Banks and other financial services and credit licensees should give consumer the benefit of the doubt when carrying out remediation, according to draft guidance issued by ASIC.
The regulator has released a consultation paper setting out draft guidance for customer remediation. When the guidance is implemented, it will cover all credit licensees, financial services licensees and retirement savings account providers.
ASIC wants credit and financial services companies to take a quicker and more proactive approach to customer remediation
ASIC deputy chair Karen Chester said in a statement: “We want our new guidance to help firms remediate with greater confidence and speed. Licensees must do better at identifying and remediating problems earlier.”
Chester said the regulator was monitoring 64 remediations that will see the return of about A$5.4 billion to more than 5.6 million consumers, and on top of that there are other remediations proceeding without its involvement.
She said a common stumbling block was underinvestment in systems, leading to “multiple failures”, including not delivering on promises to consumers, not identifying the failures involved and not being able to remediate consumer loss quickly enough.
The draft guidance says licensees must have adequate systems and processes in place to ensure misconduct or other failings are identified when they occur, and to protect and compensate customers for the loss suffered.
Failure to have adequate systems may be a breach of the Corporations Act.
Quick and effective remediation will be a key indicator of whether a licensee is meeting its licensing obligations.
The draft guide defines when remediation is required, such as contractual failure, negligence or breach of financial services or credit law.
ASIC said one of the key principles for conducting a remediation is to give consumers the benefit of the doubt.
“In some remediations, in order to save time and program costs, remediate more efficiently or make up for absent records, licensees may consider using assumptions that are beneficial for consumers,” the draft says.
Other key principles include ensuring decisions are justified and documented, making the processing easy for consumers, adequately resourcing remediation program and returning all affected customers as closely as possible to the position they would have otherwise been in had the misconduct not occurred.