Consumer remediation guidelines require 12-month transition: FSC
The Financial Services Council (FSC) is calling on the Australian Securities and Investments Commission (ASIC) to include a 12-month transition period for licensees to adjust to changes to consumer remediation guidelines.
Late last year, ASIC released a draft regulatory guide which would update the existing Regulatory Guide 256 (RG 256) to consult on the way licensees should conduct remediations to return money owed to consumers.
At the time, ASIC deputy chair, Karen Chester, said the guidance would be expanded to cover all financial services licensees, credit licensees and retirement service providers and would be aimed at helping firms remediate with greater confidence and speed.
In its submission to ASIC, the FSC said it was broadly supportive of ASIC’s regulatory guideline proposals but that it disagreed with ASIC’s assertion that the updated guidance did not need a transition period because it did not introduce any new legal requirements.
The FSC said while the updated guidance might not introduce new legal requirements, it would introduce new expectations that would need be considered by licensees.
It also argued in favour of clearer guidance as to what the meaning of “a small number of clients” would mean in practice, although agreeing with the guideline’s indication that a licensee should have some flexibility to make a determination as to its meaning.
“Perhaps another example… could be provided for a small number of consumers affected where the remediation is managed using existing incident management processes/resources,” the FSC said.
The council was also opposed to ASIC’s proposal to introduce a reduced low-value compensation threshold of $5 because it would result in disproportionate additional operational costs to licensees, increased risk of scam activity and other potential customer detriment.
“The regulatory guideline should be updated so that the low-value compensation threshold of $20 or less for former customers is maintained,” the FSC said.
The FSC also disagreed with the proposed requirement for licensees to publish information about remediations on their website.
“We submit that this would be potentially confusing for customers, undermine trust in the financial services industry, be inconsistent with wider regulatory requirements and potentially result in added costs for industry,” it said.
ASIC had not yet set a date as to when it would publish its final regulatory guide.
Earlier this week, Money Management reported that the Big Four banks, AMP and Macquarie had paid or offered a total of $3.1 billion in compensation to customers who suffered loss or detriment because of fees for no service misconduct or non-compliant advice as at 31 December, 2021.
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