Banks have quietly removed the ability of borrowers to appeal adverse decisions to internal customer advocates, because they fear running out of time to decide claims under new rules brought in by the corporate regulator.
Previously, people who complained to their bank were referred to an internal dispute resolution team, and if they were unsuccessful could appeal to a “customer advocate”.
Many banks hired customer advocates to deal with waves of unhappy clients ahead of the 2018 banking royal commission. An industry-wide set of guidelines requires them to have the power to deal with complaints.
But the removal of their appeal role leaves advocates at many banks with a largely advisory position and could result in more complaints going to the independent Australian Financial Complaints Authority (Afca), which can take longer to resolve.
The Australian Banking Association may need to revise its guidelines on advocates, which currently state they should provide “another internal avenue from complaints handling decisions”.
“The ABA raised its concerns and opposition to Asic [the Australian Securities and Investments Commission] requiring a 30-day timeframe for internal dispute resolution because of its impact on the important role consumer advocates play, however it made its decision,” an ABA spokesperson said.
“To meet the new requirements, ABA member banks are updating their policies and communications in preparation.”
ANZ on Thursday became the last of the big four banks to remove the right of appeal to its customer advocate, Jo McKinstray.
In an email to home loan customers, ANZ said: “The consumer lending terms and conditions are being updated to remove the customer advocate as a review option if you make a complaint or have a dispute with ANZ and are not satisfied with our resolution of your complaint.”
The change is effective from the start of October, when new rules reducing the amount of time banks have to decide customer complaints also come into effect.
Guidelines issued by Asic last year mean that from 1 October, the time banks have to resolve most internal complaints will be cut from 45 days to 30.
The new guidelines do not ban internal appeals to customer advocates but do not give banks any extra time to finalise them.
“The function was in the process of evolving across the industry, including at ANZ, to have a more strategic focus,” an ANZ spokesperson said. The new guidelines “simply brought forward our decision to change our model”.
ANZ has beefed up its internal complaints division and the customer advocate will now “focus more broadly on supporting fair outcomes across the overall complaints process and in other forums where sensitive customer decisions are made” as well as contributing to overall strategy.
Westpac and the Commonwealth Bank removed the appeal role late last year while NAB scrapped it in April 2020 – before Asic reduced the time allowed to resolve complaints but after the regulator signalled it wanted to do so by issuing a consultation paper.
Michelle Ward, the head of the customer advocate’s office at NAB, said its advocate, Catherine Wolthuizen, was “now proactively engaged by complaint management teams, to provide advice and guidance on complex matters including where there are vulnerable customers involved”.
Ward said Wolthuizen was now involved in resolving four times as many complaints as previously, and also “continues to conduct thematic reviews of closed complaints to identify and provide recommendations to NAB on how to improve customer outcomes”.
As a result of the new Asic rules, if customers are unhappy with a bank’s internal review they will now need to apply to Afca, which was set up following the royal commission.
Once accepted by Afca, a bank has 21 days to respond to a complaint, and a ruling in a simple case can take an additional six weeks. It can take as long as three months to get a ruling in a complex case. Asic has been approached for comment.