Financial Planning, Regulation

ASIC unveils new dispute framework

internal dispute resolution

Financial advisers will fall under a new internal dispute resolution system from late 2020 that requires quick, but detailed, responses to complaints.

Financial advice licensees have been given a 14-month window in which to transition to a new standard on how to handle complaints under their internal dispute resolution (IDR) procedures.

Under “Regulatory Guide (RG) 271: Internal Dispute Resolution” released today by ASIC, a financial advice licensee will have a maximum of 30 days to provide an IDR response to a complainant.

According to RG 271, the response must contain, in written form, the outcome of their complaint, which will be “either confirmation of actions taken by the firm to fully resolve the complaint or reasons for rejection or partial rejection of the complaint, and their right to take the complaint to AFCA (Australian Financial Complaints Authority) if they are not satisfied with the IDR response”.

The new IDR standards and requirements will take effect from 5 October 2021 and ASIC will publish a legislative instrument alongside RG 271 to outline what areas it will enforce after that date.

The corporate regulator highlighted that along with the reduced time frames for responding to complaints, RG 271 also contained details as to what information must be included in written IDR responses to allow consumers to decide whether to escalate their complaint, and gave guidance on how firms can deal with representatives not acting in consumers’ best interests.

The regulator stated that while the new guidelines did not apply to SMSF trustees, they did apply to superannuation trustees and Australian financial services licensees.

ASIC also noted that until RG 271 came into effect, “RG 165 Licensing: Internal and external dispute resolution” remains in place and most financial firms that deal with retail consumers must already have a dispute resolution system that includes IDR procedures and be a member of AFCA.

ASIC deputy chair Karen Chester said the new guide had been released after consultation with consumer and industry representatives and was also based on prior ASIC reports examining IDR processes within financial service providers, including those of NAB, ANZ, CBA, Westpac and AMP.

“Most financial firms, like us, want to see positive complaint management cultures that welcome complaints and focus on fairness, quality and timeliness in how they are handled. Better IDR not only benefits consumers and small business, it arms the boards of financial firms with rich and real-time data on the customer experience and whether their needs are being met or not,” Chester said.

The new guide was welcomed by AFCA chief executive and ombudsman David Locke, who said: “IDR plays a crucial role in the framework to resolve complaints about financial services.

“IDR is the key to early resolution, which benefits consumers, financial firms and the financial sector broadly. In our view, IDR should focus on helping financial firms to improve internal practices to avoid and resolve disputes.

“The updated guide will not only improve the quality of internal complaint resolution, but will enable financial firms to deliver better outcomes for consumers and reduce the need to escalate complaints to external dispute resolution.”

AFCA was given the power to name firms that are subject to a dispute determination in mid-2019 shortly after ASIC forced 58 licence holders to join the scheme after they had failed to do so by the November 2018 deadline.

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