The Dispute Resolution Legislation for all Australian Credit License holders has undergone recent changes. The Royal Commission’s feedback regarding the finance industry within Australia prompted a revision on handling and processing complaints. As a result, ASIC requires all Australian financial services licensees, credit licensees, credit representatives, and securitisation bodies to have an updated dispute resolution policy in place starting 5 October 2021.
The new Regulatory Guide 271 will replace RG 165 and its existing protocols. Therefore, all complaints filed beginning 5 October 2021 will be under RG 271. The current regulatory guide (165) will be withdrawn on 5 October 2022. As a license holder, how will the modifications affect you?
RG 271 has more specific requirements that financial institutions and all ACL holders including brokers and lenders should follow. While most of the requirements are the same, specific details must be incorporated into internal and external procedures and policies.
The dispute resolution system should be made up of two things. First, it should have internal dispute resolution procedures that comply with the ASIC standards and requirements. Second, the system should consist of Australian Financial Complaints Authority (AFCA) membership.
Each type of financial firm has unique dispute resolution requirements. Here are the highlights that you should be aware of:
- Australian Financial Services (AFS) License Holders should have an internal dispute resolution procedure that covers complaints of retail clients regarding the financial services that were provided to them. The AFS license holders include those with businesses that carry financial services and provide financial products to their customers. These services include but are not limited to financial product advice and custodial or depository service to clients.
- Australian Credit License Holders, such as lessors, credit providers and brokers, should have an IDR that complies with ASIC-approved requirements for all credit activities they, as well as their representatives, participate in. This obligation also covers debt collectors who partake in debt purchasing from lessors and credit providers. Brokers and other intermediaries are also included in this group, specifically those who act on behalf of the lessor or credit provider.
RG 271 intends to deliver improved outcomes for clients because it underlines the importance of resolving complaints fairly, quickly, and effectively. The goal of ACL holders is to reduce the need to escalate customer complaints externally. With RG 271, financial services companies and complainants could achieve a balanced treatment. The new standards are more practical and achievable compared to the existing RG.
Constructive Complaint Handling
Significant emphasis is placed on constructive complaint handling. The new regulatory guide states that the senior management should monitor and support the handling of complaints.
A good place to start is to understand what a complaint is. By definition, a complaint is a dissatisfaction expressed towards or about an organisation, its products or services, staff, or complaint handling procedures. RG 271 explains that a complaint can exist in many forms, including a social media post. If the person who posted is identifiable and reachable through the platform or by any means of communication, it can be deemed as a complaint.
Another important change is regarding the timeframes when responding to complaints. RG 271 shortens the maximum time frame, which should be 30 calendar days or less after the receipt of the complaint. In RG 165, businesses are allowed to respond for up to 45 days. Some exceptions should be noted since certain circumstances may be difficult to resolve right away. For example, if there is no reasonable opportunity or the complaint is complex, the maximum IDR timeframe can be adjusted.
This change is designed to improve outcomes for customers. ASIC also expects ACL holders to acknowledge all complaints within 24 hours or one business day, which can be done either verbally or in writing, such as through email or social media posts.
Firms are also required to guarantee adequate resourcing so that IDR processes operate justly and efficiently within the prescribed time frame. Because of the added obligation to review ongoing resourcing conditions regularly, it’s essential to provide training to all staff members. That way, any staff member will have the necessary knowledge and experience to action complaints. Employee training also helps in disseminating information, especially regarding the new policies and procedures.
Are There Necessary Actions to Take?
If you or your business is an ACL holder, you should do the following by 5 October 2021:
- Assess your Dispute Resolution policy and make sure it reflects the requirements specified within the Internal Dispute Resolution procedures to complainants. This is in compliance with RG 271.
- Review your business’ Complaint Handling policy and publish the revised and correct document online for easy access by your clients.
- Educate staff and management about the new policies and procedures surrounding Dispute Resolution.
Complaints are risk indicators for systemic issues within the organisation. They should be detected and mitigated, if not resolved immediately. That way, escalating matters to AFCA can be avoided while also preventing further damage or harm to customers.
The revised guideline will help ACL holders deliver better outcomes for clients, so there is less need for external dispute resolution.
Should you need help with your dispute resolutions policies, talk to us today.