ASIC RG 271 — ASIC Regulatory Guide – RG 271 Internal dispute resolution

Page 1 REGULATORY GUIDE 271 Internal dispute resolution September 2021 About this guide This guide is for Australian financial services (AFS) licensees, unlicensed product issuers, unlicensed secondary sellers, trustees of regulated superannuation funds (other than self-managed superannuation funds (SMSFs)), trustees of approved deposit funds, retirement savings account providers, Australian credit licensees (credit licensees) and unlicensed carried over instrument lenders (unlicensed COI lenders). The standards and requirements highlighted in this guide are enforceable. It explains what these financial firms must do to have an internal dispute resolution (IDR) system in place that meets ASIC’s standards and requirements. Note: This guide comes into effect on 5 October 2021. For complaints received by financial firms before that date, Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165) applies. We will withdraw RG 165 on 5 October 2022. This guide should be read in conjunction with Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267). Page 2 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in September 2021 and is based on legislation and regulations as at the date of issue. Previous versions:  Superseded Regulatory Guide 271, issued in July 2020  Consultation draft of Regulatory Guide 165 Internal dispute resolution, released with Consultation Paper 311 Internal dispute resolution: Update to RG 165 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act, National Credit Act, SIS Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Page 3 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 3 Contents A Overview .................................................................................................4 Financial services dispute resolution framework .....................................4 ASIC’s role in internal dispute resolution .................................................9 Application of the IDR requirements ......................................................11 Requirements for IDR processes ..........................................................11 Transition period ....................................................................................12 B Application of IDR requirements ........................................................13 Definition of ‘complaint’ ..........................................................................13 Definition of ‘complainant’ ......................................................................16 Outsourcing IDR processes ...................................................................18 C Maximum IDR timeframes and IDR responses .................................19 Acknowledgement of complaint .............................................................19 What an IDR response must contain .....................................................20 Maximum timeframes for an IDR response ...........................................21 IDR response requirements for multi-tier IDR processes ......................31 The role of customer advocates ............................................................32 Links between the IDR process and AFCA ...........................................33 D Systemic issues ...................................................................................34 Examples of systemic issues .................................................................34 How to manage systemic issues ...........................................................34 E IDR standards ......................................................................................36 Basis for the IDR standards ...................................................................36 Commitment and culture........................................................................37 Enabling complaints ...............................................................................37 Resourcing .............................................................................................39 Responsiveness ....................................................................................42 Objectivity and fairness ..........................................................................44 Policy and procedures ...........................................................................45 Data collection, analysis and internal reporting .....................................46 Continuous improvement .......................................................................48 Key terms .....................................................................................................50 Related information .....................................................................................55 Page 4 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 4 A Overview Key points Financial firms must have a dispute resolution system that consists of: • an internal dispute resolution (IDR) procedure that meets the standards or requirements made or approved by ASIC; and • membership of the Australian Financial Complaints Authority (AFCA). Our dispute resolution standards and requirements are set out in: • this guide, which sets out how financial firms must meet their obligations; and • Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267), which sets out how we will administer ASIC’s powers and perform our oversight role over AFCA. We must, when considering whether to make or approve standards or requirements relating to IDR, take into account: • Australian Standard AS/NZS 10002:2014 Guidelines for complaint management in organizations (AS/NZS 10002:2014); and • any other matter we consider relevant. The standards and requirements highlighted in this guide are enforceable. This regulatory guide updates our previous IDR standards and requirements to: • give effect to the reforms introduced by the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Act 2018, which implements the Australian Government’s response to the Review of the financial system external dispute resolution and complaints framework (Ramsay Review); • reflect the requirements for effective complaints handling set out in AS/NZS 10002:2014; and • refine our requirements in some key areas based on our regulatory experience. Financial services dispute resolution framework RG 271.1 Financial firms must have in place a dispute resolution system that consists of: (a) an IDR procedure that complies with standards and requirements made or approved by ASIC; and (b) membership of AFCA. Note 1: See s912A(1)(g) and 1017G(1) of the Corporations Act 2001 (Corporations Act), s47(1)(h) and (i) of the National Consumer Credit Protection Act 2009 (National Credit Act), s101(1) and (1A) of the Superannuation Industry (Supervision) Act 1993 (SIS Act), and s47(1) and (2) of the Retirement Savings Account Act 1997 (RSA Act). Page 5 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 5 Note 2: Unlicensed carried over instrument lenders (unlicensed COI lenders) have IDR obligations, but are not required to be