ASIC pulls up TelstraSuper on IDR inefficiencies
ASIC has begun civil penalty proceedings against TelstraSuper in the Federal Court, its first action regarding internal dispute resolution (IDR).
The regulator’s IDR regime commenced in October 2021 and made certain provisions of ASIC’s Regulatory Guide for Internal Dispute Resolution (RG 271) enforceable, including the requirement for super funds to respond to most super complaints within 45 days.
Complaints can cover a range of issues, from members who are inconvenienced by confusing information, to more serious complaints that result in financial harm, such as delayed or reduced payments or investments being made incorrectly.
TelstraSuper is the trustee of the Telstra Superannuation Scheme which has over 91,000 members and more than $23 billion in funds under management as at 30 June 2022.
The corporate regulator alleges some 40 per cent of TelstraSuper’s responses to complainants during the relevant period failed to comply with its own dispute resolution procedures.
It alleges that between 22 October 2021 and 13 January 2023, the super fund received 337 superannuation complaints but failed to comply with notification requirements when it failed to:
- Respond to 106 complainants within 45 days;
- Inform 85 complainants about why there was a delay in responding to their complaint;
- Inform 22 complainants about their right to take their complaint to AFCA.
It further alleges that Telstra Super failed to operate efficiently, honestly and fairly when it failed to comply with its procedures, sent delay notifications to complainants when it was not justified to do so, and did not have adequate resources to comply with its internal dispute resolution procedures.
“ASIC expects the financial services industry to have effective dispute resolution procedures in place, and, importantly, to have the systems and resourcing to ensure they are being put into practice,” said ASIC deputy chair Sarah Court.
“Financial service providers need to prioritise dispute resolution procedures to properly protect consumers.”
With these proceedings, ASIC is seeking declarations, pecuniary penalties and other orders against TelstraSuper.
The date for the first case management hearing is yet to be scheduled.
A statement from Telstra Super said: "TelstraSuper acknowledges the recent ASIC announcement regarding the commencement of regulatory action and understands the concerns it may raise among members.
"The matter relates to 135 complaints – all of which are now resolved. These occurred during an approximate 15 month period from 22 October 2021. TelstraSuper understands that the complaints process can be distressing for some members. We take complaints very seriously and we have been working constructively and cooperatively with ASIC during its enquiries.
"Since new internal dispute resolution requirements were introduced in October 2021, we have continued to review our complaint handling procedures to ensure that we're providing an efficient, effective and timely service for our members.
"We're committed to providing members with a strong member experience – and that includes our complaints handling process. This matter is now the subject of ASIC proceedings so we're unable to provide further details at this time."
Appearing before the Senate Economics References Committee last month, Court was asked by Senator Andrew Bragg if the corporate regulator is aware of the delays being incurred by members.
Court said: “Some of those themes that are subject of those media reports are about processing delays for up to two years and poor communication via the trustee with members.
“We are also aware that there is a high number of AFCA complaints in relation to those issues as well so we are looking at them. We think they are conducting issues by the superannuation trustees, we are prioritising a look at that in the next little while.
“This is an issue we have elevated to be a priority issue for us.”
In its FY22–23 annual report, the Australian Financial Complaints Authority (AFCA) reported there were 6,957 complaints about superannuation compared to 5,286 in the previous year.
“Many superannuation complaints to AFCA can be traced back to issues with service quality, including the clarity and effectiveness of internal dispute resolution processes and the responsiveness of the trustees when questions are raised,” it said.
Earlier this year, Super Review covered how there are issues with super funds’ internal dispute resolution (IDR) processes that is prompting to contact AFCA directly.
While members are encouraged to first contact their super fund in order to resolve a complaint via the internal dispute resolution (IDR) process, AFCA said the number of members contacting them directly is on the rise.
Of all complaints referred back by AFCA to a super fund last financial year, 55 per cent were from consumers who contacted AFCA first rather than their fund’s IDR team. From May 2023, this percentage has increased further to 66 per cent, which AFCA flagged as a concern.
AFCA told Super Review a lack of engagement with IDR might indicate a “breakdown of trust” with the fund or inadequate identification of a member’s expression of dissatisfaction.