The House of Representatives’ Standing Committee on Economics has announced that it intends to hold public hearings in Canberra on 11, 12 and 19 October 2018 to further investigate Australia’s lending practices.
Chair of the committee Sarah Henderson noted that the hearings are designed to scrutinise the banks and will cover the findings of the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which are set to be released on 30 September 2018.
“[These] hearings provide an important mechanism to hold the four major banks to account before the parliament,” Ms Henderson said, adding that the dates provide the committee “with an important opportunity to scrutinise the banks on a range of matters including the interim findings of the royal commissioner”.
The committee held a series of hearings and published several reports in November 2016, April 2017 and December 2017 containing recommendations for industry reform.
Several of these proposals have already been implemented by the federal government, including:
- The establishment of a one-stop shop for consumer complaints, which has been formed through legislative introduction of the Australian Financial Complaints Authority (AFCA).
- An accountability model introduced through the Banking Executive Accountability Regime bill.
- Expanding the Australian Competition and Consumer Commission’s (ACCC) powers to investigate competition issues in the setting of interest rates.
- The creation of an open data regime.
- Easing regulatory requirements for bank start-ups to strengthen competition.
The first hearing of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which will be held next month, will be looking at home lending.
“[O]ne of the themes that has emerged from the public submissions through the commission website is inappropriate or unsuitable lending.
“The focus for the first round of hearings will be on consumer lending and practices. It is likely that this topic will be examined in the context of a number of credit products, such as home loans, car loans and credit cards.”
Ms Orr noted that the first research paper issued by the commission “indicates that home loans are the largest set on the books of authorised deposit-taking institutions [ADIs], comprising around 42 per cent of the assets of such institutions as at the September 2017 quarter”, that there was a total of $1.07 trillion in finance for owner-occupied housing as at November 2017 and that “around 5.8 million households” had a home loan with an ADI.
She therefore commented: “These figures reveal the significance of home ownership for the economy, but they do not necessarily reveal the importance of home ownership for the average Australian for whom the purchase of a property is likely to be the most substantial and perhaps the most stressful financial transaction of their life. The need for honesty and fairness in this context is paramount.
“The commission will hear evidence of events involving certain financial services entities in the context of home lending that suggest that consumers have not always enjoyed the right to be treated honestly and fairly when it comes to home loans.
“Some of these events may have involved breaches of the law, while others may have involved departures from community standards and expectations.”