a member of AFCA (see RG 271.3). RG 271.2 Most financial firms also have a requirement to comply with their IDR procedures: see modified s912A(1)(g) and 1017G(1) of the Corporations Act, and modified s47(1)(h) and (i) of the National Credit Act. RG 271.3 A modified regulatory regime applies to some unlicensed credit firms. Credit representatives and exempt special purpose funding entities (exempt SPFEs) (including securitisation bodies) do not have IDR obligations, but must be a member of AFCA. Unlicensed carried over instrument lenders (unlicensed COI lenders) have IDR obligations but are not required to be a member of AFCA. Note: See s64 and 65 of the National Credit Act, and regs 23B and 23C of the National Consumer Credit Protection Regulations 2010 (National Credit Regulations); see also reg 25E of the National Credit Regulations and s47(1)(e) of the National Credit Act (inserted by Sch 2 to the National Credit Regulations). RG 271.4 Table 1 sets out the dispute resolution requirements by type of financial firm. Table 1: Legislative dispute resolution requirements by firm type Firm type Description Dispute resolution requirements Australian financial services (AFS) licensees An AFS licensee is a business carrying out financial services. This includes businesses that:  provide financial product advice to clients;  deal in a financial product;  make a market for a financial product;  operate a registered scheme;  provide a custodial or depository service; or  provide traditional trustee company services (traditional services). AFS licensees must have a dispute resolution system that consists of:  an IDR procedure that complies with the standards and requirements made or approved by ASIC (set out in this guide) that cover complaints made by retail clients in relation to the financial services provided; and  membership of AFCA. AFS licensees must also comply with their IDR procedure. Note: See s912A(1)(g) of the Corporations Act. Unlicensed product issuers and unlicensed secondary sellers An unlicensed product issuer is an issuer of a financial product who is not an AFS licensee. An unlicensed secondary seller is a person who offers the secondary sale of a financial product under s1012C(5)(b) or (8) of the Corporations Act and who is not an AFS licensee. Unlicensed product issuers and unlicensed secondary sellers are required to have a dispute resolution system that consists of:  an IDR procedure that complies with the standards and requirements made or approved by ASIC (set out in this guide) that cover complaints made by retail clients in relation to the financial services provided; and  membership of AFCA. Unlicensed product issuers and unlicensed secondary sellers must also comply with their IDR processes. Note: See s1017G(2) of the Corporations Act. Page 6 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 6 Firm type Description Dispute resolution requirements Superannuation trustees A trustee of a regulated superannuation fund (other than a self-managed superannuation fund (SMSF)), trustee of an approved deposit fund or a retirement savings account (RSA) provider. Superannuation trustees must:  be a member of AFCA; and  have an IDR procedure that complies with the standards and requirements set out in s912A(2)(a)(i) of the Corporations Act. Note 1: See also s101(1)(a)–(c) of the SIS Act. Note 2: However, s101(1)(a)–(c) of the SIS Act does not apply to a trustee if the trustee is required under the Corporations Act to have a dispute resolution system complying with s912A(2) or 1017G(2) of the Act. Australian credit licensees (credit licensees) Credit providers and lessors, including those who are assigned the contractual rights of a credit provider or lessor (which can include debt collectors who purchase a debt from a credit provider or lessor). Credit service providers (such as brokers and other intermediaries), and other (such as debt collectors) who act on behalf of the credit provider or lessor. Credit licensees are required to have a dispute resolution system that consists of:  an IDR procedure that complies with the standards and requirements made or approved by ASIC (set out in this guide) that cover disputes relating to credit activities they and their representatives engage in; and  membership of AFCA. Credit licensees must also comply with their IDR procedures. Note: See s47 of the National Credit Act. Credit representatives A credit representative is a person authorised to engage in specified credit activities on behalf of a credit licensee under s64(2) or 65(2) of the National Credit Act. The employees and directors of a credit licensee do not need to be formally authorised—they act as representatives of the credit licensee without a specific authorisation. A person can also be authorised as a credit representative by more than one credit licensee. Credit representatives do not need to have IDR processes that meet the standards and requirements made or approved by ASIC. This is because a credit licensee’s IDR process must cover disputes relating to its credit representatives. Most credit representatives are required to be separate members of AFCA: see s64 and 65 of the National Credit Act. However, a person who has been sub- authorised under s65(1) of the National Credit Act and is an employee or director of the body corporate that gave the sub-authorisation does not need to be a separate member of AFCA. Note: See reg 16 of the National Credit Regulations. Page 7 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 7 Firm type Description Dispute resolution requirements Unlicensed COI lenders (including prescribed unlicensed COI lenders) A ‘carried over instrument’ is a contract or other instrument that was made and in force, and to which an old Credit Code applied immediately before 1 July 2010 (see s4(1) of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009). Unlicensed COI lenders are credit providers or lessors who only have a closed pool of carried over instruments and have chosen not to obtain a credit licence (or to restrict their activities to their carried over instruments, and subsequently cancel their credit licence). Note: A ‘prescribed unlicensed COI lender’ is an unlicensed COI lender who fails to meet certain probity requirements and who has restrictions placed on their conduct in relation to their carried over instruments. A prescribed unlicensed COI lender must not engage in credit activities with respect to their carried over instruments (other than the activities engaged in solely by being the credit provider or lessor). They must instead appoint a credit licensee to act as a ‘representative’ to engage in credit activities on their behalf with respect to their carried over instruments. Unlicensed COI lenders (including prescribed unlicensed COI lenders):  must have an IDR procedure that complies with the standards and requirements made or approved by ASIC (set out in this guide) that cover complaints in relation to the credit activities they engage in with respect to their carried over instruments; and  may choose to join