In a joint release, opposition leader Bill Shorten, shadow minister for financial service Clare O’Neil and shadow assistant minister for families and communities, senator Jenny McAllister, announced that Labor would look to establish a $640-million Banking Fairness Fund “to revolutionise the services available to Australians in financial difficulty”.
One of the suggestions put forward by Commissioner Hayne in his final report for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was for there to be “careful consideration” of how “predictable and stable funding for the legal assistance sector and financial counselling services” could be best delivered, given the “clear” need for it.
In its response to the royal commission, released on Friday (22 February), the Labor Party committed to delivering “stable, long-term funding for financial counselling and financial services specialist community legal centres”.
Elaborating on this, the Australian Labor Party (ALP) has now revealed that it would look to raise $160 million a year from Australia’s biggest banks to help double the number of financial counsellors across Australia.
This would cover the four major banks (ANZ, CBA, NAB, and Westpac) as well as lenders such as ASX100-listed lenders AMP, Bank of Queensland, Bendigo and Adelaide Bank, Macquarie Bank, and Suncorp Bank.
Utilising $320 million of the Banking Fairness Fund over the next four years, this would take the number of financial counsellors from 500 to 1,000, according to the party.
The joint release reads: “These new financial counsellors will provide advocacy, support and advice to an additional 125,000 Australians each year.
“These 500 new financial counsellors will be able to assist Australians to pursue fair compensation through the Australian Financial Complaints Authority under significantly increased compensation caps announced by Labor last week.”
It continued: “Financial counsellors provide invaluable assistance, free of charge, to Australians who find themselves in disputes with their banks and other financial service providers.
“A stronger, larger financial counselling sector is just one part of Labor’s plan to restore fairness to financial services.”
The Labor Party said that it would make further announcements about the other programs that will be funded by the Banking Fairness Fund over coming days.
Speaking on behalf of industry body Financial Counselling Australia (FCA), CEO Fiona Guthrie welcomed the announcement, stating: “Financial counsellors provide advice and advocacy to people with money and debt problems. The large majority of the clients of financial counsellors have debts with the banks, especially credit cards but also mortgages and personal loans.
“As Commissioner Hayne noted in the final report of the banking royal commission, there is an asymmetry of knowledge and power between consumers and financial services entities. Too often people, particularly those who are vulnerable, need assistance in understanding our complex financial system and negotiating with financial institutions.”
She continued: “Australia has one of the highest ratios of household debt to income in the world, with data from the ABS showing that three in 10 households are over-indebted. Doubling the number of financial counsellors can’t come soon enough and it will mean that an additional 125,000 people will receive assistance.
“The financial counselling sector has long advocated for a levy on the financial services industry, in addition to government funding, so that financial counselling is adequately funded,” she said.
FCA is also calling for industry levies such as these to also extend to the telecommunication and utilities sectors, which Ms Guthrie said “also contribute to financial stress, refer their customers to financial counsellors and benefit when they get back on track”.
“It would be appropriate for industry levies to also apply to them,” she said.
Slater and Gordon call for structured remediation
The news follows on law firm Slater and Gordon issuing a call to the big banks to show they have “truly turned over a new leaf” following the banking royal commission, by introducing a formal process of structured remediation, through which independent advice is provided to customers who may be entitled to compensation.
The law firm suggested that such a process would involve “a qualified, independent third party” being engaged by the banks to help aggrieved customers understand what happened to their money, what their rights are, and what “a just way forward would entail”, the law firm suggested.
Slater and Gordon chief executive John Somerville commented: “Since Justice Hayne handed down his recommendations, the public focus has been on punishment to bankers and the potential for legislative change – but what about all the victims?
“Banks can’t expect to say sorry and then dust their hands. If they are serious about making people whole then they need to bring in an independent structure,” he said.
The CEO continued: “If there is one thing the royal commission has demonstrated, it is that the power imbalance between customer and bank is too wide. You can’t rely on that power dynamic to deliver justice in the form of fair remediation.”
Mr Somerville said that without remediation, the flow of class actions would likely be “relentless”, adding that while class actions “do deliver justice, [they] can be a lengthy process”.
“It would be preferable for all concerned if the banks took a more proactive approach, as without just remediation, the flow of class actions would likely be relentless,” he said.
“We will be engaging with the banks and encouraging them to embrace this model, which has worked well both here and overseas.”