Review of the Benchmarks for Industry-Based Customer Dispute Resolution Schemes

Draft

Executive Summary

Review of the
Benchmarks for
Industry-based
Customer Dispute Resolution Schemes

Final Report

July 2014

Commonwealth Consumer Affairs Advisory Council

© Commonwealth of Australia 2014

ISBN 978-1-925220-27-8

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Draft

Executive Summary

Mr Colin Neave AM
Chair of CCAAC
2014

Dear Minister,

The Commonwealth Consumer Affairs Advisory Council (CCAAC) is pleased to provide you with the review of the Benchmarks for Industrybased Customer Dispute Resolution Schemes document (the CDR Benchmarks).Industry-based customer dispute resolution schemesdeliversignificant benefits to both business and their customers, as they provide an alternative to litigation.This is the first review of the CDR Benchmarks since their establishment in 1997.

CCAAC would like to express its appreciation to the stakeholders that took the time to provide submissions and engage in consultations.This assisted in clarifying dispute resolution processes and addressing issues raised by stakeholders.

Overwhelmingly, stakeholders considered the CDR Benchmarks to be a valuable resource for industry and customers in Australia.The CDR Benchmarks remain highly relevant, and the principles are described as ‘immutable’ by a number of stakeholders.CCAAC suggests minor revisions to the CDR Benchmarks Principles, based on stakeholder feedback and consultation. CCAAC supports the revision and augmentation of the Key Practices to assist dispute resolution services to implement the Principles.Given the aspirational nature of the CDR Benchmarks, CCAAC considers that the CDR Benchmarks will not require further review for some time.However, the Key Practices supporting the CDR Benchmarks,if separated from the Principles, would allow revisions and updates as necessary.

I offer my thanks to, and acknowledge the expertise and commitment of, the CCAAC members contributing to this study.Mr Gordon Renouf led work on this inquiry, with support from the CCAAC Secretariat and contributions from other colleagues.

Yours sincerely,

Colin Neave
Chairman, Commonwealth Consumer Affairs Advisory Council

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Executive Summary

Executive Summary

The Benchmarks for Industrybased Customer Dispute Resolution Schemes document (CDR Benchmarks)was developed with the assistance of industry sector dispute resolution schemes, consumer groups, government and regulatory authorities in 1997.The CDR Benchmarks were produced in order to encourage and support the development of customer dispute resolution schemes, recognising that industry-based dispute resolution is an effective selfregulatory measure.Dispute resolution saves time and money for businesses and customers, and is an accessible and cost-effective alternative to the court system.

The CDR Benchmarksset out six benchmarks: Accessibility, Independence, Fairness, Accountability, Efficiency and Effectiveness. They outline a principle, purpose and list of key practices that support eachbenchmark.The CDR Benchmarks thereforeserve as a guide to effective practice for the industry sectors that have established schemes to resolve disputes between their industry members and individual customers. The CDR Benchmarksguide customers as to what they should expect from industry-based, external dispute resolution (EDR) schemes.

Since their inception, regulators in both Australia and New Zealand have referenced the CDR Benchmarks. In some industry sectors, providers are required to participate in a dispute resolution scheme. They are incorporated into theAustralian Securities and Investments Commission (ASIC) Regulatory Guide 139 for the financial sector, Approval and oversight of external dispute resolution schemes (ASIC RG 139).[1]The CDR Benchmarks are also referenced in telecommunications legislation[2]andare used by several industry-based EDR schemes including the Financial Ombudsman Service and the Telecommunication Industry Ombudsman.The Australian and New Zealand Ombudsman Association requires its members to observe the benchmarks.

The Commonwealth Consumer Affairs Advisory Council (CCAAC)was askedto review the CDR Benchmark’s document.CCAAC invited submissions and undertook consultations with relevant stakeholders.CCAAC considered the ongoing relevance and usefulness of the underlying principles, purposes and key practices for each benchmark; assessed whether the CDR Benchmarks act as a guide to effective practice for industry-based customer dispute resolution schemes; and considered whether the CDR Benchmarks could be modernised or enhanced, including through the development of further implementation guidance.

CCAAC considers that the CDR Benchmarks retain ongoing relevance for industry dispute resolution schemes across the economy.Overwhelmingly, stakeholders supported the CDR Benchmarks, considering them a valuable resource in customer dispute resolution and, therefore, in consumer policy more generally. The CDR Benchmarks were described as ‘immutable’ by a number of stakeholders, reflecting the usefulness of the standards. Further, the CDR Benchmarks have been an influential reference point for dispute resolution schemes, industry associations and governments. Appendix 1 provides an overview of the consultation process.

On the issue of sponsorship for the benchmarks, CCAAC proposes that the Commonwealth Minister with responsibility for competition and consumer policy should continue to sponsor the CDR Benchmarks. CCAAC is of the view that thiswillassist inensuring that allAustralian governments remain aware of the CDR Benchmarks, and that the CDR Benchmarks remain visible and useful to consumers.

