The compensation banks and other financial institutions will pay as a result of their wrongdoing towards customers will reach $7.2bn, the corporate regulator says.
The deputy chair of the Australian Securities and Investments Commission, Karen Chester, said the regulator wanted to stop its hands-on involvement in remediation schemes – a program that’s been under way since the mid-2010s, when widespread misconduct in the sector was first uncovered.
The regulator launched a new regulatory guide for remediation programs on Tuesday that Chester said she hoped “draws a line in the sand” for Asic.
“We don’t want oversighting remediation to be core business for Asic going forward,” she said.
Chester said by using the guidelines, financial services companies would be “able to get on with remediations in a decisive and confident way themselves and getting it done fairly, honestly and efficiently”.
“That’s not to say there may be some isolated cases where we may still need to oversight a remediation, but that should not be the default.”
Asic estimates that total remediation already paid has reached $5.6bn, paid to about 7 million customers, with a further $1.6bn due to 2.7 million customers.
Remediation schemes Asic has overseen include compensating victims of fee-for-no-service ripoffs in which banks and other institutions charged people for financial services such as advice that they never received, and people who bought junk insurance that was not able to be used and was sold using high-pressure tactics.
The 2018 banking royal commission also exposed practices such as charging fees to dead people.
Chester said Asic was continuing to keep a close eye on remediation programs under way at general insurers over failing to honour promises of premium discounts that have so far cost the sector more than $800m, according the Australian Financial Review.
Asic called on insurers to review their pricing practices last year after launching federal court action accusing one of the industry’s biggest players, IAG, of misleading and deceptive conduct over home and car policies. The case is set to go to trial next April.
At the time, IAG said it had already remediated 80% of affected customers and “apologises for this failure, recognises the significance and that this was unacceptable, and is putting this right for its customers as soon as possible”.
She said company boards now understood it was in their interests to act quickly to put customers back in the position they would have been but for corporate misconduct.
“Because if the last six years tells us anything, it is if you find a problem and you don’t deal with it quickly, it’s going to cost a lot more,” she said.
“We all acknowledge boards had a wake up call with the royal commission. But boards have equally had a wake up call that remediation costs a lot more if they don’t get it done early.
“I think most firms now realise that taking a narrow, slow route to dealing with remediation once they’ve uncovered a failure is a thing of the past.”
With scams running rampant, Asic is also encouraging companies to automatically pay their victims, rather than asking them to respond to a request to participate in a remediation program.
“Our guide also encourages firms to default to automatic payments wherever possible to secure the best return rate on remediation money getting to the wronged consumers, and in a way less likely for consumers to think they’re falling prey to a scam,” she said.
The chief executive of the Consumer Action Law Centre, Gerard Brody, welcomed Asic’s new guidelines.
“Asic has listened to our calls to put the onus on industry to get on with fair and timely remediations – returning the money they owe to wronged customers – and this is good news,” he said.
“Businesses that are not regulated by Asic, such as telcos or even car companies, should also apply these best practice principles when required to conduct remediation.”
