A systemic issue is one that has been raised in a complaint or several complaints or is otherwise identified by information obtained by, or provided to, AFCA that is likely to affect a class of persons beyond any person who lodged a complaint or raised a concern. Several complaints of the same type or a single complaint may raise a systemic issue, provided that the effect of the issue may clearly extend beyond a single Complainant.
Examples of systemic issues:
- A disclosure document that is inadequate
- A documented procedure that does not comply with legal requirements, for example, it permits privacy requirements to be breached
- A repeated complaint of certain type which highlights a procedural weakness that is liable to recur
- Receipt of several new complaints about the same issue
- Where the issue that affected the parties to the complaint could have affected others in a similar way
- Where the Complainant claims the issue affected others in a similar way
AFCA will investigate potential systemic issues. In doing so, it:
- refer the issue to the relevant Financial Firm for remedial action
- can require the Financial Firm to provide any information and documents AFCA considers necessary to investigate the issue.
- it refers to the issues to the relevant Financial Firm for a response and reports the issues to the relevant regulator or ASIC
What is the impact?
In accordance with the Corporations Act, the Privacy Act and any other relevant obligations, after identifying a systemic issue AFCA must report the issue to:
- the Australian Prudential Regulation Authority.
- the Commissioner of Taxation.
- the Office of the Australian Information Commissioner; or
- any other appropriate body.
Foundation necessary to address Systemic issues
AFCA’s purpose is to provide fair, independent, and effective solutions for financial disputes. It does this not only by providing fair dispute resolution services but also by working with financial firms to improve their processes and drive up industry standards of service, thereby minimizing disputes.
In addition to providing solutions for financial disputes, AFCA has responsibilities to identify, resolve and report on systemic issues and to notify the Australian Securities and Investments Commission (ASIC), and other regulators, of serious contraventions of the law. An ideal scenario for firms would be to reduce the number of customer complaints that arise in the first place and, from that, the number that proceeds to AFCA. But this is not enough.
The drivers of the root cause can usually be traced to one of two things; either a firm has failed to react to a known issue which led to customer detriment or failed to detect an issue which led to a detriment. Either way, the outcome is often the same – both in terms of regulatory impact and the wider costs involved, including reputational damage and loss of consumer trust.
It is essential to have sufficiently granular management information on the complaint caseload and to be able to conduct root cause analysis to identify whether there are systemic issues that need to be addressed. From such regular reviews, it becomes possible to consider whether there are mitigations that can be put in place.
To ensure there are no systemic issues, the right foundation needs to be in place. The majority of firms believe their complaint management is more tactical than strategic in nature, and that they gather information more effectively than they use it. A key challenge, therefore, is to see the big, strategic picture from your analysis and actually act on what it is telling you.