AFCA. Unlicensed COI lenders must also comply with their IDR procedure. Note 1: Details of the obligations of unlicensed COI lenders are set out in Information Sheet 110 Lenders with carried over instruments (INFO 110), Regulatory Guide 205 Credit licensing: Credit conduct obligations (RG 205), Regulatory Guide 206 Credit licensing: Competence and training (RG 206) and Regulatory Guide 207 Credit licensing: Financial requirements (RG 207). Note 2: A prescribed unlicensed COI lender may arrange for their credit licensee’s dispute resolution system to cover complaints in relation to their carried over instruments. However, the prescribed unlicensed COI lender remains responsible for ensuring that the requirements and standards set out in Sections C–D are met. Unlicensed COI lenders who choose not to join AFCA must keep a register of each of the following:  complaints relating to their carried over instruments;  hardship notices made under s72 of the National Credit Code (at Sch 1 to the National Credit Act); and  requests for postponement of enforcement proceedings under s94 of the National Credit Code. Note 1: Unlicensed COI lenders that make arrangements for a third-party provider or their representative’s dispute resolution system to cover complaints relating to their carried over instruments, and that are not a member of AFCA, are still required to meet these register requirements. Note 2: See s47(1A) of the National Credit Act (inserted by Sch 2 to the National Credit Regulations) for details of the information the registers must include. Page 8 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 8 Firm type Description Dispute resolution requirements Exempt SPFEs Special purpose funding entities (SPFEs) include securitisation entities and fundraising special purpose entities that make (or buy) loans or leases and repackage them as investment products to sell to investors. Note: See the definition of ‘special purpose funding’ entity in s5 of the National Credit Act (inserted by Sch 3 to the National Credit Regulations). SPFEs can either operate under a credit licence or as exempt SPFEs: see the licensing exemption in regs 23B and 23C of the National Credit Regulations. Note: See the definition of ‘exempt special purpose funding entity’ in reg 3 of the National Credit Regulations. Exempt SPFEs may rely on a licensing exemption: see regs 23B and 23C of the National Credit Regulations. If they do, they must:  enter into a servicing agreement with a credit licensee under which that licensee acts on their behalf; and  be a member of AFCA. Exempt SPFEs do not have any IDR requirements. We expect that the credit licensee’s IDR process will cover complaints about both:  credit activities engaged in by the licensee under a servicing agreement; and  conduct of the exempt SPFE (including where changes are sought to the terms of the contract—for example, on the basis of hardship or because the contract was unsuitable or unjust). Credit licensees acting on behalf of exempt SPFEs under a servicing agreement A credit licensee acting on behalf of an exempt SPFE, such as a securitisation entity that makes (or buys) loans or leases and repackages them as investment products to sell to investors. When performing this role for an exempt SPFE, the credit licensee must:  notify ASIC when they enter into a servicing agreement with an exempt SPFE and provide details of its membership with AFCA; and  notify ASIC when they cease to be a party to the servicing agreement. The credit licensee should also ensure that their IDR process covers:  the exempt SPFE’s activities; and  complaints that arise when they act as the representative of the exempt SPFE and complaints about the conduct of the exempt SPFE. The credit licensee must inform a complainant of their right to complain to AFCA or directly refer them to AFCA. Financial technology (fintech) businesses A financial technology business relying on the enhanced regulatory sandbox (ERS) exemption provided by Corporations (FinTech Sandbox Australian Financial Services Licence Exemption) Regulations 2020 and National Consumer Credit Protection (FinTech Sandbox Australian Credit Licence Exemption) Regulations 2020. Fintech businesses relying on the ERS exemption must have a dispute resolution system that consists of:  an IDR procedure that complies with the standards and requirements made or approved by ASIC (set out in this guide); and  membership of AFCA. Note: See Information Sheet 248 Enhanced regulatory sandbox (INFO 248) at Table 4. Page 9 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 9 ASIC’s role in internal dispute resolution RG 271.5 The objectives of Ch 7 of the Corporations Act are to promote: (a) the confident and informed participation of consumers and investors in the Australian financial system (also an objective of ASIC under s1 of the Australian Securities and Investments Commission Act 2001); (b) fairness, honesty and professionalism by those who provide financial services; (c) fair, orderly and transparent markets; and (d) the reduction of systemic risks. Note: See s760A of the Corporations Act RG 271.6 Within this framework, we are responsible for overseeing the effective operation of the dispute resolution system, which includes setting the standards and requirements for financial firms’ IDR processes and oversight of AFCA. RG 271.7 We must, when considering whether to make or approve standards or requirements relating to IDR, take into account: (a) AS/NZS 10002:2014; and Note: AS/NZS 10002:2014 is published by SAI Global and available for purchase on their website. It is also available through public libraries across Australia. (b) any other matter we consider relevant. Note: See regs 7.6.02(1)(a) and 7.9.77(1)(a) of the Corporations Regulations 2001 (Corporations Regulations) and reg 10(1)(a) and item 2.20 of Sch 2 to the National Credit Regulations. RG 271.8 The standards and requirements set out in ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98 and highlighted in this guide are enforceable. Other highlighted requirements in this guide reflect existing legal requirements and are also enforceable. RG 271.9 The parts of this guide that we have not highlighted or set out in the instrument are guidance to help financial firms comply with their legal obligations. RG 271.10 We may vary or revoke: (a) a standard or requirement that we have made for IDR; and (b) the operation of a standard or requirement that we have approved in its application to IDR. Note: See regs 7.6.02(2) and 7.9.77(2) of the Corporations Regulations, and reg 10(2) and item 2.20 of Sch 2 to the National Credit Regulations. RG 271.11 We have made the requirements in this guide to meet our statutory obligations and, in doing so, promote fair consumer outcomes. Page 10 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 10 The importance of IDR RG 271.12 Consumer and small business access to fair, timely and effective dispute resolution is an essential part of the financial services consumer protection framework. It is consistent with ASIC’s function of