Attwood Marshall Lawyers Commercial Litigation Associate, Georgia Taylor, follows-up on the roll out of the recommendations made by the Royal Commission into misconduct in the banking, superannuation and financial services industry, and the ongoing negative impact being felt by consumers in the absence of the recommendations being implemented.
What happened to Commissioner Kenneth Hayne’s recommendations?
The Royal Commission into misconduct in the banking, superannuation and financial services industry which ran from 2017 to 2019 reportedly cost taxpayers up to $70 million. This figure, however, does not account for the armies of solicitors, barristers and financial services professionals that were paid a high price for dedicating their time to representing the banks and quarrelling for what little standing their respective clients had left. Unsurprisingly, it is reported that in total, over $1 billion was expended in the Hayne Royal Commission.
Some would expect a sterling return for such a high price, yet despite the years of investigation, torment and unwavering reputational damage to the banks, the regulators and big banks (and the federal government, it seems) are quietly ignoring the 76 recommendations made by Commissioner Kenneth Hayne.
It has been almost two years since the final report to the Governor-General was submitted, yet it is reported that around 45 out of the 76 recommendations have not been implemented and 4 have been abandoned.
There is no question that the government needed all hands on deck during the COVID-19 pandemic to remedy, amend and issue legislation, regulations and other statutory amendments in order to keep us safe. However, every Australian is affected by the banking, superannuation and financial services industry and their conduct, and the proposed changes are still imperative, even in a COVID world. Unfortunately, to those who have experienced the impact of banks behaving badly, the delay in the implementation of the recommendations is simply not good enough.
The current Coalition federal government infamously resisted the calls for the Royal Commission until it was overwhelmingly forced to do so by the constant cases of misconduct by the banks, insurance companies, and financial planners. It is little surprise to see the federal government ‘going easy’ on the banks and using COVID-19 as an excuse.
What recommendations have been abandoned?
In some of the more politically delicate recommendations by Commissioner Hayne, that was set to completely annihilate the brokerage industry, the Liberal Government abandoned recommendations to flip the current “bank paid” broker fee to a “customer paid” model. This change came from an uproar from brokers and investigations by the government which allegedly showed these recommendations could have not only put thousands out of business, but adversely affected the entire lending industry. Instead, the government rested on a “best interests” obligation, which now imposes a civil penalty on brokers should they be found by the regulator to have been not acting in the best interests of the customer.
What recommendations have been implemented?
In a win for our farmers, following extraordinary media coverage and support from the wider population during the height of the “big dry”, recommendations were implemented to protect farmers from banks when defaulting on lending facilities if they had been severely affected by drought or other natural disasters, including:
- The inability for banks to charge default interest on loans secured against agricultural land during the time of drought or natural disaster.
- Banks are to ensure that when agricultural loans are in distress, that they are to be managed by an experienced agricultural banker, be offered mediation, and that winding up the farming business is to be used as a last resort.
Other changes are nominal and include (but are not limited to):
- Extending ASIC’s power to approve codes of conduct.
- ASIC and APRA obtaining better mechanisms of communication and co-operation.
- Repealing grandfathering provisions.
- Adding civil penalties to contravening provisions.
- Changes of disclosure provisions to insurer to allow for customer error.
- Legislation changes to impose an obligation on a licensee to comply with AFCA.
Unsurprisingly, some of these changes only came into effect on 1 January 2021.
What recommendations are missing?
In our view, some of the most significant recommendations and protections for consumers have not yet been implemented, which include (but are not limited to):
- A requirement for all financial services license holders to detect, investigate and advise any consumers that have been subject to inappropriate and/or negligent financial advice.
- Considering capping the commissions on life insurance products with a recommendation to move to a zero-commission model.
- Referencing and checking any information sharing protocols between financial services license holders and financial advisors.
- Implementing a disciplinary system for financial advisers which would include a positive obligation on financial services license holders to report any misconduct by financial adviser to the said disciplinary body.
- A bar on any deduction of advice fees from a ‘MySuper’ account.
- A ban on the unsolicited offer or sale of superannuation and insurance products.
- Imposing sanctions on insurance providers who have breached any applicable code of conduct.
- Establishment of a last resort compensation scheme which would provide payments to consumers who have been ripped off by a financial adviser.
Despite being severely behind schedule, the government did pass 20 of its implemented changes in December 2020, with further legislation currently under review or in the pipeline for approval.
Attwood Marshall Lawyers continues to take daily enquiries from consumers who have been severely financially affected by the conduct of the banks. Some of the most distressing conduct has even arisen out of recent dealings, which goes to show how necessary these changes are for our financial services industry. In our view, any delay to the implementation of these recommendations fly’s in the face of what the Royal Commission was meant to be all about.
Have you been impacted by the conduct of the banks, a broker or financial adviser?
The financial services industry continues to suffer a significant trust deficit in the eyes of the community, and for good reason. Banks act in their best interests, and not that of their customers. The fact regulators and major banks have disregarded or delayed implementing the majority of the recommendations made by the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry is a huge disappointment and setback for all consumers.
If you have suffered financial loss as a result of bad or incorrect financial advice, you may be entitled to compensation. Our Commercial Litigation lawyers are experienced in dealing with lending institution matters and use reputable forensic accountants to assess the conduct of the banks and calculate the losses you have suffered as a result. Our team are dedicated to helping you resolve your matter as quickly as possible, to obtain justice for you and help you get your life back on track.