The release of the Interim Report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry today is a watershed moment for the finance sector according to Consumer Action Law Centre and Financial Rights Legal Centre.
Commissioner Hayne has slammed the finance sector for its greed and the ‘pursuit of short term profit at the expense of basic standards of honesty.’ The Commissioner has taken aim at the industry’s sales culture, accusing banks of searching for their ‘share of the customer’s wallet’ and staff being ‘measured and rewarded by reference to profit and sales’.
The Royal Commission has uncovered a litany of misconduct and unlawful behaviour so far, including irresponsible lending, mis-selling of junk insurance policies and fees for no service. Importantly, the Royal Commission has heard from everyday Australians who have been victims of misconduct. Sadly, the stories heard by the Commission are not unique—they represent systemic problems with our finance sector that must be fixed.
Community lawyers and financial counsellors hear from people in distress every day who can’t afford to repay loans or have been sold dodgy financial products. The consequences for these people are dire: it can mean losing a home, bankruptcy, worsening health or family breakdown.
Commissioner Hayne has identified several key issues for further consideration in submissions and the upcoming policy hearings, including:
- Responsible lending standards and the use of benchmarks;
- Regulator powers and resources, including penalties for misconduct;
- The limitations of industry self-regulation;
- The role and responsibilities of intermediaries such as mortgage brokers;
- The appropriateness of carve outs and exceptions, including regulatory exemptions for funeral insurance and conflicted remuneration; and
- The value of add-on insurance products.
The Interim Report describes an industry culture of greed and impunity. It is clear that the sector can’t be trusted to self-regulate. There must be appropriate consequences for misconduct to force Australia’s financial services industry to comply with the law, and a regulator with the necessary resources to pursue businesses and individuals who break those laws.
Quotes attributable to Gerard Brody, CEO Consumer Action Law Centre
“Commissioner Hayne has rightly identified greed and the pursuit of short-term profit as a key driver of misconduct in the banking and finance sector.”
“The Interim Report presents a unique opportunity for Government to commit to swift reforms that put Australians first. Banks and other financial service providers must be accountable to their customers.”
“The lack of consequences for banks and lenders for misconduct is driving poor lending and sales practices that are hurting Australians who can least afford it. Where loans are found to be irresponsibly lent, debts should be waived—this will provide the right incentive for banks to do the right thing.”
“The Government must act to fix our broken banks and properly resource our regulators so that they can hold the industry to account for misconduct.”
Quotes attributed to Karen Cox, Co-ordinator, Financial Rights Legal Centre
“Our financial service providers need to stop lending people more money than they can afford to repay. They need to assist people to set realistic goals, not set them up to fail and profit from their misery.”
“Banks and other financial service providers have been treating the law, the regulator and their customers with contempt for too long. We need real penalties that bite, not just get factored into the cost of doing business.”
“Providing a financial service has become a licence to write an open cheque to yourself from the funds in your custody.”
“Customer outcomes need to be at the forefront of any reforms. The regulator must be empowered to act quickly and effectively on the findings of reports like ASIC’s recent work on credit cards and direct sales of life insurance to ensure that financial products are working for the consumers they are meant to serve.”
Consumer Action Law Centre – Denise Boyd, 0413 299 567, email@example.com
Financial Rights Legal Centre – Peter Vincent, 0421 389 685, firstname.lastname@example.org