promoting consumer protection in the Australian financial system. Note: See s12A(2) of the Australian Securities and Investments Commission Act 2001. RG 271.13 As the first step in the financial dispute resolution framework, IDR provides an opportunity for redress to millions of consumers and small businesses each year. RG 271.14 The Ramsay Review’s Final report: Review of the financial system external dispute resolution and complaints framework (Ramsay Review final report) stated at p. 189: Effective IDR benefits both firms and consumers. IDR is an important element of financial firms’ overall relationship with their customers and is the primary avenue for aggrieved consumers to seek redress. Pressure on [external dispute resolution] is reduced when complaints are resolved directly between firms and their customers. RG 271.15 We encourage all financial firms to cultivate an organisational culture that welcomes feedback and values complaints. A positive complaint management culture can produce beneficial outcomes for both consumers and firms, including: (a) the opportunity to resolve complaints quickly and directly; (b) the promotion of trusted relationships between the parties; (c) improved levels of consumer confidence and satisfaction; (d) greater understanding of the key drivers of complaints; (e) the ability to identify emerging issues and inform product and service delivery improvements; and (f) reduced AFCA and future remediation costs. RG 271.16 To develop and maintain a positive complaint management culture, financial firms should have a robust IDR process, including all procedures, documents, policies, resources, governance and arrangements in place to manage complaints. RG 271.17 Many firms have addressed the foundational aspects of their IDR process. However, we consider more progress can be made in key areas, including: (a) achieving organisation-wide understanding of the definition of ‘complaint’ and the types of matters that must be dealt with in a firm’s IDR process; (b) increasing the capture, tracking, analysis and reporting of complaint data; Page 11 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 11 (c) improving timeliness and efficiency; (d) enhancing the quality of written communications and IDR responses; (e) strengthening complaint management skills; (f) fostering organisation-wide accountability for complaint management; and (g) leveraging the power of technology and data analytics to improve both the IDR process and the products and services offered by financial firms. Application of the IDR requirements RG 271.18 The IDR requirements set out in this guide apply to any expression of dissatisfaction made by a consumer that meets the definition of ‘complaint’ set out in in AS/NZS 10002:2014: see RG 271.27. RG 271.19 We have provided guidance on the types of consumer (including small businesses) that financial firms’ IDR processes should cover: see RG 271.36–RG 271.44. RG 271.20 Financial firms may tailor their IDR process to suit the nature, scale and complexity of their business. We have provided guidance on the issues firms should consider when tailoring their process at RG 271.23–RG 271.24. RG 271.21 Financial firms may also outsource part or all of their IDR process. For guidance on the responsibilities that still apply to firms that have outsourced their IDR process, see RG 271.45–RG 271.48. Requirements for IDR processes RG 271.22 This guide sets out: (a) the definition of ‘complaint’ set out in AS/NZS 10002:2014 (see RG 271.27); (b) the minimum content requirements for IDR responses (see RG 271.53– RG 271.55); (c) the maximum IDR timeframes for providing an IDR response (see RG 271.56–RG 271.106); (d) our requirements for how financial firms’ IDR processes and procedures will interact with AFCA (see RG 271.111–RG 271.116); (e) the requirements for identifying and escalating systemic issues (see Section D); and (f) our IDR standards (see Section E). Page 12 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 12 RG 271.23 There are many different kinds of financial firms providing a diverse range of financial products and services. We do not take a ‘one size fits all’ approach to regulation. What firms need to do to comply with their IDR obligations will vary according to the nature, scale and complexity of their business. RG 271.24 When reviewing or establishing an IDR process, a financial firm should take into account: (a) the size of their business and the number of people in the organisation; (b) the products and services offered and the volume and size of transactions the firm is responsible for; (c) the nature of their customer base; (d) the diversity and structure of their operations (including the extent to which the IDR function is outsourced); and (e) the likely number and complexity of complaints. Transition period RG 271.25 We acknowledge that some of the IDR reforms in this guide represent change for some financial firms. Firms will need to undertake internal capacity building, establish clear lines of reporting and accountability, develop processes and systems, and upskill staff who are responsible for dealing with complaints. RG 271.26 The standards, requirements and guidance in this guide apply to complaints received by financial firms on or after 5 October 2021. Note: For complaints received by financial firms before 5 October 2021, Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165) applies. We will withdraw RG 165 on 5 October 2022. Page 13 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 13 B Application of IDR requirements Key points A financial firm must have an IDR process that adopts the definition of ‘complaint’ set out in AS/NZS 10002:2014. Financial firms must deal with expressions of dissatisfaction that meet this definition (including complaints made on the firm’s social media platform(s)) through their IDR process. The IDR process must meet the IDR requirements set out in this guide. An IDR process for financial service providers must be able to deal with complaints made by ‘retail clients’. We have modified the definition of ‘small business’ in s761G of the Corporations Act to align with the broader definition of ‘small business’ set out in the AFCA’s Complaint Resolution Scheme Rules (AFCA Rules). Financial firms may tailor their IDR process to suit the nature, scale and complexity of their business. If they outsource part or all of their IDR process, the IDR requirements still apply. Definition of ‘complaint’ Enforceable paragraphs: RG 271.27–RG 271.29 (including note) RG 271.27 AS/NZS 10002:2014 sets out the following definition of ‘complaint’ at p. 6: [An expression] of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required. RG 271.28 A financial firm must deal with expressions of dissatisfaction that satisfy this definition under its IDR process, which in turn must meet the requirements set out in this guide. Note: We interpret the words ‘or about an organization’ in the definition to cover expressions of dissatisfaction made on social media in accordance with RG 271.32(a). We do not require