ASIC requests license holders to upgrade remediation process

ASIC is calling on Australian financial services and credit licensees (licensees) to ensure they remediate affected customers quickly and fairly, in line with ASICs guidance in Regulatory Guide 277 Consumer Remediation (RG 277).

This follows ASIC‘s recent review of some large financial institutions' remediation policies and procedures to assess their implementation of RG 277. The review identified gaps where some licensees’ policies and procedures were inconsistent with RG 277 and could lead to poor outcomes for customers. ASIC has written to the licensees included in the review outlining key findings and concerns.

Over the last seven years, ASIC has overseen more than $7 billion of remediation to an estimated 8.42 million Australian consumers for failures identified across the financial services industry.

• Remediation review periods – RG 277 reinforces that the remediation review period should begin when the licensee reasonably suspects the misconduct or failure first occurred and caused loss to a consumer. However, we saw some policies that could inappropriately narrow the scope of remediation review periods such as the inclusion of unnecessary approval processes in order for review periods to exceed a certain number of years.

• Use of ‘beneficial assumptions’ – RG 277 allows licensees to use assumptions beneficial to customers in relevant circumstances to address knowledge gaps and increase the timeliness of remediations. ASICs review indicated that licensees did not always consider beneficial assumptions as a mechanism to enable efficient remediations.

• Foregone returns or interest – According to RG 277, rates for calculating foregone returns or interest must return the customer as closely as possible to the position they would have been in had the misconduct not occurred. We observed that some licensees had pre-determined rates for specific products or scenarios. It was not always clear that these were subject to adequate review and controls to ensure that they were appropriate in the circumstances.

• Reasonable endeavours – Under RG 277, licensees are expected to make reasonable endeavours to contact and pay affected consumers, with reasonableness to be determined on a case-by-case basis. The review found examples of prescriptive approaches, such as a predefined number of contact attempts, which may be insufficient in certain circumstances. Licensees adopting such approaches should take care to ensure adequate flexibility and good consumer outcomes.

• Low value payment threshold – RG 277 allows for payments to be made to a not-for-profit if the licensee does not have current payment information for any former customers owed less than $5. ASICs review found evidence of policies that could result in some cohorts of customers for whom the licensee has payment information, not receiving payments under $5.

• Oversight and controls – RG 277 highlights that licensees should have governance frameworks with appropriate oversight and accountability to ensure fair and timely remediation. The review found a general lack of focus on fairness in governance frameworks.

About ASIC

ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. It is an independent Australian Government body that is set up under and administer the Australian Securities and Investments Commission Act 2001 (ASIC Act). ASIC rles are to maintain, facilitate and improve the performance of the financial system and entities in it, promote confident and informed participation by investors and consumers in the financial system

To know about the security and reliability of your chosen brokers, you can use Wikifx app. To expand your knowledge and stay informed about the forex market. Download the Wikifx app on your phones. Here is the Link to the download: https://www.wikifx.com/en/download.html