11 October 2018
Today's big four banking inquiry must call out the cynical tactics of the
banking lobby (Australian Banking Association) and demand real and
immediate change from the big four CEOs according to CHOICE.
"In a cynical move the banking lobby yesterday promised to remove practices
which are already illegal, should have been fixed years ago, or large
swathes of the industry have already promised to eradicate" says Alan
Kirkland, CEO of CHOICE.
"Today is an opportunity for the Parliament to grill the banks about
whether they are committed to real change, rather than superficial
announcements and advertising campaigns."
"The crux of the problem is that commissions and sales incentives lead to
people being taken advantage of and sold rubbish," says Mr Kirkland.
"The banks' announcement that they want to dump one kind of legacy
commission is welcome but doesn't fix the bigger problems. We cannot lose
sight of the real issue the royal commission has highlighted, that sales
incentives of any kind lead to people being sold products they don't need
or in some cases can't even use," says Mr Kirkland.
"These are the incentives that led to CBA fraudulently activating
Dollarmite accounts and CBA selling 'junk' insurance products to more than
140,000 customers," says Mr Kirkland.
"This has serious impacts on the people in our community who can least
afford to be ripped off. During the commission hearings we heard repeated
stories of parents, older people and people with disabilities who should
have been able to trust their bank but could not. Every day the banks lobby
their way out of real change is another day Australians get hurt."
CHOICE is calling on the big four bank CEOs to commit to legislation which
would end sales incentives that are leading to consumer harm. This
legislation should cover:
-
mortgage broker remuneration
-
commissions and incentives still received by financial advisers
-
incentives for people in banks, from front line staff to senior
managers.
The latest Parliamentary hearing comes after the royal commission's interim
report raised serious questions about the incentives that drive dodgy
behaviour in banks, with the report asking:
-
Should any bank employee dealing with a customer be rewarded
(whether by commission or as part of an incentive remuneration
scheme) for selling the client a product of the employer? That is,
should any 'customer facing employee' be paid variable
remuneration?
-
If the answer is either 'no' or 'some should not' what follows
about incentive remuneration for managers or more senior
executives? If more junior employees should not be remunerated in
this way, why should their managers and senior executives?
-
Should other changes be made to the remuneration practices of
banks? What would they be, and how could change be required?
Media contact: Nicky Breen, CHOICE: 0430 172 669
Note to editors: CHOICE is able to provide copies of investigations into
financial advice from 1987 on request.
