SUMMARY

• ASIC has introduced a new Regulatory Guideline (RG) on how the finance sector must internally handle disputes and complaints.
• It affects many Australian Financial Services (AFS) firms and Fintech companies.
• Responsibility for the process will be a straight line to CEOs and Directors.
• Noncompliance exposes many financial firms to civil penalties under the force of law.
• Tighter compliance obligations loom large as they become enforceable from 5 Oct 2021.

WHO IS IT ABOUT?

AFS firms operating in the following areas:

• AFSL holders
• Unlicensed product issuers, unlicensed secondary sellers, and unlicensed COI lenders
• Australian credit licensees
• Credit service providers (brokers)
• Trustees of regulated superannuation funds (other than SMSFs)
• Trustees of approved deposit funds
• Fintech companies

WHAT HAPPENED?

• Enforceable Regulatory Guidance. For the first time, ASIC has given one of its RGs the force of law.
• Tighter compliance obligations. The new RG significantly tightens standards for how AFS firms and Fintech companies must run their IDR processes.
• Civil penalty consequences. Failure to comply with the enforceable standards could result in civil penalties.

WHEN DID IT TAKE PLACE?

RG 271 was issued on 31 July 2020. ASIC has given firms a transition period to meet the new standards.

The updated standards will apply to complaints received on or after 5 October 2021.

WHAT ARE THE MAJOR CHANGES?

Key decision-makers must be involved in compliance and implement IT systems as well as recording and reporting procedures.

At a glance:

• A complaint’s definition expanded to an ‘expression of dissatisfaction’ re products, services, staff or complaint-handling.
• The financial services customer can implicitly expect a response.
• Responsibility for compliance elevated to the CEO/Board level.
• Response timeframes shortened.
• The enforcement date looms large (5 Oct 2021).
• Outsourcing is permitted, especially if it ensures accessibility.

WHAT WILL FIRMS NEED TO DO?

They will need an IDR procedure that complies with ASIC’s new standards and requirements under RG 271.

Small financial firms must meet the same standards without the resources of the larger firms and big banks.

Many AFS firms and FinTech companies will need to develop processes and systems and undertake internal capacity building.

Best practice compliance requires:

• Accessibility (ready and easy to use)
• Timeliness (can respond < 30 days)
• Efficiency
• Objective and unbiased handling
• Resourcing to deal with intermittent spikes in volume
• Metrics and Business Intel on complaints data

Shortened response times are a key performance measure.

WHAT CAPABILITY FITS THE NEED?

AFS firms and Fintech companies will need a fit for purpose tech platform that significantly accelerates the logging and tracking of complaints.

KEY QUOTES FROM RG 271

In drafting the RG, ASIC has used the term ‘complaint’ and ‘dispute’ interchangeably.

Also, throughout the document, there is a mix of enforceable paragraphs and expected best practise standards.

The following table summarises the key areas: