Complaint handling is no longer being assessed purely on outcomes; it is being assessed on evidence.
Across recent ASIC reviews and AFCA systemic issue findings, a consistent theme has emerged: firms are resolving complaints, but cannot demonstrate how decisions were made. This is quickly becoming one of the most exposed compliance gaps under Regulatory Guide 271 (RG 271) and AFCA scrutiny.
The Core Failure: Lack of Structured Complaint Records
Most financial services firms have compliant complaint handling policies. They acknowledge complaints, investigate issues, and provide responses within required timeframes.
However, the failure is occurring within the complaint file itself.
Common breakdowns include:
- No documented investigation pathway (what was reviewed, by whom, and why)
- Absence of root cause analysis
- No clear linkage between facts identified and the decision outcome
- Inconsistent classification of complaint type or severity
- Missing evidence supporting remediation decisions
This creates a situation where a complaint may be resolved correctly, but is indefensible when reviewed by AFCA or ASIC.
Why This Matters: Evidence Is the Regulatory Standard
Under RG 271, firms are required to have a compliant internal dispute resolution (IDR) system, including structured, consistent investigation, decision-making, and complaint communication.
Critically, the expectation extends beyond process; firms must be able to demonstrate:
- How the complaint was investigated
- What factors were considered
- Why a particular outcome was reached
- Whether the response is consistent with similar complaints
At the same time, AFCA’s systemic issue reporting highlights that many complaint-handling failures stem from weak operational execution and documentation, rather than from a lack of policy frameworks.
The Emerging Risk: Complaints as Signals Being Ignored
A second, more structural issue is how firms treat complaints internally.
AFCA continues to highlight that many organisations treat complaints as isolated incidents, rather than as indicators of broader issues.
This results in:
- Missed systemic issues
- Repeated customer harm
- Delayed escalation to breach reporting
- Increased likelihood of regulatory intervention
Complaints are one of the primary inputs into identifying systemic issues under the regulatory framework, and failure to analyse them effectively undermines the entire compliance system.
What Regulators Are Actually Testing
ASIC and AFCA are increasingly focused on file-level evidence rather than high-level frameworks.
When reviewing complaint handling, regulators will assess:
- Whether the complaint file shows a clear investigation process
- Evidence supporting the firm’s conclusions
- The presence (or absence) of root cause analysis
- Consistency of decision-making across similar complaints
- Whether complaints were escalated appropriately
- Linkage between complaint outcomes and remediation
In many cases, regulatory intervention occurs not because the decision was wrong, but because the firm cannot demonstrate that it was right.
The Structural Problem: Complaints Are Not Designed as Evidence Files
Most complaint processes are designed to:
- Resolve the issue
- Communicate with the customer
They are not designed to create a defensible, auditable record.
Typical weaknesses include:
- Free-text investigation notes with no structure
- No mandatory documentation checkpoints
- Lack of standardised templates
- No requirement to document reasoning
- No linkage to systemic issue tracking
This results in complaint files that are operationally useful but regulatorily insufficient.
What Good Looks Like
Leading firms are shifting from complaint resolution to a discipline of complaint documentation.
Key elements include:
- Standardised complaint file templates with required fields
- Structured investigation logs (what was reviewed, when, and outcome)
- Mandatory root cause classification aligned to risk taxonomy
- Clear decision rationale linked to evidence
- Consistent categorisation and tagging of complaints
- Integration of complaint data into systemic issue monitoring
- Periodic file reviews to test documentation quality
Importantly, complaint files are treated as evidence documents, not service records.
AICS Perspective
From an AICS perspective, complaint-handling risk has materially shifted.
The issue is no longer whether firms are responding to complaints, but whether they can defend those responses under scrutiny.
Where complaint files lack structure, evidence, and traceability, firms expose themselves to:
- AFCA adverse determinations
- Breach reporting triggers
- Systemic issue escalation
- Regulatory challenge on governance effectiveness
Strong complaint outcomes without strong documentation no longer meet regulatory expectations.
The standard is clear:
“Complaint handling must be demonstrable, consistent, and defensible — not just operationally complete“.
Call To Action
If your complaint files do not clearly demonstrate how the outcomes were reached, they will not withstand regulatory review.
While many firms meet response timeframes, documentation often fails to evidence investigation pathways, reasoning, and consistency. Under RG 271 and AFCA scrutiny, complaints must be supported by structured, traceable, and defensible records.
AICS supports licensees in strengthening complaint-handling frameworks, ensuring that documentation reflects how decisions are made and can be justified under external review.
If you would like to assess the strength of your complaint documentation framework, click here to contact Cheyenne and the team, email [email protected] or call 07 3251 2481.
References
- Australian Securities and Investments Commission (ASIC), Regulatory Guide 271: Internal dispute resolution
View guide - Australian Securities and Investments Commission (ASIC), Report 802: Cause for complaint – Complaints handling in general insurance
View report PDF - Australian Financial Complaints Authority (AFCA), Systemic Issues Guidance
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