Prime Minister Malcolm Turnbull has delivered the government’s long-awaited response to a financial industry review, pledging to better protect consumers.
On Tuesday morning, the Turnbull government accepted all but one of the 44 recommendations from the Financial Services Review report – also known as the Murray Review – which was handed down in December of last year.
As part of its response, the Coalition will push for strict limits on unfair credit card surcharges, tougher controls on financial advisors and greater powers for industry watchdogs.
“This is a very important step in continuing the assurance that Australia’s financial services system, or our banks, insurance companies, superannuation, the whole system, whole industry is safe and secure,” Mr Turnbull said during a press conference on Tuesday morning.
The nation’s foremost consumer group welcomed the changes.
“This is a strong response to the problems we’ve seen in the financial system in recent years that were analysed in greater depth by the Financial System Inquiry,” CHOICE chief executive Alan Kirkland told The New Daily.
“We see a range of new powers and new investigations that should go to the heart of the remaining problems in the system for consumers.”
By the middle of next year, the government will attempt to legislate a ban on unfair credit card surcharges that exceed actual cost.
“We think that consumers are entitled to a very fair deal here … to get exactly what they are being represented to be getting, which is an additional charge that recovers no more than the merchant’s costs,” Mr Turnbull told reporters.
These new regulations would be enforced by consumer watchdog, the Australian Competition and Consumer Commission, with the crackdown to be gradually phased in.
CHOICE’s Alan Kirkland labelled this a “huge victory” for consumers.
“We’ve repeatedly revealed the outrageous level of credit card surcharges, which are often far more than what it costs merchants to run credit cards,” he said.
“Some of the biggest culprits are big companies like Qantas and Virgin and this will mean that finally we’ve got a regulator that’s got the power to crack down on this.”
Better investing advice
Under the changes, financial advisors would be required to hold a university degree, to sit a professional exam and to comply with a code of ethics before they could practice — measures designed to better protect consumers from unscrupulous and financially disastrous advice.
“It is about strength of our financial system, it is about choice for Australians, it’s about innovation to enable the system to keep pace and to provide the opportunities Australians need from the system and that it’s fit for purpose and it’s about transparency,” Treasurer Scott Morrison said.
Once qualified, advisors would also be required to undergo continuous professional development to ensure their skills remain up-to-date.
Advisors, as well as mortgage brokers, might also be required to disclose any relationships they have with institutions like major banks or parent companies. Criticism has been levelled at the cozy relationships some advisors have with the companies whose products they may promote.
CHOICE’s spokesman said this proposal was in effect an admission from the government that the recent FOFA changes did not go far enough.
Greater powers for corporate watchdog
By the end of 2016, the government has pledged to draft laws that would give the corporate regulator, the Australian Securities and Investments Commission, greater power to stamp out defective financial products.
These powers would include the ability to ban individuals from managing financial firms, which could protect consumers from serial offenders.
“Giving ASIC the power to step in and modify or even ban harmful financial products is really important,” Mr Kirkland said.
“There’s been lots of criticism of ASIC in recent years, but in reality ASIC hasn’t had the full set of powers that it needs in order to step in as early as possible when it sees problems.”
ASIC will also be asked to review remuneration in the mortgage broking industry.