these words to be read any more broadly than this. RG 271.29 AFS licensees’ IDR processes must cover ‘complaints’ against the licensee: see s912A of the Corporations Act. Credit licensees’ IDR processes must cover ‘disputes in relation to the credit activities engaged in by the licensee’: see s47 of the National Credit Act. In this guide, we use ‘complaint’ to mean both ‘complaints’ and ‘disputes’ as used in those requirements. Similarly, we use the word ‘complainant’ to refer to a person either making a complaint against an AFS licensee or raising a dispute about credit activities that are engaged in by a credit licensee. Page 14 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 14 RG 271.30 We expect firms to take a proactive approach to identifying complaints. A response or resolution is ‘explicitly expected’ if a consumer clearly requests it. It is ‘implicitly expected’ if the consumer raises the expression of dissatisfaction in a way that implies the consumer reasonably expects the firm to respond and/or take specific action. A consumer or small business is not required to expressly state the word ‘complaint’ or ‘dispute’, or put their complaint in writing, to trigger a financial firm’s obligation to deal with a matter according to our IDR requirements. Note: Our guidance about accessibility of the IDR process, including complaint lodgement methods, is set out in RG 271.134–RG 271.140. RG 271.31 Financial firms should not categorise an expression of dissatisfaction that meets the definition of ‘complaint’ as ‘feedback’, an ‘inquiry’, a ‘comment’ or similar (and therefore not to be dealt with in the firm’s IDR process) merely because: (a) the complainant expresses their dissatisfaction verbally; (b) the firm considers that the matter does not have merit; or (c) a goodwill payment is made to the complainant to resolve the matter without any admission of error. Enforceable paragraph: RG 271.32 (including notes) RG 271.32 Under this guide, the following expressions of dissatisfaction are complaints: (a) posts (that meet the definition of ‘complaint’ set out in RG 271.27) on a social media channel or account owned or controlled by the financial firm that is the subject of the post, where the author is both identifiable and contactable; Note 1: We do not expect financial firms to seek to identify complaints made on third party social media accounts or channels. Note 2: When responding to a complaint made on social media in accordance with RG 271.32(a), a financial firm must ensure consumer privacy is protected. Note 3: Representatives of financial firms must refer complaints made on social media in accordance with RG 271.32(a) to their licensee, as they are required to do for complaints they receive through other channels. (b) an objection to a proposed decision about how and to whom to pay a superannuation death benefit distribution; (c) complaints about a matter that is the subject of an existing remediation program or about the remediation program itself (e.g. delays, lack of communication); (d) complaints about the handling of an insurance claim (e.g. excessive delays or unreasonable information requests). Page 15 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 15 What is not a ‘complaint’ RG 271.33 For avoidance of doubt, we do not consider the following to be ‘complaints’: (a) employment-related complaints raised by financial firm staff; (b) comments made about a firm where a response is not expected, such as: (i) feedback provided in surveys; or (ii) reports intended solely to bring a matter to a financial firm’s attention—for example, that an automatic teller machine (ATM) is damaged; (c) hardship notices or requests to postpone enforcement proceedings, unless the customer raises issues that meet the definition of complaint; and (d) reports of unauthorised transactions under the ePayments Code and disputed transactions under a chargeback process. However, we consider that a complaint has been made if the consumer raises separate issues related to the transaction that meet the definition of a complaint, or expresses dissatisfaction with the outcome or handling of the unauthorised or disputed transaction. Note: The ePayments Code contains special arrangements for dealing with reports of unauthorised transactions. RG 271.34 Financial firms structure and resource their complaint management function(s) differently. Smaller firms may have one person responsible for complaints, along with other duties. Medium-sized and large firms may empower their frontline staff to resolve complaints at the first point of contact, and also provide further opportunities for matters to be considered by a specialist complaints team if complainants are not satisfied with the initial action taken. Some firms, especially in the banking sector, also offer customer advocates as an additional escalation point. RG 271.35 Regardless of a firm’s structure, it is the complainant’s expression of dissatisfaction (that meets the definition of ‘complaint’ in RG 271.27) that triggers a firm’s obligation to deal with the matter according to our IDR requirements, not the referral of a complaint to a specialist complaints or IDR team. Page 16 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 16 Definition of ‘complainant’ Small business complaints Enforceable paragraph: RG 271.36 RG 271.36 Any IDR process for financial service providers must be able to deal, at a minimum, with complaints made by ‘retail clients’, as defined by s761G of the Corporations Act and its related regulations. RG 271.37 The AFCA Rules define ‘small business’ as a business that had less than 100 employees at the time of the act or omission by the financial firm that gave rise to the complaint: see Section E.1 of the AFCA Rules. A small business includes a primary producer, if that primary producer is also a small business. Note 1: The AFCA Rules define a primary producer as a primary production business within the meaning of s995.1(1) of the Income Tax Assessment Act 1997. Note 2: The AFCA Rules exclude from AFCA’s jurisdiction a complaint where a complainant is a member of a group of related bodies corporate and that group has 100 employees or more. RG 271.38 We have modified (for IDR purposes only) the definition of ‘small business’ in s761G of the Corporations Act to align it with the broader definition in the AFCA Rules. This guarantees consistent dispute resolution access for small business complainants through both IDR and external dispute resolution (EDR). Traditional trustee complaints Enforceable paragraph: RG 271.39 (including note) RG 271.39 The IDR process for trustee companies providing traditional services (traditional trustees) must be able to deal with complaints made by retail clients. For traditional services, these specifically include individuals and small businesses who: (a) directly engage a trustee company to provide traditional services (e.g. to prepare a will, trust instrument, power of attorney or agency arrangement); and (b) do not directly engage the services of the trustee company, but who may