ASIC’s expectations about new internal dispute resolution requirements for superannuation trustees

First published by LexisNexis in the Australian Superannuation Law Bulletin Vol 32 No 6, March 2021

The Australian Securities and Investments Commission (ASIC) Regulatory Guide 271: Internal dispute resolution[1] (RG 271) was released in July 2020 and contains updated standards and requirements that will drive financial services firms to ensure they handle consumer complaints in a fair and timely manner. RG 271 supersedes Regulatory Guide 165 Licensing: Internal and external dispute resolution, and is intended to raise internal dispute resolution (IDR) standards in the industry by encouraging firms to address systemic issues that may exist across their business.

For the superannuation industry, the changes present opportunities for trustees to improve members’ trust and confidence in their fund, to minimise the costs that arise from protracted dispute resolution processes, and to improve how their fund operates.

While RG 271 does not take effect until 5 October 2021, trustees need to prepare to make the necessary changes.

There are significant legal issues to be addressed in ensuring that trustees meet the RG 271 obligations. This article outlines ASIC’s expectations to assist in the transition to meet the new requirements.

Complaints handling is the first step in the dispute resolution framework. Effective complaint management processes improve consumer outcomes and a firm’s risk management. It can also reduce the risk of downstream remediation costs.

ASIC released RG 271[2] in July 2020 after extensive consultation with consumer and industry representatives. The new standards are informed by ASIC’s consumer research and findings from ASIC’s on-site supervisory program. The “Close and Continuous Monitoring program” involved reviewing IDR policies, practices and procedures in Australia’s five largest and most complex financial services institutions. The results indicated there was scope for significant improvement in IDR processes, which echoed ASIC’s earlier work in relation to the superannuation industry specifically.

RG 271 reflects these findings and includes:

  • reduced timeframes for responding to complaints, including a reduction to a new maximum of 45 days for superannuation complaints (other than complaints about death benefit distributions)
  • further guidance on the information that funds must include in written IDR responses to allow consumers to understand complaint outcomes and decide whether to escalate their complaint, and
  • a greater focus on identifying, investigating and, where relevant, resolving possible systemic issues raised by complaints

RG 271 also introduces enforceable standards, which reinforces that trustees need to have oversight of, and be accountable for, their IDR procedures. The updated obligations are more comprehensive than existing requirements and focus with more granularity on the internal operations of the financial service provider.[3] The new enforceable requirements are discussed in more detail in a November 2020 Australian Superannuation Law Bulletin article.[4]

In interpreting the provisions of RG 271 for trustee clients, legal advisers should consider the intent behind them. Whether ASIC takes action in response to any particular failure to comply with the RG 271 IDR obligations will be subject to ASIC’s usual approach to taking enforcement action, which includes what impact any action may have on consumers.

In November 2020, ASIC held an industry roundtable to outline its expectations of trustees as they prepare for the updated RG 271 requirements. Presentation handouts[5]from the roundtable are available on ASIC’s website.

Timely preparation

While the date for compliance seems some time away, the standards in RG 271 will likely require trustees to thoroughly review existing processes, systems and resources, so trustees should turn their attention to this work now.

If they have not already done so, trustee boards should seek advice on how their operations will meet the requirements of RG 271. Some of the changes may take some time to implement. These may include necessary changes to information technology (IT) and administration systems for complaints management, including capturing data, processes and procedures, and staff training.

Trustees will also need to review their insourced and outsourced arrangements, which may require contractual and/or operational changes in order to meet the requirements of RG 271. Any third parties involved in handling complaints (including an insurer for claim related complaints) will need to be able to meet the shortened 45-day maximum timeframe (from 90 days) to resolve complaints and to meet the data collection and reporting requirements. As for external providers, under the design and distribution obligations, which also commence on 5 October 2021, product distributors must record and report the number of complaints they receive.[6] Trustees are responsible for outsourced providers and must ensure there is clear oversight of these arrangements.

Member-centric approach

Listening and responding to members when something may have gone wrong provides a valuable opportunity to not only address an individual member’s concerns early but also to learn about and improve the member experience more broadly.

ASIC expects trustees to keep the member journey front of mind when reviewing and implementing their IDR processes. Trustees will need to involve relevant, specialist staff from across their business to test and review relevant aspects of the IDR process from a member’s perspective. The complaint process should be visible, easy to access and inclusive.[7]

For superannuation funds, there is a number of enforceable obligations related to a fund’s operations, which are designed to ensure that timely and fair consumer complaint outcomes are achieved.[8]

When responding to complainants, ASIC expects:

  • the issues the complainant has raised have been identified and addressed
  • the response is tailored and includes facts that support the findings, and
  • sufficiently detailed reasons are given which are proportionate to the complexity of the complaint so that the complainant can understand the decision

Achieving all of this in 45 days (or 90 days for death benefit objections) means trustees will likely need to consider their existing procedures and processes and the workload of existing complaints staff. Templates for common complaints may be a starting point, but they are not likely to be sufficient. Complaints handling staff should be mindful to use plain language, not legalese or jargon, when responding to complainants.

Staffing and systems

One of the enforceable standards[9] requires that:

  • a trustee’s IDR process must be adequately resourced so that it operates fairly, effectively and efficiently
  • a trustee must regularly review whether its IDR process is adequately resourced
  • staffing numbers must be sufficient and skilled to deal with complaints in a fair and effective manner within maximum IDR timeframes, and
  • a trustee must provide relevant staff with appropriate training and authority to be able to resolve complaints, fairly and efficiently

We anticipate the new IDR standards may require trustees to invest in skilled staff and systems. Trustees may need to revisit how they structure delegations, including authority to make decisions and financial delegations, to ensure relevant staff are sufficiently empowered to resolve complaints fairly and efficiently, and to avoid delays in resolving complaints under the shorter timeframes. Trustees should also take into account the fact that levels and complexity of complaints can fluctuate, so they should consider how they use flexible resourcing.

