It's been a little over five years since the banking royal commission delivered its bombshell report – a withering account of just how poorly banks had been treating many of their customers.

Officially known as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – and sometimes called the Hayne royal commission in reference to commissioner Kenneth Hayne – the revelations were meant to shake the foundations and change the culture of the industry.

And it wasn't hard to see why that needed to happen. The findings implicated many major banks and included things like this:

• Commonwealth Bank (CBA) admitted that it relied heavily on mortgage brokers to vet the creditworthiness of its home loan customers – verification that was minimal.
• ANZ admitted that it didn't verify a customer's living expenses when it processed a loan through a mortgage broker, but relied on a vague "household expenditure measure".
• NAB had an "introducer program" that incentivised gym owners to sign customers up for a home loan in exchange for 0.4% of the loan value (equivalent to $1800 on a $450,000 loan).
• CBA was found to have drastically raised the credit card limit on a customer it knew had a serious gambling problem.
• There was widespread flogging of credit protection insurance, which is meant to cover you if you fall ill or lose your job and can't pay off your credit card debt – but it's junk insurance that is overpriced and often useless once the terms and conditions are factored in.
• The fees-for-no-service scandal, which involved six of Australia's largest financial institutions charging customers for financial advice that was never delivered. (They ended up paying billions in remediation.)

These kinds of practices had serious consequences. For instance, about $50 million worth of NAB home loans where borrowers were having trouble making repayments were linked to their "introducer program".

Financial Accountability Regime

Back in October 2021, CHOICE published the results of our national survey that made one thing clear: Australians think top bank executives should be held accountable for a bank's misdeeds.

Nine in 10 Australians (90%) said finance executives should be subject to personal fines when the institutions they manage break the law, and only 15% said they trust executives to treat their customers fairly.

This banking royal commission recommendation took a long time to see the light of day, but the Financial Accountability Regime is set to become a reality in the banking sector on 15 March this year, and for insurance companies and superannuation funds on 15 March 2025.

Nine in 10 Australians said finance executives should be subject to personal fines when the institutions they manage break the law

According to ASIC, this regime "imposes a strengthened responsibility and accountability framework for entities in the banking, insurance and superannuation industries and their directors and senior executives".

Big wins backed by CHOICE

A number of key recommendations from the royal commission's final report have already been taken on board by industry and have given us stronger protections against what banks can get up to.

Among those that are now enshrined in law are three reforms that came off the back of major CHOICE investigations and long-running campaign priorities.

• Mortgage broker best interest duty: Until early 2020, mortgage brokers were only required to recommend loans that were "not unsuitable". Now they are legally obligated to give you guidance that is in your best interests according to your financial circumstances.
• Unfair contracts law extended to insurance: Insurers now have to think twice before peppering your policy document with terms that are far too open to interpretation when it comes to making a claim. In general, a contract term can be ruled unfair if it unduly favours one party in the contract over the other.
• ASIC regulation of funeral insurance: Expenses-only funeral funds would probably top the list of dodgy funeral-related financial products. They're marketed especially to First Nations communities, many of which have suffered as a consequence. You generally pay far more in premiums than you'll ever get back to cover funeral expenses. And in the case of funeral insurance provider Youpla, the whole thing turned out to be a sham. It was high time that this predatory industry fell under the jurisdiction of ASIC.

Car dealers have long tried to get customers to buy extra insurance for things like tyre and rim damage – so called 'add-on' insurance.

Other significant royal commission wins

Deferred sales for add-on insurance

Another outcome of the royal commission, which took effect in October 2021, was the imposition of a four-day waiting period before a retailer can try to sell you add-on insurance. Car sales are the classic example, with salespeople trying to get customers to buy extra insurance for things like tyre and rim damage, or to cover them in case they can't keep up with their car finance payments. 

The royal commission found lots of problems in the add-on insurance market, including misleading sales tactics and the fact the insurance products were poor value for money with a history of poor claims outcomes.

Compensation Scheme of Last Resort (CSLR)

Perhaps the biggest consumer win to come out of the royal banking commission was a scheme to cover people who've been awarded compensation by the Australian Financial Complaints Authority (AFCA) or its predecessor the Financial Ombudsman Service but never received it because the firm in question had gone bankrupt.

Perhaps the biggest consumer win to come out of the royal commission was a scheme to cover people who've been awarded compensation by AFCA but never received it

The scheme came into effect in June 2023, but it's far from perfect. Compensation is capped at $150,000 per case no matter how much you lost, and the CSLR doesn't cover failed managed investment schemes, an area where many collapses have occurred and left financial devastation in their wake.

Recommendations that were rejected

Not all of the royal commission's recommendations were taken on board, however.

The call to end weak self-regulation through industry codes that can be breached with no consequences, for instance, was not heeded.

And the recommended removal of the point-of-sale exemption for unlicensed credit providers is still a work in progress, which is why retailers such as Harvey Norman and Apple are able to flog Latitude Finance credit card offers when you head to the counter to make a purchase.

Putting a spotlight on the wrongdoing didn't end it. It would be a stretch to say the culture of the Australian financial services industry has really changed

It's also necessary to point out that putting a spotlight on the wrongdoing didn't end it. It would be a stretch to say the culture of the Australian financial services industry has really changed.

But in the end the Herculean undertakings of the banking royal commission has resulted in some fundamental improvements to the ways financial service providers treat their customers – a good thing for Australian consumers.

Stock images: Getty, unless otherwise stated.

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