The Design and Distribution Obligations (DADOS) require financial service providers to provide products that meet customer needs rather than focussing on securing the sale. In our joint submission on the exposure draft Corporations Amendment (Design and Distribution Obligations) Regulations 2019 (Cth) (the Regulations) with Financial Rights Legal Centre, Financial Counselling Australia and CHOICE, we support the extension of the design and distribution obligations (DADOs) to additional products such as basic banking products.
However, we recommend that small business credit provision and pawnbroking be removed from the list of exempt products. Our organisations have long argued that loopholes related to credit provided for business purposes and pawnbroking should be closed. Ensuring the DADOs apply will be a positive step to protecting vulnerable consumers who are impacted by exploitative pawnbrokers and companies that extend credit to businesses which do not have the same level of responsibilities or consumer protections in place to prevent mis-selling of unsuitable products.
Our organisations also strongly support DADOs applying to financial products as defined in the Australian Securities and Investments Commission Act 2001, which includes regulated and unregulated credit. In particular, we support buy now pay later providers being captured by the DADO regime. Regulators must be empowered to encourage a more consumer-centred approach to product design and distribution, particularly given evidence of consumer harm associated with these products.