Defects in institutions’ systems have escalated many remediation programs, according to the corporate regulator, reporting blown up costs for financial services providers and damage to consumers.
ASIC has released a consultation paper on proposed updates to its regulatory guide on consumer remediation conducted by advice licensees.
The paper addresses an update to Regulatory Guide 256: Client review and remediation conducted by advice licensees (RG 256), including clarification of its application to all financial services licensees, superannuation trustees and credit licensees.
Since October last year, around $1.68 billion has been returned to consumers in both finalised and ongoing financial system remediations.
The corporate watchdog is currently monitoring more than 100 remediations, which it has estimated could return at least another $3.55 billion in total to more than 3.6 million consumers upon finalisation.
There are also other firms dealing with remediations outside of ASIC involvement.
But the regulator reported that many remediations had been caused or blown out by ongoing systems failures, ultimately resulting in significant costs to licensees and further harm to consumers.
ASIC acting chair Karen Chester commented placing money back into consumers’ hands has “never been more important”.
“There are opportunities for firms to not only identify the issues that can lead to remediations earlier, but also to make sure that they have arrangements and systems in place to return money to affected consumers as fact and as fairly as possible,” she said.
“We are also seeing some positive signs from firms who are looking at ways to fast track remediations, including through the use of beneficial assumptions.”
The regulator has asked industry and stakeholders to give feedback about challenges in designing and executing remediations in its consultation paper.
“The issues we are consulting on reflect the questions that firms frequently ask ASIC,” Ms Chester said.
“Clarity on these issues will help firms step up and deliver good consumer outcomes.”
ASIC has been involved in customer remediations across the superannuation, wealth, banking and insurance industries since it first released the regulatory guide in 2016, from the fees for no service issues affecting the major banks to smaller system errors and failures by licensees to deliver on their contractual obligations.
“Ensuring that the processes for returning this money are efficient and fair is central to consumer confidence and trust in financial products and services and in the firms themselves,” Ms Chester said.
Submissions for the consult are open until 26 February. ASIC is then set to release the draft guidance, informed by the feedback received during the consultation period, for a second round of industry discussion.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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