The following organisations have contributed to and endorsed this submission:• Consumer Action Law Centre, Financial Rights Legal Centre, and Super Consumers Australia.
We support a continuing focus on consumer remediation by the Australian Securities and Investment Commission (ASIC) in its enforcement. Effective remediation programs are an essential part of the financial services system, enabling timely and efficient compensation for people impacted by misconduct. Importantly, remediations are a learning opportunity for firms, enabling the firm to understand the causes and impacts of the misconduct and take corrective action to prevent any repetition.
Generally, the Draft Regulatory Guide (Dragt RG) is excellent and provides useful guidance and practical examples on how to undertake best practice remediation. We commend ASIC for undertaking this important work, and look forward to its promotion and enforcement across the financial sector. It will also be a useful resource for companies and regulators in other sectors seeking to undertake best practice remediation.
We have two serious concerns that require redrafting in the Draft RG:•
Public reporting: All firms should be required to publicly report on all remediation programs (including scope and its outcomes) in the interests of transparency and accountability. Public reporting, if done well, can bring much needed transparency for consumers, and the systems fixes undertaken by the firm. Without this, poor outcomes for consumers will be hidden or white-washed in claims about “successful” remediations.
If ASIC requires anything less than full and transparent public reporting on all remediation programs, this regulatory guide will be highly inconsistent with the internal dispute resolution data reporting requirements, and the general trend towards naming firms in recent years, including named determinations at the Australian Financial Complaints Authority (AFCA). •
Money unable to be returned to consumers: The draft position that community benefit (or ‘residual remediation’) payments only be made when an unclaimed money regime is not available will be a win for industry. Community benefit payments have a proven track record of being used to benefit the class of consumers who were affected by the misconduct. Allowing firms to utilise unclaimed money regimes will disincentivise firms from finding all eligible consumers –who will then be denied the opportunity to make timely complaints to AFCA if the amount of compensation is unfair. Most money will end up in the Government’s Consolidated Revenue, rather than benefitting the group of consumers impacted by the misconduct, as currently occurs with community benefit payments.
At the bare minimum, the final RG must give guidance on how firms are to make residual remediation payments, to prevent firms making payments to their own charities, or deriving benefit from their misconduct by promoting a “charitable payment”.
The submission makes 12 guide recommendations on improvements and clarifications to the Draft RG, summarised below.
Read our full submission (PDF)220228_CP350_JointSubmission_Final