Monday 4 February 2019
Consumer group CHOICE has hailed the banking royal commission report as
a once-in-a-generation opportunity to clean up the banking and
financial services sector.
"Commissioner Kenneth Hayne makes it clear: the laws that govern the banking
system have not been up to the job," says CHOICE CEO Alan Kirkland
"Simple community expectations – that financial institutions should act
honestly and in their customers' best interests – have been undermined by
decades of industry lobbying, resulting in laws that are riddled with
carve-outs and exceptions. This has to end."
"This represents a key turning point for the industry and its lobby
groups: will they pretend to accept the recommendations then lobby to
undermine them behind closed doors, as they have with every other major
reform? Or will they realise that if they want to win back community
trust, this time they need to act with integrity?"
"The report is also a damning indictment of industry self-regulation.
For too long, we have allowed banks to write and enforce their own
rules. This means that the rules are weak and the consequences for
breaking them are non-existent."
"Commissioner Hayne makes it clear that if we are going to have
industry codes, they have to have the force of law, with clear
sanctions where they are breached."
"The sector that cops the greatest wrath – and quite rightly – is the
mortgage broking industry. The royal commission says that payments by
banks to brokers should be banned, and that brokers should have strong
obligations to act for their customer: the person taking out the loan."
"For the first time, the broking industry will have to prove that it is
offering a service that consumers are willing to pay for. If they think
they are offering value, they have nothing to fear from this reform."
Key reforms CHOICE says should be implemented as a matter of urgency
are:
-
The end to weak self-regulation through industry codes that can
be breached with no consequences (Rec 4.9)
-
A ban on hawking financial products to unsuspecting
consumers – especially insurance and superannuation (Recs 3.4
& 4.1)
-
A ban on the payment of commissions to mortgage brokers and
financial advisers so it is clear that they act for the person
seeking advice, and nobody else (Rec 1.3)
-
An obligation that mortgage brokers act in the best interests
of the person seeking a loan (Rec 1.2)
-
An end to hidden fees for financial advice (Recs 2.1 & 2.4)
-
A compensation scheme, funded by industry, to make sure that
when consumers are found to deserve compensation it is paid
(Rec 7.1)
"The release of the final report presents a once-in-a-generation moment
to repair a broken financial system and achieve justice for victims. It
is important that the government starts the law reform process now and
listens to what Commissioner Hayne has said about the need for simple,
strong laws. This time we can't let industry persuade parliamentarians
to water down the law."
Superannuation
"Superannuation should be treated as an essential service, not a cash
cow for insurers and super fund executives" says Xavier O'Halloran,
acting head of Advocacy at the Superannuation Consumers' Centre.
"The negative reaction by the super lobby to the royal commission and
recent productivity commission report shows an industry set on protecting their own interests, not those of ordinary Australians
saving for a retirement. The royal commission's recommendations can be
the first steps in making the super system work for members."
Key things the Superannuation Consumers' Centre says should be
implemented as a matter of urgency are:
-
The end to duplicate superannuation accounts, which have taken
$50,000 from the retirement savings of the average person (Rec
3.5)
-
A civil penalty regime for funds that breach their best
interest duty to members (Rec 3.7)
-
Making it easier for consumers to understand the default life
insurance that is provided in MySuper funds, through
legislating definitions and terms that apply to all life insurance products (Rec 4.13)
"The royal commission report is not the final word on superannuation.
With only one round of hearings, the royal commission could look at
very few aspects of the system. The productivity commission's
three-year review went much deeper and wider. If we are going to
address the biggest problem in superannuation, that of poor fund
performance, we need to improve the default system as a whole."
Alan Kirkland and Xavier O'Halloran are available for comment from
Canberra.
Erin Turner, CHOICE Director of Campaigns and Communications is
available from Sydney.
Extra content is being added to Dropbox here:
https://www.dropbox.com/sh/stba7xkmw65a0v9/AABzxoxzPWJY9wD5kCmL7501a?dl=0
Media contact: Jonathan Brown, 0430 172 669 – media@choice.com.au
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