CCAAC considers that the wording of the sixbenchmarks and their respective Principles and Purposes continue to capture the key standards for industry-based, external dispute resolution.However, CCAAC finds that the CDR Benchmarks would benefit from some modernisation.Consequently, CCAAC suggests some minor revisions and updates to some of the terminology, based on stakeholder comments, such as the change from ‘scheme’ to ‘office’, and ‘member’ to ‘participating organisation’.

CCAAC recommendsreconfiguring the CDR Benchmarks byseparating the Principles and Purposes from the Key Practices. The Principles and Purposes should be retained (with the minor changes recommended in this Report) as a stand-alone document. They are unlikely to require further review in the medium term.

The Key Practiceswill become a separate document. Theyshould be monitored and updated from time-to-time in line with changes in the community and technology as they emerge at the direction of the responsible Minister. CCAAC is of the view that stakeholder input and consultation is essential to such a process.

This separationwould more easily allow ASICRG 139 to play a guidance role in the financial service industry and the new Key Practices document to apply more generally to other industries.

CCAAC considered whether further guidance material should be developed to support the Principles and Purposes and Key Practices documents. CCAAC notes that stakeholders find the ASIC RG 139to be an excellent resource, and that itsuse of examples showing the practical application of the principles is beneficial for financial dispute resolution schemes. CCAAC recommends that schemes that areconsidering developing their own guidance material should similarly use examples to demonstrate the application of the CDR Benchmarks.

CCAAC considers that these actions willraise the profile of the CDRBenchmarks and affirm their role in national consumer policy. A summary of the findings is at Appendix 2.

Key Findings

1. The Principles and Purposes are strongly supported by stakeholders. They are an important set of standards for customer dispute resolution, and have achieved their original objectives.CCAAC is convinced of their ongoing relevance.
2. There is a need for some minor revisions to the CDR Benchmarks, in particular to reflect current community values such as ensuring access to customers with special needs and utilising advances in information and communication technology. See Appendix 3 for a copy of the revised Principles and Purposes, taking into account the recommendations made in this report.

–CCAAC finds that with these changes there will be no need to review the benchmarks themselves for some time.

–The benchmarks are currently supplemented by Key Practices. A considerable number of suggestions were made for amended or additional key practices.

1. CCAAC finds that a number of key practices should be updated and a number of new key practices should be added. Recommended revisions and additional practices areidentified under the relevant benchmark discussions below. A copy of the revised KeyPractices, taking into account the recommendations, is at Appendix4.
2. CCAAC finds that once these changes are made, the Key Practices should be separated from the CDR Benchmarks Principles and Purposes to become a living document that is amended from time-to-time to ensure that it is responsive to the community’s changing needs in relation to dispute resolution.

–The Key Practices could be revised and augmented from time-to-time in response to stakeholder feedback, at the discretion of the Minister.

–Stakeholders should be encouraged to write to CCAAC (), which will then report to the Commonwealth Minister responsible for competition and consumer affairs, to suggest revisions and updates to the Key Practices.

1. Active sponsorship would assist in further promotion of the benchmarks. The Commonwealth Minister responsible for competition and consumer policy should be the Minister responsible for the CDR Benchmarks.

–This could be leveraged by ensuring all governments in the consumer protection policy environment are aware of, and are connected to, the CDR Benchmarks.

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Executive Summary

The Commonwealth Consumer Affairs Advisory Council

CCAAC Terms of Reference

CCAAC is an expert advisory panel, which provides advice to the Commonwealth Minister responsible for competition and consumer policy.

CCAAC’s terms of reference are to:

•consider issues, reports and papers referred to it by the Minister and report to the Minister on their consumer policy implications, and in doing so take account of the need for wellfunctioning markets with confident consumers;

•identify emerging issues affecting Australian markets and consumers and draw these to the attention of the Minister; and

•when considering consumer policy issues, take account of their competition and other relevant economic implications.

Membership

The membership of CCAAC consists of:

•Mr Colin Neave AM (Chair);

•Ms Carolyn Bond AO;

•Professor Stephen Corones;

•Ms Lynda Edwards;

•Ms Deborah Healey;

•Mr Peter Kell;

•Mr Gordon Renouf;

•Dr Rhonda Smith; and

•Mr Ray Steinwall.

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Executive Summary

Review Terms of Reference

CCAAC was requested to review the Benchmarks for Industrybased Customer Dispute Resolution Schemes document (the Benchmarks Document).

For the review, CCAAC was requested to:

•review the current function and use of the Benchmarks Document;

•consider for each benchmark, the ongoing relevance and usefulness of the underlying principles, purposes and key practices;

•assess whether the Benchmarks Document is meeting the objective of acting as a guide to effective practice for the industry sectors with customer dispute resolution schemes; and

•consider how the Benchmarks Document could be modernised or enhanced, including through the development of implementation guidance.

CCAAC was requested to consider the views of interested stakeholders.

