ASIC's new rules

New ASIC regulations that make it simpler to switch between banks and limit the length of PDSs may mean more favourable outcomes for consumers.
 
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01.A fairer financial sector

New ASIC rules

Along with ASIC’s more far-reaching efforts, new rules were added to the books in 2012 to:

  • tackle the fine print on simple investment schemes
  • clamp down on misleading advertising, and
  • force banks to make it easier for consumers to switch to a competitor.

And as part of ASIC’s ongoing push for greater transparency, the regulator has imposed tougher disclosure rules on complicated investment schemes and is now disclosing more fully its own limitations in the area of consumer protection. The new rules should make a difference – but only if financial services providers choose to follow them.

Shorter PDSs

As of June last year, product disclosure statements (PDSs) on most superannuation-related financial products, simple managed investment schemes (but not multi-funds, hedge funds and the like) and margin lending arrangements are down from up to 100 pages to a maximum of eight A4 pages. And PDSs must now have uniform headings, cover specified information and avoid tiny font sizes. 

For insurance products automatically included within super accounts, the PDS must state the type of cover, the cost of the insurance and how a person can decline, cancel or change the cover. Although the industry was granted a two-year transition period for existing products starting from when the changes were first announced in June 2010, ASIC says it will allow some leeway for financial services providers to get on board, but will take “stronger regulatory action” if it detects systematic breaches. 

Simpler switching between banks

Our 2011 banking satisfaction survey confirmed a troubling truth: Australia’s big four banks have long held the lion’s share of accounts, yet received the lowest satisfaction ratings. Not much appears to have changed since the survey. In fact, a recent IMF report found Australia’s banking sector to be the most concentrated in the world, with the big four together controlling almost 80% of the sector. Why don’t customers simply take their money elsewhere? 

Along with a general feeling that one bank is as bad as the next, many survey-takers told us the inconvenience of transferring direct credit and debit details was a formidable obstacle. However, this hurdle will no longer exist should the banks abide by the new regulations. New bank account switching rules that took effect in July last year mean your new bank (we recommend one that charges the fewest fees and allows you to easily switch money in and out of an interest-bearing savings account) can demand your current bank provide a list of regular direct debits and credits over the previous 13 months. Under the new rules, you can then sign a single form at your new bank authorising it to provide the debiting and crediting institutions with your new account details.  

 
 

 

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