The RC initial hearing on 12 February 2018 has provided valuable information and insights. Key matters are:
- First round of hearings – To be conducted in 1 months’ time. Considers whether in relation to lending consumers are enjoying the right of all Australians to be treated honestly and fairly in dealings with banking and financial services providers. Focus on consumer lending re credit products (e.g. home and car loans and credit cards and possibly add on insurance).
- Next area of focus – Financial planning and wealth management – Evaluation of the success of FOFA reforms and an inquiry into the practices of the financial advisory industry.
- Process for public hearing – Document indicating scope of each round of public hearings will be released on RC website before round begins. Many will focus on case studies, which will be used to explore topics connected with the case study. They will concern particular events involving one or more financial services entities. At the end of each round, written submissions will be invited on topics identified by the RC. Submissions can be made by entities not directly participating in particular hearings.
- RC engagement with industry to date – Initial requests sent to industry (including insurers) for voluntary submissions asking them to identify misconduct and where they have not met ‘community standards and expectations’ since 1 January 2008 and reasons for this. RC is unhappy with response quality and is engaging further.
- What are ‘Community Standards and expectations’ – RC gave an indication on what this may cover by referring to the Financial System Inquiry. In summary, it was of the view that the ultimate purpose of the financial system is to facilitate sustainable growth in the economy by meeting the financial needs of its users and this will be achieved if it operates in a manner that is efficient, resilient and fair. Fundamental to fair treatment is the concept that financial products and services should perform in the way that consumers expect or are led to believe. Fairness, understood in this way, may lie at, or at least close to, the heart of community standards and expectations about dealings with consumers. No comment was made on whether expectations must be reasonable.
- Submissions – 385 public submissions to date and increasing – 49% banking, 18% superannuation, 6% general insurance market, 6% life insurance and total permanent disability insurance market.
Areas of concern identified – 31% personal finance; 17% superannuation; 13% small business finance; 12% mortgage brokers; and 9% financial advice
Term of Reference issues – 84% misconduct or conduct of financial services entities that falls below community standards and expectations; 40% culture and governance practices of financial services entities; and 35% effectiveness of redress for consumers;
- misconduct or conduct that falls below community standards and expectations – falsified documents, inappropriate financial advice, inappropriate lending and delay in processing insurance claims;
- culture and governance practices – conflicts of interest of representatives of financial services entities and incentive-based remuneration resulting in inappropriate outcome for customers etc; and
- effectiveness of redress – efficiency of IDR and EDR frameworks.
There will be more.
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