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CHOICE welcomes increased financial crimes penalties

CHOICE is calling on the Federal Government to introduce a consumer compensation scheme as it moves to increase penalties for financial misconduct

20 April 2018

Consumer group CHOICE has welcomed the introduction of increased penalties for financial firms following decades of industry-wide corporate and financial criminality.
 
"While the banks are finally acknowledging the impact of their harmful behaviour under the heat of the Royal Commission, we've been calling for action on these issues for more than 30 years," says CHOICE CEO Alan Kirkland.
 
"It's clear these institutions have a profit at any cost culture that has led to very poor outcomes for consumers."
 
Penalties for some financial crime offences haven't been updated since 1993. At the time, penalties for individuals were set at $200,000 and later corporations were liable for civil penalties of $1 million in 2004.
 
"While the government's proposal to increase these fines is a long-fought win for consumers, we are concerned that civil penalties for corporations will be capped at $210 million," says Mr Kirkland.
 
"$210 million might sound like a massive fine, but it represents less than 1% of the annual revenue for corporations with tens of billions of dollars in annual turnover. [1]
"The cap is not something we've seen placed on other Australian businesses that harm consumers. If companies like Telstra and Qantas can face larger fines for misconduct, why are we protecting the banks?"
 
CHOICE is renewing its call to give the financial regulator, ASIC, new directions powers to help it rapidly intervene and direct banks, financial advice firms and insurers to remedy consumer harm when it discovers wrongdoing.
 
The call comes following days of revelations at the banking royal commission that some of our leading financial institutions were knowingly misleading the regulator, taking years to remedy customer problems and charging fees without providing services.    
 
"With latest estimates finding more than 300,000 Australian customers have been ripped off to the tune of $216 million by financial advisers who charged fees for no service, [2] we need to give the regulator tougher powers."
 
CHOICE is also calling for the urgent introduction of a compensation scheme for consumers harmed by financial institutions that go under.
 
"While fines will drive better behaviour, at the end of the day it's people who suffer when financial institutions do the wrong thing," says Mr Kirkland.
 
"When the level of misconduct is so poor that a corporation goes under, it's these people that are currently left with nowhere to go, often losing homes and retirement savings.
 
"The industry needs to be required to fund a compensation scheme, so that when consumers lose money as the result of poor advice, they can get it back."
 
Media contact: Tom Godfrey, CHOICE, Head of Media and Spokesperson: 0430 172 669

 
[1] For example, CBA had annual revenue of $26 billion in 2017. A $210 million fine represents just 0.8% of annual revenue.
[2] Evidence from Peter Kell in the Banking Royal Commission.