When considering IT system resources, ASIC will be encouraging trustees to think about how best to structure systems to support complaints handling staff in all areas of their business. Trustees should also consider what systems they need to put in place to make full use of the insights from complaints data. ASIC encourages organisations with the ability to introduce sophisticated machine learning technologies to their complaints handling systems and analysis to do so.

Organisational culture

The updated IDR framework strongly emphasises having the right governance arrangements and operational transparency in place, underpinned by a member-centric approach. From ASIC’s perspective, the way trustees approach IDR is an indicator of a superannuation fund’s culture. Having IDR procedures that are responsive and effective is one way trustees can prove that they are delivering for their members.

RG 271 reinforces that IDR remains the trustee’s responsibility. We expect top-down commitment from trustees to ensure clear lines of reporting and accountability for complaints handling and management of systemic issues. Boards should ensure that they are kept informed about IDR operations and any systemic issues, and that this is reflected in the organisation’s governance policies. Trustees should ensure they have clear accountabilities for IDR functions, including thresholds and processes for identifying and reporting systemic issues.

Trustees should also assess their existing IDR practices and integrate the standards set out in RG 271 into their organisational culture. ASIC believes that if good complaints handling is entrenched in an organisation’s culture, it becomes the default mindset of all employees and creates a sense of shared responsibility for the results. ASIC wants to see trustees and their service providers empowering their staff and supporting them to proactively identify and speak up about any potential systemic issues as they arise, rather than further along the complaints process.

Identifying and responding to systemic issues

Systemic issues and their consequences are another focus of RG 271. Complaints data can provide useful insights into what systems are or are not working in an organisation. RG 271 emphasises that firms should make a conscious effort to act on these insights. Section D of RG 271 sets standards for IDR procedures around identifying and managing systemic issues related to complaints.

Trustees should be aware that reviewing IDR procedures cannot be done in isolation. IDR procedures should be integrated with incident and risk management processes to ensure a superannuation fund’s complaints are reviewed to:

  • flag potential systemic issues
  • invoke actions to prevent and rectify actual systemic issues, and
  • report on the handling of flagged issues as part of complaints reporting

Identifying and addressing systemic issues early not only benefits members who complain — managing systemic issues identified from complaints is linked to reducing downstream remediation costs. ASIC expects staff to regularly analyse complaints datasets and to escalate any possible systemic issues to the appropriate areas for investigation. If an investigation confirms that a systemic issue exists, we expect trustees to identify impacted consumers and rectify the issue promptly. Staff should also provide complaints reports to senior management and board committees in a timely manner which cover any systemic issue investigations, including the actions that have been taken to resolve them.

Future IDR reporting

ASIC has recently sought further feedback on proposed requirements for internal dispute resolution data reporting provided for in the Treasury Laws Amendment (Putting Customers First—Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth). This reporting is intended to enhance transparency about IDR activity and performance across the financial services sector. These data reporting requirements will commence after 5 October 2021, however trustees should bear it in mind when preparing for the commencement of the RG 271 changes.

More details about this new data reporting can be found on ASIC’s website.[10]

Next steps and further work

The areas highlighted above offer an insight into areas of particular interest for ASIC with the new RG 271 standards. Realising the full benefit of these insights depends on the effectiveness of the end-to-end IDR processes trustees put in place.

ASIC encourages trustees to take an expansive approach to identifying, recording and responding to complaints, and to ensure fund staff are empowered and encouraged to do the same. IDR-related processes should be run efficiently, honestly and fairly — from the handling of complaints to managing identified systemic issues to internal reporting.

Trustees should engage with RG 271 early to ensure that they are fully compliant with the new standards by 5 October 2021. ASIC will check in with industry at various stages of implementation and assess whether its expectations about preparation are being met.

Jane Eccleston
Senior Executive Leader, Superannuation
Australian Securities and Investments Commission

 


[1] Australian Securities and Investments Commission, Regulatory Guide 271: Internal dispute resolution (July 2020).

[2] Australian Securities and Investments Commission, “20-171MR ASIC releases final updated guidance on complaints handling” media release (30 July 2020) , https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-171mr-asic-releases-final-updated-guidance-on-complaints-handling/.

[3] For example, RG 271.118 to RG 271.120 covers specific enforceable requirements for escalating, reporting and managing systemic issues identified through complaints.

[4] P McAlister “ASIC’s enforceable requirements and standards for internal dispute resolution” (2020) 32(4&5) SLB 79.

[5] Australian Securities and Investments Commission, Internal Dispute Resolution in Super — New Enforceable Requirements (RG 271) (2020), https://download.asic.gov.au/media/5888319/idrinsuper-roundtablehandouts.pdf.

[6] See Corporations Act 2001 (Cth), ss 994B(5)(g) and 994F(3) and (4) to be inserted under the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth), subject to commencement of the Design and Distribution Obligations regime on 5 October 2021.

[7] Above n 1, at RG 271.131–RG 271.140.

[8] Above n 1, at RG 271.142–RG 271.171 covers ASIC’s standards on Resourcing, Responsiveness and Objectivity and fairness.

[9] Above n 1, at RG 271.142–RG 271.150.

[10] Australian Securities and Investments Commission, “20-327MR ASIC seeks further feedback on internal dispute resolution data reporting requirements” media release (16 December 2020) https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-327mr-asic-seeks-further-feedback-on-internal-dispute-resolution-data-reporting-requirements.

Last updated: 06/04/2021 12:00