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 entities.

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