Regulatory Guide 271: Internal dispute resolution (RG 271), issued by the Australian Securities and Investments Commission (ASIC), outlines enforceable standards and requirements for financial firms’ Internal Dispute Resolution (IDR) systems and reporting obligations. This guide applies to Australian financial services licensees (AFSL), credit licensees (ACL) and other specified entities, mandating the timely and fair resolution of consumer complaints.
In October 2021, RG 271 became effective, featuring notable changes from the previous guidance, RG 165. Given the complexity and significance of these regulations, we outline the shifts in regulation and show how financial institutions can find expert advice to ensure compliance and effectively manage regulatory risks.
Understanding The Evolution of Internal Dispute Resolution (IDR) Frameworks
According to ASIC, consumers and small businesses should have access to fair, timely and effective dispute resolution as a component of the financial services consumer protection framework. IDR is a critical element of a firm’s relationship with its customers and is the primary mechanism for afflicted consumers to seek redress. RG 271 supports ASIC’s promotion of consumer protection in the Australian financial system by laying out requirements for financial institutions to handle complaints effectively.
RG 271 supersedes the former regulatory framework, RG 165. ASIC noted several shortcomings in RG 165, including a need for more vigorous enforcement, broader application and improved standards. RG 271 addresses the regulatory gaps in RG165, with core changes to the regulation including:
- Shortened resolution timeframes: RG 271 mandates faster resolution timeframes than RG 165. For instance, standard complaints now have a resolution period of 30 days (previously 45 days), and traditional trustee and superannuation complaints now have a resolution period of 45 days (previously 90 days).
- Enforceable provisions: Certain aspects of RG 271 are legally binding, meaning that if firms don’t adhere to requirements, ASIC can pursue civil action to ensure compliance. To give ASIC extended enforcement power, it created an IDR legislative instrument alongside RG 271.
- IDR Data reporting requirements: Firms must capture and report detailed data on their complaints management process twice yearly. The information must be presented to ASIC in a specific format, facilitating better oversight and the identification of systemic issues.
- Requirements for outsourcing IDR: Firms can outsource IDR to third-party providers but remain independently responsible for ensuring these providers uphold RG 271 regulations.
Non-compliance with RG 271 regulations could result in consequences for Australian financial institutions, including regulatory action from ASIC, potential fines and reputational damage. Further, failure to comply with standards may increase the risk of complaints elevated to the Australian Financial Complaints Authority (AFCA), potentially eroding consumer confidence.
The AFCA is an external dispute resolution body that aims to resolve unsettled disputes externally under Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267). An independent compliance expert like MIntegrity can help firms align with RG 271 requirements, mitigating the potential fallout of non-compliance or complaint elevation to the AFCA.
Core Components of RG 271
RG 271 is not exactly a “light read.” There are several components that Australian financial firms must comply with to align IDR practices and mitigate regulatory risk. We break them down below:
Timeframes and Enforceable Sections
RG 271 prescribes reduced maximum timeframes for financial institutions to respond to complaints. The maximum timeframe for most complaints is now 30 days, with certain exceptions granted if the complaint is complex and the firm submits an ‘IDR delayed notification.’
Timelines vary for complaints regarding:
- Certain types of credit.
- Superannuation death benefit distributions.
- Superannuation trustees.
- Traditional trustees.
Firms must review their IDR process to stay ahead of new variables and address inefficiencies.
Mandatory Reporting and Disclosures
Reporting complaints data to ASIC has become one of the most resource-consuming and critical tasks required by RG 271. Financial firms must collate IDR data as outlined by RG 271, present it in an RG 271-ordained format and submit it to ASIC twice annually.
However, many institutions do not always follow this process. In some cases, data is manipulated in these reports to tick the compliance box, which, when audited, doesn’t accurately reflect the firm’s complaints management process. These discrepancies are leading ASIC to take civil action.
To maintain compliance with new regulations, you must address IDR reporting at a systemic level, baking compliance into your process.
Systemic Issue Identification
Per ASIC, a systemic issue is “a matter that affects, or has the potential to affect, more than one consumer.”
To adhere to standards, businesses must:
- Regularly analyse complaint data to identify potential systemic issues.
- Set clear accountability for complaint handling.
- Encourage staff to escalate potential systemic issues they encounter in individual complaint handling.
- Escalate any potential systemic issues to the appropriate functions within the firm for investigation and prompt action.
- Conduct internal reports on the outcome of the investigation and actions taken.
ASIC further encourages firms to identify consumers previously impacted by systemic issues. The ultimate goal is to nip systemic problems in the bud and reduce complaint escalation to the AFCA. Tech solutions for simplified compliance can help identify procedural gaps so you can address them and achieve compliance fast.
Internal Resourcing and Staffing Needs
To meet RG 271 requirements, firms must have adequate staffing, empowerment, materials, training and funding to handle complaints effectively and within stipulated time frames.
This section is enforceable and may place additional strain on smaller firms or those with limited resourcing. However, regulatory compliance platforms can help firms overcome resourcing challenges by supporting staff handling complaints.
Written IDR Notices
If firms do not handle complaints by the end of the fifth business day following submission, they must provide a written IDR response to the complainant.
This must include:
- The outcomes of the complaint.
- Justification for the firm’s decision.
- The consumer’s right to escalate the matter to the AFCA and how to do so.
Even if a firm resolves a complaint by the end of the fifth business day, it must provide a written IDR response if the complainant requests one or if it concerns hardship, declined insurance claims, the value of an insurance claim or a superannuation trustee’s decision.
Acting in the Customer’s Best Interest
RG 271 outlines the principles ASIC expects to underpin a business’s internal dispute resolution process. These require a firm to enable complaints, demonstrate objectivity and fairness in resolving them, enact complaint management policies and gather data on complaint handling.
Making RG 271 Manageable
ASIC obliges firms to practice continuous improvement in complaint management. RG 271 compliance is not always straightforward, although it is necessary.
With its deep expertise in financial services regulation and extensive commercial experience, MIntegrity is well-positioned to help firms navigate these obligations. Our compliance assurance, regulatory reviews and independent expert services are designed to help financial institutions meet their regulatory requirements efficiently.
Stay compliant with RG 271. Contact MIntegrity for expert regulatory support.
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