ASIC tells banks, super funds to speed up on complaints

Banks and super funds have been given new rules designed to speed up the resolution of customer complaints.

Karen Chester, deputy chair, ASIC. Picture: David Geraghty.

Banks will have 30 days to work through disputes with customers under new guidance from the corporate regulator aimed at improving the complaints handling process.

Superannuation funds, meanwhile, will have their deadline for resolving member complaints halved to 45 days under the new enforceable internal dispute resolution requirements from the Australian Securities and Investments Commission.

But the new rules won’t come into force for more than a year, with the regulator pushing out the deadline for financial firms to comply with the new standards until October 2021.

As part of its updated guidance for how consumer and small business complaints are handled, ASIC has also told financial firms they will need to give customers a reason for their decisions when the outcome doesn’t go in the complainant’s favour.

This follows a review the regulator conducted in 2018 which found that just 45 per cent of complainants who were handed an unfavourable outcome were given an explanation for the decision.

ASIC is also tightening its stance on the use of customer advocates by the major lenders, ordering them to include this step of the dispute process within the new required deadline.

This was to address concerns that consumer advocates were extending the process and adding an unregulated layer to dispute resolution.

“Complaints handling is the first step in the dispute resolution framework and plays a critical role for firms to restore consumer trust when things have gone wrong,” ASIC deputy chair Karen Chester said of the updated guidance.

“A financial firm’s approach to complaints handling is a meaningful measure of how it treats its customers and listens to their voice,’ she said.

ASIC undertook a review of internal dispute resolution in 2017 and found consumers were facing a number of obstacles in the process, including a lack of transparency.

The regulator found that out of 3.2 million Australians who considered making a complaint to a financial services firm in the preceding 12 months, less than half — 1.5 million — went ahead with the complaint. Of those, 18 per cent withdrew from the internal dispute resolution process before it concluded.

Four in five, meanwhile, were not told of their options for external dispute resolution. Under the new standards, firms must provide details to a complainant on how they can access the body that deals with external disputes, the Australian Financial Complaints Authority.

“At this time of economic uncertainty, consumer access to fair and timely complaints handling is more important than ever,” Ms Chester said.

“Making it right when consumers have suffered loss is an important way to stimulate ongoing consumer participation and trust in the financial system.”

As part of its enhanced supervision program, ASIC went to the big four banks and AMP in 2019 to see their dispute resolution processes at work: how they dealt with individual complaints as well as systemic issues.

To combat found patchy reporting and disorganised collection of complaints, ASIC provided lenders with a road map on how to improve their processes. The regulator said it will follow up with banks to ensure they are following through on the required changes.

The regulator is also cracking down on debt management companies, including in the new guidance that financial firms don’t need to deal with these groups if they don’t feel they are acting in the consumer’s best interests.

“New requirements recognising the harm that can be done by some debt management firms will also assist in addressing longstanding concerns about their behaviour which are shared by industry and consumer representatives,” Ms Chester said.