Trustee preparedness for IDR requirements lacking: ASIC

A survey by the Australian Securities and Investments Commission (ASIC) of registrable superannuation entities (RSE) about their preparedness for the new enforceable internal dispute resolution (IDR) obligations has identified five areas requiring further work.

Following the survey, ASIC engaged with individual trustees to understand in more detail the steps taken in their preparation to assist trustees with their preparations for Regulatory Guide 271 Internal dispute resolution (RG 271).

RG 271 established new standards and requirements for how all financial firms would need to deal with consumer complaints from 5 October, 2021.

ASIC said despite many trustees taking significant steps to uplift their handling of consumer complaints in the lead up to the new requirements, it identified some important areas that required additional effort:

• Attention to governance arrangements;
• Application of the expanded definition of ‘complaint’;
• Implementation of the new maximum timeframes for IDR responses;
• Identification, ownership and reporting of systemic issues; and
• Data capture and integration.

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Governance

ASIC said at the time of the survey, 29% of the trustees surveyed had not briefed their boards on their obligations under RG 271.

“This raises concerns about whether the enforceable requirements are being sufficiently prioritised,” ASIC said.

“Many superannuation funds are likely to require significant changes and investment to comply with the new requirements. ASIC has noticed variability across trustees in the extent to which they are consumer-focused. Trustees need to put their members first when it comes to handling complaints. This requires them to understand the full nature of the issue raised by the member, and the root cause of any problems identified. This is a cultural shift away from looking at complaints through a risk or compliance lens.

“While it is common practice for trustees to outsource administration of their fund's IDR process, the obligation to meet the IDR requirements is that of the trustee’s. Trustees should consider whether they are satisfied with how their service provider will comply with RG 271 and ensure that they are extracting the learnings and data that will help them focus on their members’ interests. Trustees should carry out regular and ongoing quality assurance IDR process, including whether complaint outcomes are fair.”

Expanded definition of ‘complaint’

ASIC said RG 271 adopted the Standards Australia definition of ‘complaint’, which encompassed objections to death benefit distributions, which were previously not treated as complaints by all trustees.

“It is important that trustees fully integrate objections into their fund’s IDR processes, data collection and complaints reporting,” ASIC said.

Response timeframes

ASIC’s survey found that some trustees had already introduced a triaging mechanism and/or new processes to improve compliance with the new timeframes for IDR responses, which ASIC said was a positive.

“In preparing for the new timeframes, trustees should consider whether there are barriers or risks across their business or in outsourcing arrangements and take steps to address these issues; these may include IT system constraints, resourcing or delegations,” ASIC said.

Systemic issues

ASIC said compared to the other new IDR requirements, trustee preparedness for systemic issue identification, ownership and reporting was not as advanced.

“Trustees should be able to clearly define and communicate what a systemic issue is, the role different staff will play in identifying, escalating and managing systemic issues, and how they will be reported,” ASIC said.

Data capture

ASIC said many surveyed trustees appear to be using different IT systems to record complaints information across various operational areas.

“Trustees should consider how data from each system can be integrated or extracted to give a holistic view of complaints handling and to support the identification of systemic issues,” ASIC said.

“Trustees will benefit from keeping in mind the new IDR data reporting requirements as they prepare for the RG 271 changes.”