires less than half the energy or time it took to complain about them.”
— Mokokoma Mokhonoana
Are you prepared?
As at 30 June 2020, AFCA received 80,546 complaints of which 78% were closed and $258.6 million was paid in compensation. Complaints related to:
- 28, 411 Banks
- 15,748 General Insurers
- 9,857 Credit Providers
- 4,732 Superannuation fund Trustees or advisors
- 2,607 Debt collectors or buyers
Drilling down to those providing investment advice, complaints related to:
- Misleading product and/or service information (757)
- Inappropriate advice (585)
- Failure to follow instructions/agreement (575)
- Failure to act in client’s best interests (469)
- Service quality (380)
I’m not complaining, but …
ASIC released updated requirements 30 July 2020, RG 271 Internal Dispute Resolution, in relation to how financial firms deal with consumer and small business complaints under their internal dispute resolution (IDR) procedures.
With the birth of the new and improved Regulatory Guide on Internal Dispute Resolution due to commence 5 October 2021, how will these stats, clearance rates and customer satisfaction levels be affected?
Will the new definition, compressed timelines, increased policy, processes and allocation of resources see a different result in June 2022?
Despite catching many unawares, the IDR policy consultation has been long and protracted; It started in December 2018 with “ASIC Report 603: The Consumer journey through the Internal Dispute Resolution process of financial service providers”.
download asic REPORT 603
The investigation undertaken by ASIC at the time found that:
- 4 in 5 complainants experienced difficulty, decreased satisfaction and formed a negative impression of the firm.
- 1 in 2 people who complaint was not resolved in their favour did not get an explanation.
- 1 in 7 found it difficult to find the firms contact details.
- 4 in 5 people whose complaints took >45 days were not told about EDR.
- 1 in 3 people spoke to too many contacts over the course of the complaint.
- 1 in 7 people withdrew from the complaint process due to an inadequate response form the firm.
The majority of these suggest process failures, that a competent Licensee should have identified.
However, when you read the updated guidance, you’ll see more significant responses including:
- An introduction of reduced timeframes for responding to complaints, including superannuation complaints;
- Enhanced disclosure in terms of the information firms must include in written IDR responses to allow customers to decide whether to escalate their complaint;
- New timeframe requirements for consumer advocate reviews of appeals against the IDR decisions; and
- Guidance about how firms can deal with representatives who are not acting in consumers’ best interests.
You have until 5 October 2021 to comply with the new IDR standards and requirements, but we thought you’d appreciate some practical suggestions about how you might change your processes, policies systems to accommodate the new changes.
Your first few steps
“Not one of the probably eight or nine people I had to deal with were actually listening”
— ASIC Report 603 “The Customer journey through the Internal Dispute Resolution process of financial service providers, p6
Consumers can now use your IDR processes to complain about your IDR processes, the outcomes of the IDR process and your remediation program.
With the broadened scope, and your obligations to uncover and facilitate complaints, you may need to consider the adequacy of your current resources.
Public Complaints Policy
You’ll will need to have a public complaint policy that explains:
- How consumers may lodge a complaint (e.g. online, by email, by phone and in person);
- The options available to assist complainants who might need additional help to lodge their complaint;
- Your key steps for dealing with complaints;
- Response timeframes; and
- Details about accessing AFCA where a complaint is not resolved.
Process and Record Keeping
Outsourcing IDR processes:
If you outsource, all or part of, your IDR process you must:
- Have measures in place to ensure that due skills and care is taken in choosing a suitable service providers;
- Monitor the ongoing performance of your service provider; and
- Appropriately deal with any actions by service providers that breach service level agreements or fall short of their obligations.
You will need to review your outsourcing policy, selection and performance criteria and contractual clauses.
You now have to acknowledge a complaint within 24 hours of one business day of receiving it, or as soon as is practicable.
You must take into account the method used by the complainant to lodge their complaint and any preferences they may have expressed about communication methods (i.e. email, post or social media channels).
You’ll need to look at the systems you have in place to effectively monitor your firm’s social media footprint.
Written response for partial/full rejection of complaint:
For those complaints you reject, your response must clearly set out the reasons for the decision by:
- Identifying and addressing the issues raised in the complaint;
- Setting out your findings on material questions of fact and referring to the information that supports those findings; and
- 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.
You will need to review your complaint correspondence and templates to ensure you can meet the new requirements.
Compressed timeframe to provide IDR Response
As a general rule, RG271 will require you to provide an IDR response no later than 30 calendar days after receiving the complaint.
In some cases, a different timeframe applies:
- Traditional trustee complaints – no later than 45 days
- Superannuation trustee complaints – no later than 45 days
- Superannuation death benefit complaints – no later than 90 days
- Credit related complaints involving default notices – no later than 21 days
You will need to consider your resourcing requirements and ensure you have adequate capacity to deal with these new timeframes.
Complaints closed within 5 business days of receipt
You won’t need to provide an IDR response to a complainant if you:
- Resolved the complaint to the complainants satisfaction; and
- Gave the complainant an explanation and/or apology when the firm can take no further action to reasonably address the complaint.
You will, however, need to look at your record keeping processes to ensure adequate notes are maintained to support your closed nil-IDR responses.
Your people will have an obligation to proactively identify people who might need additional assistance.
In addition, they will need to adequately resource IDR staff and they must be appropriately authorised (with appropriate delegations) to resolve complaints, and also have an awareness of cultural differences that should be reflected in their Position Descriptions.
You’ll need to identify IDR staff and have adequate numbers to deal with complaints; ensure they are resourced, capable and operate under the right position descriptions.
Tools for staff
You’ll need to ensure your IDR staff have:
- knowledge of the regulatory guides, consumer protection laws relating to financial products and services, AFCA approaches and relevant industry codes of practice;
- an understanding of the products and services officered by your firm;
- Empathy, respect and courtesy; and
- an awareness of cultural difference and the ability to identify and assist complainants who need additional assistance.
Firms should develop health and safety policies to support staff involved in complaint management.
TIP: Review or develop these policies and train and develop your IDR staff to be able to satisfy ASIC’s requirements.
Data and analysis
Metrics and Monitoring
Firms will need to monitor key metrics for complaint management on an ongoing basis.
Extensive information regarding complaints will need to be documented, tracked and monitored including
- number of complaints received and closed;
- time taken to acknowledge;
- time taken to resolve;
- complaint outcomes;
- possible systemic issues; and
- number of complaints escalated to AFCA.
ASIC will expect you to carry out regular and ongoing quality assurance.
Firms should conduct regular compliance audits to identify and address issues of non-compliance.
Reporting data internally and publicly
IDR Staff should regularly provide detailed reports about complaints data to senior management and the Licensee’s Board.
In addition, complaints should be included in annual reports.
TIP: Review your data and recording capability.
The (increasing) cost of doing business
Better complaints management doesn’t come cheap.
The enhanced regulatory guide has been estimated to cost the industry approximately $5.087 million per year, according to the ASIC regulatory impact statement.
In reality, the cost of non-compliance may be significantly higher.