ASIC calls on licensees to strengthen remediation procedures

ASIC has called upon financial services and credit licensees in Australia to enhance their consumer remediation procedures, aligning them with the guidelines outlined in Regulatory Guide 277 Consumer Remediation (RG 277). This initiative follows a recent review by ASIC, which assessed the implementation of RG 277 by major financial institutions. The review identified inconsistencies in some licensees‘ policies and procedures that could lead to adverse outcomes for customers. ASIC has communicated its key findings and concerns to the licensees involved in the review.
Over the past seven years, ASIC has overseen remediation efforts totaling over $7 billion, benefiting approximately 8.42 million Australian consumers across the financial services industry. According to ASIC Deputy Chair Karen Chester, RG 277 provides essential guidance for licensees to conduct effective and fair consumer remediation. She emphasized the importance of proactive, timely, and equitable approaches in the remediation process.
ASIC underlines the significant costs associated with incorrect remediation, both for consumers burdened by financial firms‘ errors and for the firms themselves, which may have to redo remediations and address damage to their reputation. While ASIC generally refrains from directly overseeing remediation programs, it warns of potential regulatory action against licensees failing to provide fair and timely remediation to affected consumers.
ASIC expects all licensees to realign their remediation practices with RG 277’s guidance, taking into account the review’s key findings and making any necessary adjustments to their policies, procedures, and practices.
Key findings from the review include:
Remediation Review Periods: RG 277 emphasizes that review periods should commence when misconduct or failure is reasonably suspected to have occurred and caused consumer loss. Some policies unnecessarily restricted review periods by including approval processes.
Use of Beneficial Assumptions: Licensees did not consistently consider beneficial assumptions as a mechanism to expedite remediation, as permitted by RG 277.
Foregone Returns or Interest: Some licensees had predetermined rates for specific products or scenarios, raising questions about their suitability.
Reasonable Endeavors: Some licensees adopted prescriptive approaches to contacting and paying affected consumers, lacking flexibility in certain circumstances.
Low-Value Payment Threshold: Policies risked excluding some customers with payment information from receiving payments under $5.
Oversight and Controls: Governance frameworks often lacked a focus on fairness, despite RG 277’s emphasis on governance for fair and timely remediation.
This initiative is particularly relevant in light of the recent passage of the FAR Bill 2023, which requires accountable entities to designate an accountable person responsible for overseeing remediation programs.