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ASIC laments licensee ‘lag and drag’ after $5.6 billion client remediation bill
ASIC has delivered a stinging rebuke to licensees alongside the release of its guide on consumer remediation, with deputy chair Karen Chester blaming the industry’s lack of investment in adequate systems as being at the heart of a remediation effort totalling $5.6 billion dollars.
ASIC is still monitoring a total of 36 remediation activities across superannuation, advice, credit and banking and insurance, with $3.25 billion paid or offered to over 3.4 million consumers at June this year. A further estimated $1.6 billion is yet to be returned to around 2.7 million consumers.
While licensees weren’t the only target of the regulator’s ire, they were at the front of the firing line. Licensees “must do better”, Chester (pictured) stated in a release, at identifying and remediating problems at an early stage to avoid the expensive “lag and drag” of remediation.
“The common stumbling block we have seen across remediations is underinvestment in systems,” she said. “This underinvestment has led to a trifecta of failures. First and foremost, in delivering on promises to consumers, second in identifying the failures and third in being able to remediate consumer loss in a timely way.’
Capping a series of comments highlighting the regulator’s frustration with the licensee sector, Chester said ASIC shouldn’t be spending so much time and energy making sure licensees repay clients who have been disadvantaged by issues like fees-for-no-service.
“To date ASIC has needed to oversee large scale remediations to ensure affected consumers were treated fairly and received the compensation they were entitled to,” Chester stated. “Going forward, while ASIC may need to intervene in some isolated cases, we cannot and should not oversee remediations in order for consumers to receive fair and timely outcomes.”
Those large scale remediations have centred on two main programs in the past six years; fees-for-no-service misconduct or non-compliant advice, which has seen $3.6 billion paid or offered in compensation to over 1.4 million consumers, as well as remediations in the insurance industry worth $1.3 billion.
Expanded guidance
With the Hayne Royal Commission in the rear-view mirror and its recommendations fully implemented bar the Levy Review, the regulator has sought to provide a thorough, overarching framework to the remediation process.
The new guide, RG277 Consumer remediation, also comes with an update to ASIC’s existing “best practice field guide” Making it right: How to run a consumer centred remediation.
The guide, ASIC advises, gives licensees more scope to allow licensees to tailor remediation programs so they better suit the consumer. It includes nine principals for conducting a remediation including examples to assist their application, assistance on the assumptions licensees can use and a guidance on several other facets of the remediation process.
“The release of our expanded guidance, along with the updated Making it right field guide, delivers licensees all they need to achieve the right remediation outcomes on their own,” Chester stated. “It explicitly allows the use of assumptions to help firms address knowledge gaps and accelerate remediation programs in a way that does not disadvantage consumers.”
