Today ob体育 initiated public consultation on new standards about how financial firms handle consumer and small business complaints.聽The proposed standards, which include new mandatory data reporting, will improve the way that consumer complaints are dealt with across the financial system and make firms鈥� complaints handling performance transparent.
Financial firms will be required by ob体育 to meet the new standards when they deal with consumer complaints through their Internal Dispute Resolution (IDR) arrangements.
IDR is the first step in the complaints handling process 鈥� an opportunity for the financial firm to investigate, resolve or redress a problem before a consumer or small business can escalate their complaint to the Australian Financial Complaints Authority (AFCA).聽All financial firms (including banks, insurers, credit providers, advisors and most superannuation funds) are required by legislation to have an IDR system that meets ob体育鈥檚 standards.
Announcing the consultation, ob体育 Deputy Chair Karen Chester said, 鈥業t is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system. The Ramsay Panel Review, recent ob体育 research, case studies before the Financial Services Royal Commission (FSRC) and our own supervisory work have all identified shortcomings in consumer complaints handling.鈥�
鈥楥onsumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate.聽The absence of such effective redress, and the failure of firms to identify and look into systemic complaints, were key findings of the FSRC and the Prudential Inquiry into the CBA.鈥櫬� 聽
聽鈥榃ith the benefit of broad consultation, ob体育鈥檚 new standards will lift complaints handling performance of firms and ultimately consumer outcomes and fairness of the financial system.聽And transparently so.聽These standards will also apply in their entirety to all APRA regulated superannuation funds鈥�, Ms Chester said.
The proposed new standards have been informed by recent consumer research by ob体育 and findings from aspects of ob体育鈥檚 new onsite supervisory program 鈥� Close and Continuous Monitoring - which is currently reviewing IDR policies, practices and procedures in Australia鈥檚 five largest and most complex financial services institutions.
ob体育鈥檚 consumer research 鈥� The consumer journey through the IDR process of financial service providers 鈥� published in December 2018, found evidence of 鈥榗onsumer fatigue鈥� and IDR shortcomings, including:
- while 17% of Australians surveyed considered making a complaint to a financial firm in the preceding 12 months, only 8% went on to lodge a complaint,
- 18% of surveyed complainants dropped out or withdrew their complaint before it was concluded;
- the length of time taken by a financial firm to conclude a complaint significantly affected consumer satisfaction;
- one in seven complainants found it difficult to find the financial firm鈥檚 details to make a complaint; and
- almost a quarter of complainants did not have the IDR process explained well at first contact and 27% were unsure how long they would have to wait for a decision; and
- critically, only 45% of complainants who received an unfavourable outcome reported receiving an explanation from the financial firm of the decision made against them.
The consultation covers:
- proposed updates to ob体育鈥檚 IDR standards (currently set out in Regulatory Guide 165 Licensing: Internal and external dispute resolution); and
- the proposed framework for mandatory IDR data reporting by financial firms to ob体育.
Importantly, the proposed new standards and data reporting requirements will continue to forge the effective relationship between IDR and the work of AFCA, the independent external complaints scheme.
Ms Chester said, 鈥楩irm performance in how they handle customer complaints, and their interaction with AFCA, will increasingly be in plain sight. This greater transparency will inform consumer and broader public understanding of how well firms treat their customers.聽For a regulator, it also provides an invaluable insight into how non-financial risks are being managed by the firm and ultimately the Board.聽ob体育 expects greater investment and attention by Boards to their own internal customer complaints data and complaints handling performance.鈥�
Some key elements of the new standards that ob体育 is seeking feedback on include:
- reducing maximum time frames for IDR responses;
- what constitutes a complaint, including if received by way of a firm鈥檚 social media
- setting clear standards about what should be in written reasons for decisions;
- strengthening the requirement that firms take a systemic focus to complaints handling; and
- the details of the new framework for recurrent complaints data reporting to ob体育
ob体育 seeks public input on the consultation documents by 9 August 2019 and aims to release new IDR standards (in a new Regulatory Guide 165) by end 2019.聽A further, separate consultation on the publication of IDR data will commence in early 2020.