Consumer groups respond to Royal Commission Final Report

Consumer Advocates in Canberra for the release of the Royal Commission's final report

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has now concluded. The Final Report and the Government’s response was released to the general public on Monday afternoon, providing a road map for law reform that should deliver improved standards in the finance sector. 

Many of the report’s 76 recommendations have been welcomed by consumer
organisations including CHOICE, Consumer Action Law Centre, Consumer Credit
Legal Service WA, COTA Australia, Financial Counselling Australia and Financial
Rights Legal Centre.

“This is a monumental day in the history of consumer protection”,
said Gemma Mitchell, Managing Solicitor of the Consumer Credit Legal Service WA.
Ms Mitchell added that the recommendations in the report go a long way to
addressing the power imbalance between consumers and financial services

However, many consumer groups are disappointed that some
recommendations did not go far enough, including improving remedies for
breaches of responsible lending law and banning junk products.

FCA and Consumer Action Law Centre agree that irresponsible
lending has not been adequately addressed in the final report. “If there were
better remedies for consumers subject to irresponsible lending—including debt
waiver—this would provide an important compliance incentive”,
said Consumer Action CEO Gerard Brody.

In its response to the report, the Government says it’s taken
action on all 76 recommendations and gone further in some areas. This includes
extending laws already before parliament that ensure financial products meet
the needs of consumers, and allowing ASIC to intervene in or ban the sales of
financial products that risk causing substantial consumer harm. These laws will
now apply to all credit and financial products.

Loopholes to be
closed include: 

  • the
    ability of mortgage brokers to charge conflicted remuneration, starting with
    banning trailing commissions; 
  • exemptions
    to licensing requirements for car dealers and retailers that sell loans; 
  • exemptions
    for funeral expenses policies from important
    consumer protections;  
  • ‘unfair
    contact term’ exemptions for insurers; and 
  • regulatory
    oversight of insurance claims-handling. 

Enhanced consumer
protections include: 

  • a ‘best
    interests’ duty for mortgage brokers, treating them like other
    financial advisers; 
  • banning ‘hawking’
    or unsolicited selling of insurance, including funeral insurance; 
  • enhanced
    rules for add-on insurance, requiring a consumer to opt-in to the purchase of
    an insurance product bundled with a loan or car; 
  • sanctions
    for breaches of industry codes applying to insurance and banking; 
  • new
    banking code provisions benefiting low-income and vulnerable groups,
    including banning unarranged overdrafts and default charges on basic
    bank accounts; 
  • a
    new compensation scheme of last resort to compensate consumers where
    the entity does not or is unable to pay, including compensation
    for historical uncompensated claims;  
  • greater
    public accountability of remediation schemes, including having
    the Australian Financial Complaints
    Authority provide oversight; and 
  • extending
    the Banking Executive Accountability Regime to consumer protection
    matters, and beyond the big banks. 

The Government has also committed to review the
adequacy of funding for community legal centres and financial counselling.
Commissioner Hayne emphasised the important role of
these organisations in ‘providing a balancing consumer
voice in policy development’. 

“Community legal centres and financial counsellors
frequently struggle with demand. It is time to adopt an industry levy to
fund these important services that ensure disadvantaged people have
‘equality of arms’ when they have a dispute with a financial
institution,” said Mr Brody of Consumer Action.

“The report is also a damning indictment of industry
self-regulation”, said CHOICE CEO Alan Kirkland. “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.”

Commissioner Hayne also recommends the establishment of an oversight
authority who would in effect, regulate the regulator.

With regard to implementing the final report recommendations, Karen
Cox, CEO, Financial Rights Legal Centre, said:

 “We expect bipartisan support
for this once in a generation chance at reforming the financial services sector
to ensure that the consumer interest, not corporate mega-profits are front and
centre of a new regulatory regime.

“Experience has shown us that the lobbying of the banks, insurers
and other financial services have watered down previous attempts at reform.
That’s a big part of how we have got to where we are. The banks and insurers
need to step back to enable Government to put the consumer interest front and
centre of any reforms.”

Australia’s leading senior’s advocacy organization, COTA Australia also emphasized the importance of reviews of the implementation of the Royal Commission recommendations over the next few years. “Both sides of politics need to commit to them happening, and ensure they are properly independent and consumer focused”, said COTA Australia CEO Ian Yates.

View the Final Report in full

View responses to the Final Report from Consumer Groups below:


Consumer Action Law Centre

Consumer Credit Legal Service WA

COTA Australia

Financial Counselling Australia

Financial Rights Legal Centre