Beyond RG256: ASIC consults on its Draft Consumer Remediation Guidance

On 17 November 2021, ASIC released Consultation Paper 350, including its proposed Draft Consumer Remediation Guidance setting out expectations of licensees when conducting customer remediation programs.

The release of Consultation Paper 350 is a continuation of ASIC’s wholesale review of existing guidance (RG 256) and follows the release of Consultation Paper 335 Consumer remediation: Update to RG 256 (CP 335) in December 2020.

In the release, ASIC Deputy Chair Karen Chester said ASIC is currently “monitoring 64 remediations that will see the return of about $5.4 billion to more than 5.6 million consumers upon finalisation”. This does not include remediation programs not supervised by ASIC.

It follows then that the Draft Consumer Remediation Guidance is underpinned by the foundational principles that:

• licensees must take responsibility for the consequences of their misconduct or other failures, and must remediate customers for their loss (financial or otherwise); and
• customer outcomes should be the driving consideration behind remediation design and delivery.

Key points from the draft guidance include:

• the new guidance will apply to all Australian Financial Services (AFS) licensees, limited AFS licence holders, Australian credit licensees and retirement savings account providers (Licensees);
• Licensees must design remediation programs in accordance with the 9 principles set out in the guide:

1. return customers to the position they were in had the misconduct or other failure not occurred;
2. have a comprehensive understanding of what happened, why it happened and investigate the full extent of the misconduct or other failure;
3. give customers the ‘benefit of the doubt’ and minimise risk of under-compensation;
4. document key decision making and processes;
5. use ‘reasonable endeavours’ when making remediation payments;
6. be efficient and timely - but also accurate;
7. make the remediation process easy for the customer;
8. do not retain a profit from the misconduct or other failure; and
9. ensure appropriate accountability, resourcing and governance is in place.

• ASIC expects Licensees to proactively monitor and analyse data to identify and remediate issues quickly - noting proactive and timely identification and remediation will limit issues associated with aged or missing data and ‘lost’ customers;
• the new draft guide includes 25 practical examples as well as guidance on appropriate remedies for misconduct in relation to insurance and wealth products, systems errors, pricing errors, inappropriate financial advice, ongoing advice and fee for no service breaches and financial advice;
• ASIC expects Licensees to remediate all current customers irrespective of value (low value payments must be made);
• Licensees may be exempted from ‘reasonable endeavours’ obligations for former customers where no contact details are held and the remediation amount is $5 or less (low value compensation threshold);
• one-off contact attempts (including issuing refund cheques that remain uncashed with no customer follow up attempts) may not satisfy the ‘reasonable endeavours’ principle;
• making it easy for customers means drafting clear, concise communications and limiting the requirement for customers to respond or provide further details;
• Licensees should waive limitation periods or AFCA time periods where a customer’s ability to make an informed decision about an issue has been impacted by the existence of a remediation process;
• Licensees should refrain from commencing or continuing with legal proceedings or any other enforcement action (including debt collection activities) that:

1. could adversely affect customers affected by a remediation process, until remediation is complete;
2. may impact AFCA outcomes until an AFCA response has been provided; and
3. relate to the underlying misconduct necessitating the remediation activity in the first place.

ASIC is inviting industry feedback ahead of an 11 February 2022 deadline. The release date for the new Consumer Remediation Guidance is yet to be confirmed.

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