No more excuses: ASIC publishes guide for corporate remediation

The Australian Securities and Investments Commission has put industry on notice that it must improve remediation for past poor performance, revealing $1.6bn is still unpaid to consumers.

Companies that fail to follow the corporate regulator’s guide to running a remediation program may face significant financial penalties.

The publishing of the guide, unveiled on Tuesday, marks the latest intervention by the Australian Securities and Investments Commission pressuring businesses to improve remediation programs, amid concern from within the regulator many companies were stalling.

The move marks an effort by ASIC to step away from closely monitoring remediation schemes from companies, which the regulator revealed had topped $5.6bn in repayments to customers over the past six years.

ASIC is monitoring 36 remediation programs across superannuation, advice credit, and banking and insurance.

ASIC warned that $1.6bn was still to be paid to almost 2.7 million customers across remediation programs and that it was still monitoring.

ASIC deputy chair Karen Chester said while large parts of these funds were from recently uncovered pricing scandals in the insurance sector, many older issues were unresolved and unpaid.

Ms Chester said ASIC was concerned that many companies had failed to prioritise remediation at a board level, or properly resource operations.

“To date, ASIC has needed to oversee large-scale remediations to ensure affected consumers were treated fairly and received the compensation they were entitled to,” Ms Chester said.

“When a firm gets it wrong, and some inevitably will, they need to identify the problem, fix it and put the consumer back into the position they ought to have been in. This is not just a legislative obligation; they wouldn’t be passing the pub test if they failed to do this.”

Australian Securities and Investments Commission deputy chair Karen Chester. Picture Kym Smith

Ms Chester said ASIC’s guide was the first from a financial regulator and offered industry a path forward for how to best run remediation programs.

“There are serious penalties involved here if they don’t do it,” she said.

ASIC’s remediation interventions have come in waves. About $3.6bn has been paid to compensate 1.4 million customers for no service misconduct or non-compliant advice.

A further $1.3bn has been paid for selling junk insurance, insurers failing to pass on promised price discounts, or poor sales practices.

Ms Chester said ASIC had consulted with a number of companies over the past two years and had identified a number of issues – most notable of which was underinvestment in systems.

“This underinvestment has led to a trifecta of failures. First and foremost, in delivering on promises to consumers, second in identifying the failures and third in being able to remediate consumer loss in a timely way,” she said.

“Licensees must also do better at identifying and remediating problems earlier to avoid the costly lag and drag of remediation.”

Ms Chester said the guide was notable in that it “explicitly allows the use of assumptions” and allows companies to accelerate programs in a way that “does not disadvantage consumers”.

“Running these remediation programs when done in a narrow, legal way has proved painstakingly slow and very costly,” she said.

“Firms are on notice of their obligations to run remediations in a fair and efficient way. We’ve pursued transparency about getting good remediation outcomes.”

Ms Chester warned that ASIC was not done entirely with remediation programs, noting the regulator still had powers to review ongoing programs or intervene if it felt companies were failing.

“We think that this guidance now means ASIC oversight may only be needed in isolated cases to help them do the right thing,” she said.