Complaints Handling (IDR)
What is it?
From 5 October 2021, the law and regulatory guide relevant to how complaints made by retail investors must be handled will change. It applies all AFS Licensees who can offer financial products or services to retail clients.
What will OIG be doing?
OIG will be reviewing our IDR procedures which may include amending the IMA to ensure complaints are referred by managers promptly. It may also require amendments to fund’s constitutions (definition and complaints handling procedure), PDS disclosures and periodic statements.
What OIG expects its managers to do?
Stay informed and if they have an AFS Licence that means they are a “financial firm”, amend their complaints handling process too. OIG expects its managers to work collaboratively with it to implement the necessary changes to comply with the law.
Summary
ASIC has published ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98 (Instrument). This contains updated requirements for how “financial firms”¹ deal with consumer and small business complaints under their Internal Dispute Resolution (IDR)
procedures, including reduced timeframes for responding to complaints.
ASIC has also issued Regulatory Guide RG 271 (RG 271), which deals with internal dispute resolution for financial firms, including Australian financial services (AFS) licensees. This updated guide aligns ASIC’s IDR requirements with the statutory regime introduced by the Treasury Laws Amendment (Putting Customers First – Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth).
The instrument applies in relation to complaints received on or after 5 October 2021 by a financial firm. Complaints that are made to financial firms before 5 October 2021 will continue to be dealt with under the requirements in RG 165.
The Instrument and RG 271 form part of ASIC’s attempt to improve how consumer complaints are dealt with across the financial services industry and to make complaints handling performance transparent. Key areas of focus include the fair and timely resolution of complaints and the elimination of systemic issues.
What are the changes?
The Instrument:
- Sets out new standards and requirements that ASIC has made and approved for the internal dispute resolution procedures (IDR procedures) of financial firms.
- Clarifies that financial firms must comply with ASIC’s IDR procedures.
- Modifies the definition of “small business” in relation to IDR in Chapter 7 of the Corporations Act so it aligns with the definition of “small business” in the Rules of the Australian Financial Complaints Authority in relation to external dispute resolution. Under AFCA, a small business is defined as an organisation with less than 100 employees.
RG 271:
- Introduces reduced timeframes for responding to complaints.
- Sets out what information firms must include in written IDR responses to allow consumers to decide whether to escalate their complaint.
- Sets new timeframe requirements for customer advocate reviews of appeals against IDR decisions.
- Provides guidance about how firms can deal with representatives who are not acting in consumers’ best interests.
What is a complaint?
ASIC has adopted the AS/NZS 10002:2014 definition of ‘complaint’ as:
“[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 is slightly different from the definition of a complaint previously required by ASIC to be included in a registered scheme constitution and accordingly we expect to have to amend the constitution of each registered scheme. OIG will be seeking legal advice that this amendment may be done without a meeting of members as an amendment not adverse to members’ rights.
ASIC maintains that it is unable to provide an exhaustive list of what is and is not a complaint. An issue may still be a “complaint” for the purposes of the IDR even where AFCA does not ultimately have jurisdiction.
A consumer or small business is not required to expressly state the word ‘complaint’ or ‘dispute’, or put their complaint in writing, to trigger a financial firm’s obligation to deal with a matter, according to ASIC’s IDR requirements.
Social media and complaints
ASIC interprets the words ‘or about an organization’ in the definition of complaint covers expressions of dissatisfaction made via social media.
ASIC says that the definition of complaint should only include complaints made on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable.
It says complaints made to a firm on their social media channel or account should not be ‘played out’ publicly. Firms should redirect these complainants to an appropriate, private complaints process in a way that reduces additional friction as far as possible. This should alleviate any privacy concerns or issues with identifying complainants. Where the consumer fails to respond or cannot be identified, this may mean that the complaint cannot be reasonably dealt with.
Timeframes
ASIC has reduced the times allowed for responding to complaints.
ASIC expects that firms will acknowledge a complaint within 24 hours (or one business day) of receiving it, or as soon as practicable.
A financial firm must provide an IDR response to a complainant no later than 30 calendar days after receiving the complaint.
There are also different requirements for complaints closed within five business days of receipt.
Contents of IDR response
RG271 specifies the required content of an IDR response including when a financial firm rejects or partially rejects a complaint mandating the IDR response clearly set out the reasons for the decision to reject the complaint.
A complaint may go through the IDR process but remain unresolved, or may not be resolved within the relevant maximum IDR timeframe. In this instance, the IDR process must require the firm to inform the complainant that they have a right to pursue their complaint with AFCA; and provide
details about how to access AFCA.
IDR process
ASIC expects financial firms to comply with its IDR standards for the design, implementation, and ongoing improvement of financial firms’ IDR processes. ‘Process’ refers to the totality of all procedures, documents, policies, resources, systems, governance and arrangements in place to
manage complaints.
ASIC’s IDR standards reflect the requirements for effective complaint management set out in AS/NZS 10002: 2014 and other matters ASIC considers relevant.
The changes to the IDR will require changes to some registered scheme constitutions where the constitution sets out details of OIG’s complaints handling procedure. We will be seeking legal advice that this amendment may be done without a meeting of members as an amendment not adverse to members’ rights.
Firms should consider a broad range of possible remedies when attempting to resolve complaints.
In terms of complaints, OIG considers that its mangers may play an important role in complaints handling. RG 271 requires firms to –
- encourage and enable staff to escalate possible systemic issues they identify from individual complaints;
- regularly analyse complaint data sets to identify systemic issues; and
- promptly escalate possible systemic issues to appropriate areas within the firm for investigation and action.
Visibility and accessibility
All changes to your Fund’s IDR/complaints processes will need to be widely publicised and will require updates to compliance plans, FSGs, PDSs, periodic statements and all online policies.
Importantly, the IDR process must be free, easy to understand and use and be accessible access to a diverse group of people, including those with disability or language difficulties. Further details can be made available on request.
Firms must continuously review the effectiveness of their IDR communications.
¹For OIG purposes, an AFS Licensee authorised to provide financial products or services to retail clients.