Consumer Action Law Centre has welcomed the report of the Financial System Inquiry and urged the Federal Government to implement its recommendations as soon as possible to improve the financial security and protection of Australian households.

The David Murray-led Financial System Inquiry represents a “paradigm shift” for Australia’s financial system. The report recognises that consumer welfare should be the core goal of the financial system and, as such, makes recommendations that promote fairness, strengthen consumer protections and recognise the value of proactive regulators.

‘We’re pleased the report recognises that disclosure, or ‘buyer beware’ statements, provide insufficient consumer protection and need to be complemented by more robust safeguards,’ said Gerard Brody, CEO of Consumer Action Law Centre. ‘The report makes a number of common sense recommendations that, if adopted by government, would stop consumers being sold inappropriate or dodgy products.”

‘The report recommends making financial service providers responsible for ensuring their products meet customers’ needs. In the past we’ve seen companies selling products that are great for their bottom line but completely inappropriate for their customers, so we think this recommendation could have an immediate and significant impact.”

‘We also welcome the recommendation that ASIC be given ‘product intervention powers’ so that it can step in when it sees dodgy products and fix them or ban them all together. We’re never going to be rid of rogue operators in our financial system, but having a powerful and proactive ASIC will help minimise consumer detriment,’ said Mr Brody.

Mr Brody identified a number of financial services currently causing widespread harm, which could be cleaned up by the Report’s recommendations. ‘Payday lenders and consumer lease providers load customers up with unsustainable debt. Funeral insurance and consumer credit insurance are being sold to people who don’t need the product or are highly unlikely to ever make a claim. Even mainstream insurance products have hidden exclusions and unfair terms.

‘These products all stand to be improved if the Financial System Inquiry’s recommendations are implemented. Even the threat of a product intervention power should mean that those that design products ensure they fulfil consumer needs rather than simply add to their bottom line.’ said Mr Brody.

Consumer Action welcomed the Inquiry’s proposal to clean up unfair surcharges on credit cards and payments but warned that without a strong regulator policing surcharges the promised savings may never eventuate. ‘Consumers feel helpless when stung by high and hidden surcharges. While the recommendation for the Reserve Bank to limit or abolish surcharges on low and medium cost cards is a step in the right direction, consumers need somewhere to lodge a complaint otherwise  illegal surcharges will continue.’

Mr Brody noted that the Financial System Inquiry had missed the opportunity to fix up problems with consumer redress. ‘Where businesses do cause consumers harm, and subsequently leave the marketplace, consumers can be left high and dry. We’d like the Government to look at a last-resort compensation scheme.’

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