In February 2019, the banking royal commission handed down 76 recommendations after its scathing review exposed countless unscrupulous practices in the banking, superannuation and financial services industry.
In exciting news, last Thursday, legislation acting on 20 of those recommendations was made law by the Federal Government. It's a huge win for Australian consumers and one that builds on a previous set of reforms legislated in February.
"Alongside other consumer advocacy groups, CHOICE has been fighting for reforms like this for decades, so it's great to see these recommendations finally become law," says Patrick Veyret, CHOICE's Banking Policy Adviser.
"It's a real victory for people who deserve better products and more protection when it comes to financial services."
What are the key reforms?
1. A new deferred sales model for add-on insurance
What it means: Retailers will no longer be allowed to spruik additional insurance as part of a customer's immediate purchase. Instead, they'll need to wait four days before any up-selling.
"This new waiting period saves people from being unfairly pressured into buying low-quality products they don't need or that don't adequately protect them," says Patrick.
"So whether you're buying a car, a mobile phone or even a concert ticket, you'll now have time and space to consider your needs and make the decisions that are right for you."
This new waiting period saves people from being unfairly pressured into buying low-quality products they don't needPatrick Veyret, CHOICE Banking Policy Adviser
2. A ban on 'hawking' insurance and superannuation products to consumers
What it means: Companies will be prohibited from using high-pressure sales tactics (including cold calling) to offer low-value insurance products that offer weak protection.
"The banking commission's report exposed some truly horrible 'hawking' techniques and the real damage they can wreak on consumers, especially those that are more vulnerable," explains Patrick.
"This new law protects them from insurance companies and super funds from engaging in dodgy marketing tactics."
3. Stricter obligations to report breaches
What it means: Financial institutions will now have much tougher reporting obligations when they suspect they have broken the law. These are known as "breach reporting obligations".
"For too long, institutions have ignored breaches of the law or simply failed to report themselves to the ASIC," says Patrick.
"This is an essential reform that puts responsibility back on banks and other financial services to follow the law and not hide or ignore misconduct."
For too long, institutions have ignored breaches of the law or simply failed to report themselves to ASIC
4. Insurance claims handling now regulated by ASIC
What it means: How an insurance company treats you during the period of making a claim will now be regulated by the Australian Securities and Investments Commission (ASIC).
"Many people would be surprised to know that the claims handling process was previously unregulated," says Patrick.
"Insurers regularly give people a raw deal when they go to claim on insurance, with techniques including delaying claims or requesting unnecessary documents. This loophole has been closed and people now have much stronger consumer protection from dodgy claims processes."
More reforms to come in 2021?
We certainly hope so. The new legislation is a positive step forward but there's still a long way to go to give customers the protection and fair go they deserve when it comes to financial services.
CHOICE expects Treasurer Josh Frydenberg to act on his commitment to pass two more landmark pieces of legislation, also based on royal commission recommendations.
The first is the new Financial Executive Accountability Regime (FAR) that would hold executives personally accountable for misconduct and liable for personal penalties up to $1,050,000 for breaches of the law. It's a reform that already has widespread public support. Recent polling commissioned by CHOICE shows that 81% of Australians agree there should be stronger laws that hold senior financial executives to account.
The second piece of legislation is the creation of the Compensation Scheme of Last Resort which would compensate people wronged by financial institutions. Again, our recent polling shows that 82% of people think there should be compensation for people when they are wronged by financial institutions.
Call to action to save safe lending laws
While these reforms are welcome, the government is still going ahead with their plans to axe safe lending laws. This contradicts the very first recommendation of the Hayne Royal Commission: to enforce safe lending laws.
Over 125 community organisations and 18,000 people have joined forces in an open letter to parliamentarians urging them to save safe lending laws. Please consider supporting our campaign.
Stock images: Getty, unless otherwise stated.