Speaking at a media conference on Tuesday (19 February), Labor leader Bill Shorten said the party had “drawn up the first legislation” in response to Commissioner Kenneth Hayne’s final recommendations, which followed an 11-month inquiry into misconduct in the financial services sector.
The major party is proposing to introduce three private member bills into Parliament pertaining to grandfathered commissions, consumer protections and “strengthening” the Australian Financial Complaints Authority (AFCA).
“These new laws go towards protecting people against dodgy car loans. They go to protect people against funeral insurance rip-offs. They go to protecting people against poor insurance claims handling,” the opposition leader said.
“Labor has written the laws to start implementing the banking royal commission; it’s now the time for the Parliament to debate the laws and get on with protecting people so no one suffers now because we have a part-time Parliament.”
One of the bills will bring an end to grandfathered commissions after Commissioner Hayne recommended in his final report that they be repealed “as soon as practical” as they have “outlived their validity”.
Labor noted that the major banks had already announced plans to reduce or eliminate grandfathered commissions, but that the industry needs the government to pass legislation that will end the $400 million in grandfathered trailing commissions from leaving the retirement savings of super members every year.
Shadow treasurer Chris Bowen noted the current government’s plan to ban grandfathered commissions by 1 January 2021, saying that Labor could get it done a year earlier.
“We believe it can be done on 1 January 2020, and it can be legislated now. Give people time to adjust. Give people, planners and the financial sector time to implement it,” the shadow treasurer said.
Another bill will seek to strengthen AFCA processes in line with Commissioner Hayne’s recommendation that section 912A of the Corporations Act should be amended to require Australian Financial Services Licence (AFSL) holders take reasonable steps to cooperate with AFCA in the resolution of disputes.
Commissioner Hayne’s final report stated that the Corporations Act mandates the form of AFSL holders’ internal and external dispute resolution systems but did not impose any conduct-related obligations when providing or using those systems.
During the conference on Tuesday, shadow minister for finance, Clare O’Neil, said: “When a consumer has an issue with a financial institution, they can complain through AFCA, as it is known. There is currently no obligation for banks to deal promptly and directly and to provide AFCA with documentation to help resolve customers’ issues.”
The opposition is also looking to remove the point-of-sale exemption for credit sales, such as car loans, that absolves sellers from taking the same steps required by credit providers to ensure customers are financially fit to meet their repayment obligations. It said the removal would make it more difficult for customers to obtain a car loan at a dealership or buy products on credit at a department store.
“We will remove the point-of-sale exemption effectively, requiring people who are selling credit to apply by the normal laws that the community expects credit providers to abide by,” the shadow finance minister said.
Further, Labor is looking to address the royal commission’s concern that certain insurance products, such as funeral insurance, are exempted from the consumer protections outlined in the National Consumer Credit Protection Act 2009.
The exemption currently means the Australian Securities and Investments Commission (ASIC) has no oversight of insurance claims.
“At the moment, ASIC has the power to oversee all of the aspects of the way that insurance is sold – the pricing, the means by which insurance is sold. But the most important part of insurance is the claim. That’s when something goes wrong and how do consumers get dealt with throughout that process. At the moment, ASIC does not have oversight of that,” Ms O’Neil said.
“If an insurance company is doing the wrong thing, if they’re not behaving fairly towards a customer, especially if it is happening at a systemic level, ASIC has no power to do anything about it, and in fact, ASIC has repeatedly asked the government to give them this power.”
[Related: BEAR should be co-regulated, says RC]
Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.