In late 2021, ASIC released Consultation Paper 350 which is a draft regulation guide dealing with consumer remediation (CP 350) (and can be found here)

Comments on CP 350 close on February 11, 2022.

2021 saw a raft of changes in legislation – all of which were designed to ensure that:

1. the right products are sold the to the right consumer (the design and distribution obligations)
2. if there is a complaint by a consumer, it is identified and dealt with promptly, and that systemic issues are identified (IDR – RG271)
3. when things do go wrong, breaches are investigated and reported as required (changes to breach reporting)

Arguably, there was a part missing – and that is what ASIC’s expectations are when remediating consumers.

To solve for this gap, ASIC has released CP 350 which is a draft regulation guide dealing with consumer remediation.

CP 350 comes after ASIC previously released CP 335 in December 2020 which also dealt with consumer remediation but did not include a draft regulatory guide.

What is ASIC proposing in CP 350?

CP 350 proposes to replace current RG 256 which applies only to AFSL holders who provide personal advice to retail clients with a new RG which will apply to all AFSL holders, ACL holders and retirement savings account providers.

The main changes CP 350 proposes to make to RG 256 are summarised below.

1. Expanded guidance on the threshold for identifying misconduct and other conduct that gives rise to remediation.
2. Removal of the ‘7 year anchor’ – meaning that licensees should not limit remediation to incidents that occurred no more than 7 years ago, Licensees will be expected to remediate from the time period when the misconduct commenced.
3. New guidance about how assumptions can be used, and a requirement that assumptions be beneficial to consumers.
4. Clarification about the various approaches to calculating foregone returns or interest.
5. Addition of material dealing with ASIC’s expectations when it comes to using reasonable endeavours to make remediation payments.
6. A reduced low compensation threshold of $5 (reduced from $20).
7. Expectations about resourcing of remediation projects and the consequences if a remediation is not resourced appropriately (including this being a breach of a licensee’s general conduct obligations).
8. New guidance on actions that should be taken if a consumer cannot be contacted, including when unclaimed money regimes are not available.
9. Guidance on other remediation outcomes that licensees will need to take into account including tax consequences, staying of proceedings, waived limitation periods and the use of deeds of settlement.
10. Guidance on ASIC’s role in remediation and the actions and tools that ASIC may consider using.

CP 350 includes a number of new examples, including what ASIC refer to as ‘product neutral’ examples.

What should you do – it’s time to have your say

CP 350 is significantly more comprehensive than RG 256, however, it does not include as many credit examples (responsible lending and broker best interest duty) as would be helpful. These matters are complex, and remediation can be difficult, including ascertaining when remediation is even needed.

Further, as CP 350 is designed to apply across the entire financial services and credit industry, there is a lack of clarity around how licensees of different sizes are meant to resource a remediation project without being in breach of their general conduct obligations.

Given the importance of consumer remediation, licensees should review CP 350 and make a submission to ASIC before the guidance is issued in final form.
In terms of consumer remediation more generally, it is also worthwhile referring back to ASIC’s document ‘Making it right: How to run a consumer-centred remediation’.