ASIC has today released a consultation paper on proposed updates to Regulatory Guide 256: Client review and remediation conducted by advice licensees. Consultation Paper 335 Consumer Remediation: Update to RG 256 (CP 335) includes clarification of RG 256’s application to all financial services licensees, credit licensees and superannuation trustees.
Announcing the consultation, Acting Chair Karen Chester said, “Putting money back in Australian consumers’ hands has never been more important”. Since October 2019, it has been confirmed that about $1.68 billion has been returned to consumers in relation to both finalised and ongoing financial system remediations. “Ensuring that the processes for returning this money are efficient and fair is central to consumer confidence and trust in financial products and services and in the firms themselves”, Ms Chester said.
ASIC has been involved in many consumer remediations across insurance, superannuation, wealth and banking since releasing RG 256 in 2016. These range from Fee for No Service remediations affecting all of the major banks (highlighted at the Financial Services Royal Commission) to smaller remediations arising out of systems errors and failures by licensees to deliver on their contractual promises to consumers.
ASIC is currently monitoring over 100 remediations that could see the return of at least another $3.55 billion in total to over 3.6 million consumers upon finalisation. There are many other remediations that are dealt with by firms without any ASIC involvement.
While ASIC has seen some good practices by licensees, we have also seen many remediations caused – or blown out – by ongoing systems failures, ultimately resulting in significant costs to licensees and further harm to consumers.
“There are opportunities for firms to not only identify the issues that can lead to remediations earlier, but also to make sure that they have arrangements and systems in place to return money to affected consumer as fast and as fairly as possible”, Ms Chester said. “We are also seeing some positive signs from firms who are looking at ways to fast track remediations, including through the use of beneficial assumptions”.
CP 335 gives industry and stakeholders the opportunity to provide feedback about the challenges they face in designing and executing remediations. It includes real-life case studies based on remediations in which ASIC has been directly involved.
“We want firms to get on with the job of doing fair and efficient remediations in line with their legal obligations”, Ms Chester said. “The issues we are consulting on reflect the questions that firms frequently ask ASIC. Clarity on these issues will help firms step up and deliver good consumer outcomes”.
Submissions on CP 335 are due by 26 February 2021. ASIC will then release the draft guidance, informed by the feedback received during this consultation period, for a second phase of consultation.
ASIC has also today released Making it Right: how to run a consumer centred remediation, a resource that offers immediate help to licensees with the day-to-day design and execution of consumer-centred remediations. This customer-centred field guide draws on ASIC’s on-the-ground experience with remediations and lessons from behavioural science. It does not set new legal obligations.