ASIC flags complaints handling processes as an area of focus

4 mins  16.12.2018

Overview of ASIC Report 603 The consumer journey through the Internal Dispute Resolution process of financial service providers and next steps

ASIC has called on financial services entities to review (and if necessary improve) their complaints procedures in light of the findings in Report 603.  The regulator has also flagged internal dispute resolution as an area of focus, stating that it will conduct onsite reviews of internal dispute resolution systems and consult on changes to IDR standards and guidance.   


Key takeouts


Two areas of particular concern: ASIC’s review of consumer experience of internal dispute resolution (IDR) processes in the financial services sector (Report 603) identified two particular areas of concern:  a) the fact that only 45% of complainants who received an unfavourable outcome received an explanation of the decision made against them by the firm; and b) the fact that only 21% of complainants whose complaints were not resolved in the timeframe set by ASIC guidance had the external dispute resolution (EDR) process explained to them. 
Industry action: ASIC has called on all financial firms to closely review the research findings and consider whether their complaints procedures need to be reformed.  ASIC has also said that firms should prepare to engage with ASIC about its review of the complaints handling standards and requirements.  In addition, ASIC states that a specialist ASIC team has been set up under ASIC’s Close and Continuous Monitoring Program to conduct onsite monitoring of the IDR functions at NAB, CBA, Westpac, ANZ, and AMP.
Review of existing IDR guidance: From February 2019, ASIC will be consulting publicly on a review of existing IDR guidance set out in Regulatory Guide 165, Licensing: Internal and external dispute resolution.  

Introduction

The Australian Securities and Investments Commission (ASIC) has released the results of its report into the consumer experience of internal dispute resolution (IDR) procedures across the financial services sector.  The report looked into the experience of people thinking about, or making a complaint to, a financial services firm (firms operating in the banking, credit, general insurance, life insurance, financial advice and superannuation sectors).  It also looked at the incidence of complaints, as well as the barriers and difficulties people face in approaching and navigating the complaints process. Overall, ASIC found that making a complaint is a stressful exercise for many people, and that there are clear opportunities for financial services firms to improve consumer experience and outcomes.

Some Key Points

  • In the last 12 months, 3.2m Australian adults considered making a complaint about a financial services firm.  Of this group, 1.7m did not proceed and 1.5m complained.
  • Of those who complained 270,000 withdrew from the complaints process.  47% said that they didn't think it would make a difference, 38% said they felt it was not worth their time to proceed, and 26% said that they did not have enough time.
  • Of those complaints that proceeded, 82% of complaints were concluded.  66% of finalised complaints were in favour of the complainant.
  • The primary barriers or obstacles that consumers faced in the complaints process:
    • 4 in 5 people experienced difficulty, decreased satisfaction or formed a negative impression of the firm
    • 1 in 2 people (whose complaint was not resolved in their favour) received no explanation as to why this was the case
    • 4 in 5 people (whose complaint took over 45 days to resolve) weren't told about external dispute resolution options
    • 1 in 3 people felt they spoke to too many contacts over the course of their complaint
    • 1 in 7 people found it difficult to locate the firm's contact details
    • 1 in 7 people withdrew from the complaints process due to inadequate response form the firm
  • Of the group who didn't proceed with a complaint, 1 in 4 (408,000 people) expressed dissatisfaction to the firm (19% did so in person and 6% did so via social media).  Some consumers expressed dissatisfaction to others: 55% expressed dissatisfaction to friends or family, 8% on social media, 8% on online forums, 4% approached a solicitor and 3% did so somewhere else.

Areas of particular concern

ASIC highlights two issues of particular concern:

  1. the fact that only 45% of complainants who received an unfavourable outcome received an explanation of the decision made against them by the firm, and 
  2. the fact that only 21% of complainants whose complaints were not resolved in the timeframe set by ASIC guidance had the external dispute resolution (EDR) process explained to them.

ASIC writes that it considers that these steps are essential to assist consumers to effectively escalate their complaint to an independent and external forum (which since 1 November has been the Australian Financial Complaints Authority (AFCA)).

Commenting on the report findings ASIC Commissioner Ms Danielle Press said, 'As the first step in the financial dispute resolution system, IDR plays a vitally important role in Australia’s consumer protection framework.  Consumers and small businesses should have access to transparent, fair and timely complaints processes. Our research shows the strong connection between consumer satisfaction in how a firm deals with a problem, and their confidence in that financial firm.  Making a complaint can be a stressful exercise for many people and that there are clear opportunities for financial services firms to improve consumer experience and outcomes'.

Next steps for industry and for the regulator: ASIC to work on raising financial services IDR standards, outcomes and transparency 

ASIC states that the release of the report is the 'first step' in a broader body of work aimed at improving financial services IDR standards and transparency. 

  • Industry action: ASIC has called on all financial firms to closely review the research findings and consider whether their complaints procedures need to be reformed to improve the experience for consumers and to ensure that identified problems are remedied effectively and promptly.  Firms should also prepare to engage with ASIC about its review of the complaints handling standards and requirements.
  • IDR onsite visits: ASIC states that a specialist ASIC team has been set up under ASIC’s Close and Continuous Monitoring Program to conduct onsite monitoring of the IDR functions at NAB, CBA, Westpac, ANZ, and AMP.  The team will review and assess target firms’ IDR arrangements (including processes, practices, resourcing, communications, governance and reporting) and will map and evaluate their systems capabilities.
  • Review of IDR guidance: From February 2019, ASIC will be consulting publicly on a review of existing IDR guidance set out in Regulatory Guide 165, Licensing: Internal and external dispute resolution.  The review will consider, amongst other matters: the definition of 'complaint' ie what triggers the IDR process; requirements for complaints that are resolved immediately or within 5 business days; maximum IDR timeframes across all complaints including superannuation related complaints, and written reasons for decisions made by superannuation trustees about complaint.  The review will also include consultation on the proposed data collection and reporting framework for financial firms to report on IDR performance.  Both the broad IDR policy reforms and the proposed data collection framework will be informed by insights from the consumer research and findings of the IDR onsite program.

[Sources: ASIC media release 10/12/2018; Report 603: The consumer journey through the Internal Dispute Resolution process of financial service providers

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