The Commerce Commission (Commission) recently published draft consumer remediation guidance for businesses (see here) which outlines how businesses should consider fixing issues for consumers if they think issues within the business are likely to have breached laws that the Commission is responsible for (excluding cartel conduct which has separate guidance).
As has occurred in Australia, this type of guidance from regulators becomes highly influential for any business engaging in large scale remediation, and ultimately sets expectations. This is an important opportunity for businesses to provide feedback, especially the steps that are required to meet the guidance.
No one-size-fits-all-approach
The Commission has, appropriately in our view, chosen a principle-based approach so businesses can scale up or down depending on the unique consumer remediation situation they face. However, there are a number of onerous requirements contained in the guidance, which may make large scale remediations even more complex.
Of note are the following points:
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Approaching remediation: The process should not be treated as a distraction from core business activities. It should be:
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comprehensive - in that it identifies all affected consumers as far back as possible and understands all root causes;
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initiated promptly - businesses should not wait for an issue to become widespread before taking action;
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fair - by being genuinely consumer-focused and compensating any harm or loss; and
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transparent - the remediation should be well-documented and clearly explained to consumers.
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Calculating compensation: A fair, equitable and transparent path should be taken. Compensation should reflect the consumer's individual circumstances, seeking further information from consumers to fill gaps, using "beneficial assumptions" that favour over-compensation where consumer loss cannot be precisely quantified and, where appropriate, paying consumers use-of-money interest or compensation for lost investment returns. This approach is consistent with the approach taken by the Australian courts.
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Time-barred claims: The guidance cautions against taking a legalistic route to consumer entitlements such as limitation periods, instead stating a preference for consumers' losses to be remedied irrespective of any limitation periods.
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Engaging with consumers: Businesses should make all reasonable attempts to engage with consumers by following a communications strategy, providing an option for consumers to self-identify (like a landing page), using all available contact methods, and using any other methods for locating consumers that the business typically uses (even if those methods incur costs). Businesses should strive to provide clear, plain language and well-timed communications which should always be captured in writing. Those communications should cover what the potential breach was and how remediation was calculated.
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Governance: The guidance calls for businesses to consider implementing appropriate governance structures with sufficient senior oversight, including independent assurance for large consumer remediation programmes.
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Record keeping: Businesses should take adequate records throughout the remediation process. This includes documentation of steps being taken, governance arrangements, external advice taken, progress against timeframes, assessment of remediation quantum and communications with consumers.
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What happens if consumers cannot be identified: Businesses who cannot identify all consumers should ensure they do not profit from potential breaches and have an avenue for providing any excess money to charity or providing it to Inland Revenue as unclaimed money. As tends to occur in practice, the Commission's view is that businesses will need to remediate any consumer who comes forward later and requests compensation even if this step has been taken, provided the consumer cannot recover it from Inland Revenue.
Benefits of following the guidance
Proactively identifying issues and carrying out a full remediation programme in accordance with the guidance is factored into the level of enforcement response chosen by the Commission. This may well be the best approach to avoid proceedings. However, it is worth remembering that remediation is one of a number of factors considered by the Commission and it may still take enforcement action. Therefore, taking proactive steps to avoid issues arising in the first place should always be a business priority.
Making submissions
The Commission seeks feedback on whether the guidance is "meaningful, helpful and produces the right outcomes for consumers". Businesses should note the submission deadline is 22 September 2022. Responses, feedback and comments can be sent by email to [email protected].
If you would like any assistance understanding the implications for your business of this draft guidance, please contact one of the authors below.