New regulatory guidance on internal dispute resolution (IDR)

On 16 February 2011, the Australian Securities and Investments Commission (ASIC) issued new regulatory guidance for financial institutions, including credit licensees, designed to make it easier to settle complaints or disputes internally with customers. 

The guidance, on IDR and external dispute resolution (EDR) procedures, applies to financial services licensees, credit licensees and some other financial services providers.

Simplification of the ‘final response’ requirement

The guidance makes provision for reduced paperwork obligations where credit and financial industry participants (eg. banks, credit unions, insurers, financial planners, stockbrokers, insurance brokers and mortgage brokers) resolve complaints or disputes quickly using IDR processes.  That means, complaints or disputes can be dealt with verbally, which will be useful where, for example, the complaint or dispute involves small amounts of money or is reasonably straightforward.

Where a customer has not requested a response in writing and the complaint or dispute is resolved to the customer’s complete satisfaction by the end of the fifth business day after the complaint or dispute is received, the requirement to provide a ‘final response’ (ie. a written response to a complaint or dispute setting out the final outcome at IDR, the right to take the complaint or dispute to EDR and the name and contact details of the relevant EDR scheme to which the complaint or dispute can be taken) will not be required.    

The exceptions to this are complaints or disputes relating to hardship, a declined insurance claim or the value of an insurance claim.  Those complaints or disputes will still require a ‘final response’.   

Similarly, when the complaint or dispute is not resolved to the customer’s complete satisfaction within the five business day period, customers must still be sent a ‘final response’.

Securitisation bodies

The guidance also sets out IDR and EDR procedures for customers who have loans from bodies which make or buy loans or leases and repackage and sell them to investors (ie. securitisation bodies).  

Securitisation bodies may be exempt from the requirement to hold a credit licence where:  

  • they enter into a servicing agreement with a registered person or credit licensee under which the registered person or credit licensee acts on their behalf; and

  • they are a member of an ASIC approved EDR scheme form 1 April 2011. 

You may have additional obligations where you are a registered person or credit licensee who acts on behalf of a securitisation body.  For example, you must notify ASIC when you enter into the servicing agreement, including providing details of the securitisation body you act for and the name of the EDR scheme that securitisation body belongs to, and also when you cease to be a party to the agreement.

Lavan Legal comment

Financial services licensees, credit licensees and others to which the IDR and EDR procedures apply, should determine what they need to do, and ensure they have in place adequate and documented arrangements, systems, processes and measures to comply, and demonstrate compliance, with those obligations and requirements. 

This should include a review of complaints or disputes handling systems and processes to ensure they are robust, adequate and enable complaints or disputes to be dealt with promptly, and otherwise, within the prescribed timeframes.

In all instances, we recommend you seek appropriate legal advice to cater to your specific circumstances.

For more information please contact Kylie O'Keeffe, Special Counsel on (08) 9288 6852 / kylie.okeeffe@lavanlegal.com.au.