request an information return. These persons include: (i) beneficiaries (including beneficiaries named in a deceased’s will, people who have an interest in the estate of someone who has died without a will, and people who have commenced legal proceedings to be included as a beneficiary of a deceased’s estate); and Page 17 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 17 (ii) certain other persons involved in charitable and other trusts (e.g. the settlor of a trust, or a person who has the power to appoint or remove a trustee or vary any of the terms of the trust). Note: See s601RAB(3) and 761G of the Corporations Act, and regs 7.1.28A and 5D.2.01 of the Corporations Regulations. RG 271.40 An ‘information return’ needs to include certain information about the trust, including information about income earned on the trust’s assets, expenses and the net value of the trust’s assets: see s601RAC(1)(e) of the Corporations Act and regs 5D.2.01, 5D.2.02 and 7.1.28A of the Corporations Regulations. Superannuation-related complaints Enforceable paragraph: RG 271.41–RG 271.42 RG 271.41 There are specific requirements for IDR processes for regulated superannuation funds (except for SMSFs), approved deposit funds and RSA providers. At a minimum, their IDR process must be able to deal with complaints made by a superannuation fund member or third-party beneficiary who is: (a) eligible to make a complaint to AFCA under s1053 of the Corporations Act; or (b) taken to be a member of a regulated superannuation fund or approved deposit fund, or a holder of an RSA, under s1053A of the Corporations Act. RG 271.42 This means that the IDR process must accept and deal with complaints made by: (a) superannuation product holders: (i) members or former members of a regulated superannuation fund (but not an SMSF); (ii) beneficiaries or former beneficiaries of an approved deposit fund; (iii) people with an interest in a superannuation annuity policy issued by a life company; (iv) holders or former holders of an RSA; and (v) people with an interest in an insurance contract where the premiums are paid from an RSA; (b) beneficiaries with an interest in a death benefit; and (c) parties (and intending parties) to an agreement under the Family Law Act 1975 or order affecting superannuation, including: (i) a member, beneficiary or RSA holder’s spouse or former spouse who is party to an agreement, or subject to an order about that person’s superannuation interest; and Page 18 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 18 (ii) someone eligible to request information about that superannuation interest. Credit-related complaints Enforceable paragraph: RG 271.43 RG 271.43 At a minimum, an IDR process for credit must be able to handle complaints made about the credit activities engaged in by the credit licensee or its credit representatives, or an unlicensed COI lender: s47(1)(h) of the National Credit Act and Sch 2 to the National Credit Regulations. This will involve covering complaints made by consumers of credit, lessees and guarantors as defined under the National Credit Act. RG 271.44 We encourage firms to develop IDR processes that have broader coverage than outlined at RG 271.43, and that are consistent with the nature of their business and their dealings with consumers and investors. In particular, we encourage all credit licensees to deal with complaints from small businesses—as defined in the AFCA Rules—under their IDR processes. Outsourcing IDR processes RG 271.45 Some financial firms outsource part, or all, of their IDR process. Outsourcing might be to external parties or to other entities within a related corporate group. RG 271.46 A financial firm that outsources part, or all, of its IDR process remains responsible for ensuring that the service provider’s IDR processes comply with all the requirements in this regulatory guide. RG 271.47 Outsourcing should also be done in a way that ensures accessibility for consumers and maintains a consumer-centric approach. Enforceable paragraph: RG 271.48 RG 271.48 Firms that outsource part, or all, of their IDR process must: (a) have measures in place to ensure that due skill and care is taken in choosing suitable service providers; (b) monitor the ongoing performance of service providers; and (c) appropriately deal with any actions by service providers that breach service level agreements or fall short of their obligations under this regulatory guide. Page 19 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 19 C Maximum IDR timeframes and IDR responses Key points This section sets out: • when financial firms should acknowledge a complaint; • what financial firms must include in an IDR response; • the maximum timeframes that financial firms have to provide an IDR response; and • when a financial firm does not have to provide an IDR response within the maximum IDR timeframe. We also set out our expectations about how firms’ IDR processes will interact with AFCA. RG 271.49 Timeliness is central to effective complaint management and is a key performance measure of a firm’s IDR process. Findings from ASIC’s research into the consumer experience of the IDR journey indicate that delays and frictions in the IDR process can create real barriers for consumers and damage the consumer–firm relationship. Note: See Report 603 The consumer journey through the Internal Dispute Resolution process of financial service providers (REP 603). RG 271.50 Important measures of timeliness include the length taken to acknowledge a complaint and to provide the complainant with an IDR response. Acknowledgement of complaint RG 271.51 A financial firm should acknowledge receipt of each complaint promptly. We expect that firms will acknowledge the complaint within 24 hours (or one business day) of receiving it, or as soon as practicable. RG 271.52 Financial firms may acknowledge a complaint verbally or in writing (email, post or social media channels). When determining the appropriate method of communication, we expect firms to take into account the method used by the complainant to lodge their complaint and any preferences they may have expressed about communication methods. Page 20 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 20 What an IDR response must contain Enforceable paragraphs: RG 271.53–RG 271.54 (including notes) RG 271.53 An ‘IDR response’ is a written communication from a financial firm to the complainant, informing them of: (a) the final outcome of their complaint at IDR (either confirmation of actions taken by the firm to fully resolve the complaint or reasons for rejection or partial rejection of the complaint); (b) their right to take the complaint to AFCA if they are not satisfied with the IDR response; and (c) the contact details for AFCA. Note 1: In order to give an IDR response, unlicensed COI lenders who have not joined AFCA must inform the complainant of the final outcome of their complaint at IDR within 30 calendar days. Note 2: If the complaint relates to a superannuation death benefit distribution, the death benefit decision-maker must also