Karen Chester (left) and Sean Graham

A year after indicating it would take a hands-off approach to monitoring remediation, the corporate regulator now says the industry needs to do better at delivering compensation programs fairly otherwise it may need to step in.

ASIC released the 94-page RG277: Consumer remediation as well as an 18-page supporting document Making it right: How to run a consumer-centred remediation this time last year, putting the onus on financial services and credit licensees to pursue fair and timely remediations.

The regulator wanted to take a hands-off approach, citing the prioritising of resources to larger scale remediation programmes. But it has now arguably changed its tune.

“Going forward, while ASIC will generally not oversee remediation programs, we will consider regulatory action where licensees fail to deliver fair and timely remediation to affected consumers,” ASIC deputy chair Karen Chester said in a media release on Tuesday.

Assured Support managing director Sean Graham tells Professional Planner some licensees may have over-complicated the process by trying to seek absolute certainty instead of following the principles of acting with a “reasonable level of certainty”.

“That latest release will give them a lot of heart because it’s saying… ‘we just want to make sure you’re acting in a manner consistent with the principles we’ve outlined’,” Graham says.

“I don’t think anyone could dispute the underlying principle – it’s not the principle itself, it’s the practical implementation and how it’s operationalised.”

Work in progress

While timeliness was a key issue coming out of the review, ASIC noted several other areas licensees need to improve, including remediation processes, as well as the amount of compensation affected customers are due.

While the regulatory guide dictated the remediation review period should begin when the licensee “reasonably suspects the misconduct or failure first occurred” and caused consumer loss, ASIC believed some of the policies it reviewed could inappropriately narrow the scope of remediation review period by including unnecessary approval processes in order for review periods to exceed a certain number of years.

The review found that licensees didn’t consider beneficial assumptions – where licensees are given flexible to make assumptions beneficial to consumers to address knowledge gaps – to improve to the timeliness of remediations.

When it came to foregone returns or interest, ASIC found some licenses had pre-determined rates for specific products or scenarios where it was not always clear these were subject to review and fit for varying circumstances.

The review found some licensees did not take reasonable steps to contact affected consumers, whether it was due to a prescriptive approach or a pre-defined number of contact attempts.

Graham says the outcome of the review isn’t surprising because licensees have struggled to understand when a remediation program should commence.