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Executive Summary

Contents

Executive summary

Key Findings

The Commonwealth Consumer Affairs Advisory Council

Review Terms of Reference

Glossary

Introduction

Overview of the CDR Benchmarks

Responsibility for the CDR Benchmarks

Industry-based customer dispute resolution schemes

Benefits and ongoing relevance of the CDR Benchmarks

Note on the scope of this review

Structure of this report

Review of the CDR Benchmarks

Broad comments

Key themes

Key areas of improvement

The Benchmarks

Accessibility

Independence

Fairness

Accountability

Efficiency

Effectiveness

Conclusion

References

Publications

Appendix 1 — Overview of the Consultation Process

Appendix 2 — Summary of Findings

Appendix 3 — Principles and Purposes

Appendix 4 — Key Practices

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Executive Summary

Glossary

ABA / Australian Bankers’ Association
ACA / Airline Consumer Advocate
ACL / Australian Consumer LawThe ACL is a cooperative reform of the Australian Government and the States and Territories, through CAF.
ADMA / Association for Data-driven Marketing and Advertising
ADR / Alternative Dispute Resolution.An umbrella term for processes, other than judicial determination, in which an impartial person assists those in a dispute to resolve the issues between them.
ANZOA / Australian and New Zealand Ombudsman Association.The peak body for ombudsmen in Australia and New Zealand.
ASIC / Australian Securities and Investments Commission.ASIC is Australia’s corporate, markets and financial services regulator, which administers the Australian Securities and Investments Commission Act (ASIC Act), and works to enforce the Corporations Act.
CAF / Consumer Affairs Forum, officially titled the Legislative and Governance Forum on Consumer Affairs. CAF's role is to consider consumer affairs and fair trading matters of national significance and, where possible, develop a consistent approach to those issues.
CALC / Consumer Action Law Centre
CCAAC / Commonwealth Consumer Affairs Advisory Council
CCLC / Consumer Credit Legal Centre (NSW)
CDR Benchmarks / The Benchmarks for Industry-based Customer Dispute Resolution Schemes (as published in 1997).
COSL / Credit Ombudsman Service Limited
EDR / External Dispute Resolution.Dispute resolution processes that are external to the business or organisation for which the complaint relates.
FOS / Financial Ombudsman Service
FPA / Financial Planning Association of Australia
Industry scheme / Any entity established by an industry to consider complaints made by that industry’s customers, including those that do not apply the Benchmarks’ principles and key practices.
ICA / Insurance Council of Australia
NFSF / National Financial Services Federation
QCA / Queensland Consumers Association
TIO / Telecommunications Industry Ombudsman

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Review of the CDR Benchmarks

Introduction

At the 6 July 2012 meeting of the Legislative and Governance Forum on Consumer Affairs (CAF)[3], Ministers agreed with the Commonwealth Minister for Competition and Consumer Policy that it was timely to review theBenchmarks for Industry-based Customer Dispute Resolution Schemes(CDR Benchmarks).Consultation was undertaken with key stakeholders in industry-based consumer dispute resolution schemes.

The Commonwealth Consumer Affairs Advisory Council (CCAAC) was subsequently issued with Terms of Reference to review the CDR Benchmarks.On 24 April 2013, CCAAC released an issues paper that invited responses from the public and stakeholders.
Twenty-ninesubmissions were received, with 27non-confidential submissions published on the CCAAC website.[4]

Overview of the CDR Benchmarks

The CDR Benchmarkswerefirst published in 1997. They were developed with the assistance of industry sector dispute resolution schemes, consumer groups, government and regulatory authorities. The purposes of the CDR Benchmarks were threefold:

1. To guide industry sectors seeking to set up a dispute resolution scheme for disputes that arise between their members and consumers;
2. For existing dispute resolution schemes, to provide objective guidance on practices to aim for in the operation of these schemes; and
3. To guide the expectations of consumers about the dispute resolution schemes.

The CDR Benchmarks were initiallydesigned to apply to national, industry-based customer dispute resolution schemes, including the banking, telecommunications and insurance industries, on an economy-wide basis. However, they can also apply to state or territory based industry or non-industry schemes.[5] The CDR Benchmarks apply on a voluntary basis.

Since 1997, the CDR Benchmarks have been an important standard in guiding effective practice for consumer dispute resolution. For example,the CDR Benchmarks have proven effective principles for schemes, including the adoption of the CDR Benchmarks in both Australian and New Zealand regulations for the approval of external dispute resolution schemes,[6]the significant number of resolved disputes reported by a variety of external dispute resolution (EDR) schemes, and stakeholder feedback received for this review.

Responsibility for the CDR Benchmarks

TheCDR Benchmarks were first developed by the then Department of Industry, Science and Tourism. Existing dispute resolution schemes, consumer groups, governments and regulatory agencies informed their development.

A number of the stakeholder submissions reflected concerns about the current ambiguity onwhere responsibility for the CDR Benchmarks lies andconflicting views aboutwhere responsibility for them should rest.Some stakeholders advocated for the CDR Benchmarks to become an Australian Standard, akin to the Australian Standard on Complaints Handling[7],which is now an International Standard.However, others were concerned that a dispute resolution standard would be too prescriptive and lack flexibility – particularly as updates would become more bureaucratic and complicated.In addition, access to such astandard would entail a cost that is likely to be prohibitive to consumers.