give the complainant information about the 28 calendar day time limit (under s1056 of the Corporations Act) for lodging a complaint with AFCA (see RG 271.84(a)). This time limit must be included in a death benefit decision-maker’s notice. Note 3: If a complaint has been referred to IDR by AFCA, the financial firm may draft the IDR response to reflect the fact that the customer has already initiated contact with AFCA. RG 271.54 If a financial firm rejects or partially rejects the complaint, the IDR response must clearly set out the reasons for the decision by: (a) identifying and addressing the issues raised in the complaint; (b) setting out the financial firm’s findings on material questions of fact and referring to the information that supports those findings; and (c) providing enough detail for the complainant to understand the basis of the decision and to be fully informed when deciding whether to escalate the matter to AFCA or another forum. RG 271.55 The level of detail in an IDR response should reflect the complexity of the complaint and the nature and extent of any investigation conducted by the firm. We do not expect financial firms to provide information in an IDR response that would breach the firm’s privacy or other legislative obligations (e.g. the ‘tipping off’ provisions of the Anti-Money Laundering and Counter- Terrorism Financing Act 2006). Page 21 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 21 Maximum timeframes for an IDR response When an IDR response must be provided by Enforceable paragraphs: RG 271.56–RG 271.60 and Table 2 (including note) RG 271.56 A financial firm must provide an IDR response to a complainant no later than 30 calendar days after receiving the complaint. However, in some cases a different timeframe applies: see RG 271.58. There are also exceptions: see RG 271.64–RG 271.66. Note: Section 36 (Calculating time) of the Acts Interpretation Act 1901 is to be applied in construing the timeframes in RG 271. The timeframes begin on the day that the complaint is received, regardless of whether the day of receipt is a business day. As per s36, the timeframes do not include the day of receipt. ‘Day 1’ is therefore the first calendar or business day (depending on the paragraph of RG 271) after the financial firm has received the complaint. RG 271.57 Superannuation trustees and RSA providers satisfy the requirement to provide written reasons for a decision (see s101(1)(d) of the SIS Act and s47(1)(d) of the RSA Act) when they provide an IDR response. RG 271.58 Table 2 summarises the maximum IDR timeframes for all complaints. RG 271.59 Different timeframes apply to: (a) complaints about a traditional trustee (see RG 271.76–RG 271.78); (b) complaints about superannuation trustees (see RG 271.79); (c) complaints about superannuation death benefit distributions (see RG 271.80–RG 271.85); and (d) certain types of credit complaints (see RG 271.86–RG 271.101). RG 271.60 There are also different requirements for complaints closed within five business days of receipt: see RG 271.71–RG 271.75. Table 2: Maximum IDR timeframes for financial firms to provide an IDR response Complaint type Maximum timeframes for IDR response More information Standard complaints No later than 30 calendar days after receiving the complaint. RG 271.56 Traditional trustee complaints No later than 45 calendar days after receiving the complaint. RG 271.76– RG 271.78 Superannuation trustee complaints, except for complaints about death benefit distributions No later than 45 calendar days after receiving the complaint. RG 271.79 Page 22 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 22 Complaint type Maximum timeframes for IDR response More information Complaints about superannuation death benefit distributions No later than 90 calendar days after the expiry of the 28 calendar day period for objecting to a proposed death benefit distribution referred to in s1056(2)(a) of the Corporations Act. RG 271.80– RG 271.85 Credit-related complaints involving default notices No later than 21 calendar days after receiving the complaint. RG 271.86 and RG 271.91 Credit-related complaints involving hardship notices or requests to postpone enforcement proceedings No later than 21 calendar days after receiving the complaint. Exceptions apply if the credit provider or lessor does not have sufficient information to make a decision, or if they reach an agreement with the complainant. Insufficient information If the credit provider or lessor does not have sufficient information about a hardship notice to make a decision, they must request the information no later than 21 calendar days after receiving the complaint. The complainant must provide the information within 21 calendar days of receiving the request. Once the credit provider or lessor has received the requested information, the credit provider has a further 21 calendar days to provide an IDR response. If the credit provider or lessor does not receive the requested information within 21 calendar days of requesting the information, the credit provider or lessor has 7 calendar days to provide an IDR response. Agreement reached If agreement is reached about a hardship notice or request to postpone enforcement proceedings, the credit provider or lessor has 30 calendar days to confirm the terms or conditions in writing. RG 271.92– RG 271.93 RG 271.61 We consider that an objection to a proposed decision about how and to whom to pay a superannuation death benefit distribution is a complaint. For details on how the maximum IDR timeframe applies to death benefit distribution complaints, see RG 271.80–RG 271.85. RG 271.62 Where a complaint about unauthorised transactions is covered by card scheme rules, the timeframes for providing a response set out in the scheme rules will apply. Complaint management delays RG 271.63 There are many variables that can affect complaint response times. This includes the complexity of the issues raised and the availability of information, including from third parties. However, we consider that the pursuit of best practice should result in firms regularly meeting or outperforming the maximum IDR timeframes. Page 23 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 23 Enforceable paragraphs: RG 271.64–RG 271.66 (including notes) RG 271.64 A financial firm is not required to provide a complainant with an IDR response within the relevant maximum IDR timeframe if certain circumstances exist: see RG 271.65–RG 271.66. RG 271.65 First, there must be no reasonable opportunity for the financial firm to provide the IDR response within the relevant maximum IDR timeframe because: (a) resolution of the individual complaint is particularly complex (see RG 271.67 for examples of ‘complexity’); and/or (b) circumstances beyond the financial firm’s control are causing complaint management delays (see RG 271.68 for examples of such circumstances). RG 271.66 Second, before the relevant maximum IDR timeframe expires, the financial firm must give the complainant an ‘IDR delay notification’ that informs the complainant about: (a) the