Consumer groups CHOICE and Consumer Action Law Centre welcome today’s announcement of new funding and powers to protect consumers of financial services.
In 2014-15 ASIC’s budget was reduced by $120 million over four years, in addition to an efficiency dividend of $47 million over the same period.[i]
“Today’s funding announcement is good news for Australians. Our financial regulator will be getting funding and new powers to keep the powerful banking sector in line,” Says CHOICE CEO Alan Kirkland.
“But keep in mind, this funding announcement only partially restores the cuts ASIC has faced in the last few years. It’s also being asked to take on new powers and a new commissioner. ASIC is effectively being asked to do more with less funding than it had a few years ago,” Says Mr Kirkland
“ASIC needs additional funding to make the most of new powers and should have a clear process to increase the bank levy as needed to protect consumers and build more confidence in our financial services sector,” Says Consumer Action Law Centre CEO Gerard Brody.
In addition to regulator funding, ASIC needs the powers and laws to ensure financial products are safe.
“We welcome accelerated implementation of the pro-consumer reforms proposed by the Financial System Inquiry. Too often, unsafe financial products have cost Australians and left them not only out-of-pocket, but at risk of ongoing financial distress,” Says Mr. Brody.
“A product intervention power for ASIC and financial product safety obligations should work to prevent consumer harm, rather than requiring ASIC and dispute resolution services to pick up the pieces,”says Mr. Kirkland.
The proposal to establish an expert panel to consider merging dispute resolution schemes into a one stop shop is also welcome news for consumers.
“We know that this is an area where competition does not work, and Australians should have confidence that when they have a dispute with a financial service provider, they will get a fair hearing on an equal footing. At the moment, it’s the financial service providers who chose which scheme to be a member of. Merging the schemes is efficient and will be better for consumers,” Says Mr. Brody
The groups said this review should consider establishing a compensation scheme for consumers who had suffered financial losses due to financial misconduct.
“We’ve been calling for a last resort compensation for a long time—it’s the missing piece in protecting Australians who’ve had their trust breached by banks and financial advice. If Australians have been impacted by dodgy financial advice or because a financial service provider broke the law, and the provider is unable to compensate them, it’s only fair that an industry funded compensation scheme be set up to give them justice.
“This, in conjunction with a stronger ASIC will help regain the trust Australians have lost in the banking and finance sector in recent years,” says Mr. Brody.
CHOICE’s latest Consumer Pulse Report shows consumers overwhelming support strengthening the financial regulator (87%). Most consumers support the idea of an industry-levy to cover finance regulation, with 74% agreeing that banks, investment firms, insurers and financial advisers should have to pay to cover the costs of regulating their industries.[ii]
[i] ASIC, Annual Report 2014-15, p.4.
[ii] CHOICE Consumer Pulse – March 2016, total sample in wave 8 of the Consumer Pulse is n=1062. Fieldwork was conducted between 11 and 24 March 2016 by GMI/Lightspeed Research Australia.