ASIC consults on consumer remediation draft guidance

The Australian Securities and Investments Commission (ASIC) has released a draft updated and expanded regulatory guide to consult on the way licensees should conduct remediations to return money owed to consumers.

The draft guidance is an important step to improving remediation across the financial services industry. Proactive remediation upon discovery of misconduct or other failures is necessary for licensees to achieve good outcomes for their consumers and comply with their licensing obligations to act efficiently, honestly and fairly.

ASIC Deputy Chair Karen Chester said, “Recent experience has shown that poor conduct has significant financial implications for companies, their investors, and ultimately their customers. This is demonstrated by the costly lag and drag of remediation and reputational damage. Right now, ASIC is monitoring 64 remediations that will see the return of about $5.4 billion to more than 5.6 million consumers upon finalisation. There are many other remediations that are dealt with by firms without any ASIC involvement.”

“We want our new guidance to help firms remediate with greater confidence and speed. Importantly, we have expanded our guidance to cover all financial services licensees, credit licensees, and retirement service providers. Our draft guidance sets out how all licensees should act to ensure their remediations are conducted efficiently, honestly, and fairly”, she said.

The draft guidance is comprehensive and makes allowance for licensees to tailor it to the circumstances of their particular remediation. It has been informed by ASIC’s operational experience and benefited from extensive earlier consultation.

“Licensees must do better at identifying and remediating problems earlier. One of the most common stumbling blocks we have seen across remediations is underinvestment in systems. This underinvestment has led to multiple 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,” added Chester.

The release of Consultation paper 350 Consumer remediation: Further consultation (CP 350) follows ASIC’s earlier consultation through Consultation Paper 335 Consumer remediation: Update to RG 256 (CP 335) which was published on 3 December 2020.

CP 350 seeks feedback on the draft consumer remediation regulatory guide which in turn reflects consideration of the feedback received on CP 335. ASIC’s response to the feedback is set out in detail in Report 707 Response to submissions to CP 335 Consumer remediation: Update to RG 256. Comments should be sent by 5 pm on Friday 11 February 2022 to remediation@asic.gov.au.