reasons for the delay; (b) their right to complain to AFCA if they are dissatisfied; and (c) the contact details for AFCA. Note 1: We consider that objections to proposed decisions about how and to whom to pay a superannuation death benefit distribution are complaints. AFCA cannot consider a complaint about a death benefit distribution unless the complainant has first lodged a complaint about that decision with the death benefit decision-maker and received a response to the complaint. If the death benefit decision-maker delays providing a complainant with an IDR response and the complainant escalates the matter to AFCA, AFCA cannot consider the complaint as it relates to the distribution of the death benefit but can consider the delay. This restriction to AFCA’s jurisdiction should be reflected in any IDR delay notification a death benefit decision-maker provides in response to a death benefit distribution complaint. Note 2: The exceptions set out at RG 271.64–RG 271.66 do not prevent a complainant from exercising their right to escalate a complaint to AFCA and do not affect AFCA’s ability to register a complaint. Note 3: The exceptions do not apply to the refer back timeframes applied by AFCA when a complaint is escalated to AFCA. Note 4: If a complaint has been referred to IDR by AFCA, the financial firm may draft the IDR delay notification to reflect the fact that the customer has already initiated contact with AFCA. RG 271.67 Examples of ‘complexity’ include when: (a) an individual complaint is about a transaction or event that occurred more than six years ago and requires reconstruction of account information; and (b) a complaint about a superannuation death benefit distribution involves multiple submissions from potential beneficiaries with competing information about the status of relationships or levels of financial dependence. Page 24 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 24 RG 271.68 Examples of circumstances that may be beyond a financial firm’s control include when: (a) the complainant is waiting on a medical appointment that the firm reasonably requires the complainant to attend; (b) the complainant is unable to respond to the financial firm due to illness or absence; (c) information must be obtained from third parties to a complaint (excluding an authorised representative who is a party to the complaint); and (d) a death benefit decision-maker is waiting on information requested from potential beneficiaries to a death benefit to substantiate their claim. Enforceable paragraph: RG 271.69 RG 271.69 Superannuation trustees and RSA providers satisfy the requirement to provide written reasons for the failure by a trustee to make a decision on a complaint (see s101(1)(d) of the SIS Act and s47(1)(d) of the RSA Act) when they provide an IDR delay notification. RG 271.70 Unlicensed COI lenders who have not joined AFCA need to inform the complainant of the reasons for the delay before the end of the 30 calendar day period. Complaints closed within five business days of receipt Enforceable paragraph: RG 271.71 RG 271.71 A financial firm does not need to provide an IDR response to a complainant if the firm closes the complaint by the end of the fifth business day after receipt because the firm has: (a) resolved the complaint to the complainant’s satisfaction (see RG 271.73); or (b) given the complainant an explanation and/or apology when the firm can take no further action to reasonably address the complaint (see RG 271.74). RG 271.72 However, an exception may apply: see RG 271.75. RG 271.73 When determining whether a complaint has been resolved to a complainant’s satisfaction, we expect firms to consider whether: (a) the complainant has confirmed (verbally or in writing) that they are satisfied with the action(s) taken by the financial firm in response to the complaint and do not wish to take the matter further; or (b) other circumstances exist that make it reasonable for the firm to form the view that the complaint has been resolved to the complainant’s satisfaction. Page 25 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 25 RG 271.74 In some circumstances, it may be reasonable for a financial firm to form the view that an explanation and/or apology is the only action they can take to address the complaint. For example, if the complaint relates only to: (a) a financial firm’s commercial decision, such as a refusal to grant credit or provide insurance cover on certain terms; or (b) reasonable initial contact by a financial firm about debt collection. Enforceable paragraph: RG 271.75 RG 271.75 A financial firm must provide a written IDR response, even where the complaint is closed by the end of the fifth business day: (a) if the complainant requests a written response; (b) if the complaint is about: (i) hardship; (ii) a declined insurance claim; or (iii) the value of an insurance claim; or (c) for any decision of a trustee (or failure by the trustee to make a decision) relating to a complaint. A trustee in this paragraph means a trustee of a regulated superannuation fund other than an SMSF, or of an approved deposit fund (see s101(1)(d) of the SIS Act). Note: Section 101(1)(d) of the SIS Act does not provide an exception from providing written reasons because a complaint is resolved promptly. Not all complaints resolved by a trustee will involve a decision of a trustee (or failure by a trustee to make a decision) relating to the complaint. In some cases where a complaint is resolved promptly, all the trustee may be providing is an explanation or an apology, rather than making a decision relating to the complaint within the meaning of s101(1)(d). For example, if the complaint is about: • the general administration or a policy of the fund (and the complainant is not seeking to argue for changes in their own case); and • the operation of statutory conditions of release and service delays that have not caused the complainant loss. The trustee must determine what is an appropriate response based on the context and facts of each complaint. If the response to the complaint requires some consideration of the complainant’s individual circumstances or the complainant has requested a particular resolution, then it is more likely that in responding to the complaint the trustee will have made a decision (or will have implicitly failed to make a decision), which will require written reasons. For complaints that are not closed by the end of the fifth business day, trustees must provide a written IDR response regardless of whether there was any decision of the trustee (or failure by the trustee to make a decision) relating to a complaint. Page 26 REGULATORY GUIDE 271: Internal dispute resolution © Australian Securities and Investments Commission September 2021 Page 26 More information on maximum timeframes for traditional trustee complaints Enforceable paragraph: RG 271.76–RG 271.78 RG 271.76 During the 45 calendar day maximum IDR timeframe, a traditional trustee must: (a) on receiving the complaint, use their best endeavours to identify and notify other people who may re