Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Financial Services) Share this | Hansard source

It's clear the Morrison government did all that it could to avoid a royal commission into banking and financial services in Australia, and, indeed, to delay many of these recommendations coming to the parliament. It has even gone as far as completely ignoring some of the recommendations of the royal commission into banking and financial services, most notably the No. 1 recommendation about ensuring we maintain responsible lending laws in Australia. It should never be forgotten that the government voted 26 times against a royal commission. This was despite predatory hawking of financial sector products, including insurance, already being a well-known issue that had been raised well before the royal commission. It had been raised in reports by ASIC and consumer groups. Add to that the litany of financial scandals that Australia had gone through in the last 15 years: Trio Capital, Timbercorp, Opes Prime, Storm Financial, the Commonwealth Bank's wealth management scandal, the CommInsure scandal, the fees-for-no-service scandals in all of the banks and the scandals uncovered by AUSTRAC of late.

Despite all of these scandals in Australia, the government still refused and resisted a royal commission. It only relented in the end when the banks gave it the go-ahead. The banks saw the writing on the wall, saw the damage it was doing to their reputations and, in some cases, to their share prices, and wrote to the Prime Minister and said: 'We relent. You can have a royal commission.' The banks wanted it done quickly, and yet here we are. The Morrison government continues to drag its feet.

It has already forgotten the shocking story of a young man with Down syndrome being pressured into purchasing life insurance by predatory salespeople hawking insurance products. Grant Stewart, a Baptist minister, was flummoxed as to how Freedom Insurance thought it was okay to sell his 26-year-old son more than $100,000 of life insurance. He said it would have been clear on the phone that his son had an intellectual disability. But that didn't stop the salesman pushing the product and getting the young man's debit card details. Mr Stewart said his son was left distressed by the experience, and was apprehensive about answering the phone after that. He said:

"He believed he'd done something wrong and was quite embarrassed and didn't know what he'd done," …

The commission heard recordings of phone calls between Freedom Insurance's sales agents and Mr Stewart's son. When the public heard this evidence in the Hayne royal commission, they were rightly horrified. We could hear the long pauses as the young man struggled to answer some of the questions. At one point the salesman even asked Mr Stewart's son if he had any further questions. That horror that the Australian public felt then turned to outrage when we heard that the young man's father called Freedom Insurance, the company, to complain. He asked them how their sales agent could possibly believe that his son had understood what was happening. The Australian public were also outraged that Freedom didn't immediately cancel the policy. It took numerous phone calls and emails from Mr Stewart to resolve the matter, and he ended up filing a complaint with ASIC. It had taken two years for the company to send him the recordings and transcripts of the phone calls between his son and Freedom's sales agents. The commission also heard this salesperson had been the subject of multiple complaints and warnings.

We know that this wasn't an isolated case of predatory hawking of financial products. The Hayne royal commission also heard evidence of sales staff at ClearView Wealth being trained to cold call potential customers on the phone and sign them up to life insurance as quickly as possible, despite their objections, before sending them documentation to read. This is in breach of the law. It was a deliberate strategy by ClearView to give customers no time to think about their decision. It was only through the work of the royal commission that ClearView was forced to admit that they'd broken the antihawking laws in Australia 300,000 times between 2014 and 2017 by cold calling people to sell them insurance. That's one of the great shames of all of the evidence that came out in the royal commission relating to many of the financial scandals; the number of breaches of laws associated with some of these scandals is into the hundreds of thousands.

The predatory approach resulted in a lot of Australians signing up for insurance products that they didn't need or want. The commission was told ClearView held staff training days to circumvent regulatory barriers put in place by the Future of Financial Advice conflicted remuneration laws. The company admitted there were no consequences for management at ClearView for attempting to circumvent the law. Australians were gobsmacked by the sheer level of scandals that were exposed by the royal commission into the banks.

In consultations with some financial service providers, in the wake of all of this, we're asked: why is the government regulating? Why are we regulating this industry? My answer to those people was simple: we don't wake up in the morning saying, 'Let's go and put a regulation on banking and financial services.' We don't wake up and say, 'Let's go and make it harder for people to do business in this industry.' But when you have 15 years of a litany of scandals in which Australians are ripped off and, in many respects, lose their life savings or their greatest asset, their house, government is forced to act.

That is why Labor was pushing the government, some years ago, for a royal commission into banking and financial services. In 2016 Labor announced support for a royal commission; yet the response from the government at the time was that it was unnecessary and a populist whinge. The former Treasurer now Prime Minister said that Labor's push for a banking royal commission threatened to undermine a key pillar of the Australian economy. He then urged Labor to stop playing 'reckless political games' and said the prospect of a royal commission had caused harm overseas about the strength of the Australian banking system. He said, 'We're focused on the practical things that need to be done,' and that Labor was acting with 'callous disregard and complete political opportunism'. That particular statement now shows just how out of touch the Prime Minister was on this issue and has been ever since.

It's clear that the coalition never wanted a royal commission into the big banks. They voted against it 26 times and only relented after getting the green light from the big banks and heading off a backbench revolt. Then the Prime Minister said, 'Well, it's regrettable but necessary action.' The reality is that the rip-offs and rorts exposed during the Hayne royal commission would never have seen the light of day if it hadn't been for the very strong advocacy of many whistleblowers, and I wish to pay tribute to those who blew the whistle on many of these activities in, particularly, the big banks—many of them to their personal detriment. They were dismissed, they were ridiculed, and many of them have never been able to find employment in the wake of that. They deserve our praise and appreciation. There's also been the advocacy of consumer groups and many victims of financial services fraud and, of course, Labor's advocacy for important reforms such as the royal commission. Our focus was on exposing the blatant law breaking in the financial sector and on helping to improve the circumstances for millions of Australian consumers.

It's something that we are proud of in working with those consumer groups and those whistleblowers. It has resulted in 76 recommendations being delivered by the royal commission, 54 of those calling for federal government action. The government's implementation road map was released in August 2019 indicating that the vast majority of legislation required to be implemented would be completed by the end of 2020. Despite this commitment, they haven't met much of that timetable.

This Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 contains 12 schedules that implement the government's response to 20 recommendations in the royal commission. Schedule 2 amends the Insurance Contracts Act to implement two changes, to limit the circumstances under which insurers can avoid life insurance contracts on the basis of misrepresentation or non-disclosure by a person, such as not disclosing symptoms of a medical condition that would void a contract in certain circumstances. They also deal with replacing the strict duty of disclosure on people for consumer insurance contracts, with a 'duty to take reasonable care not to make a misrepresentation'. This will make it harder for insurers to void claims on insurance products. The amendments will apply in relation to consumer insurance contracts that are entered into on or after 5 October 2021.

Schedule 3 implements an industry-wide deferred sales model on the sale of add-on insurance products—for example, many junk insurance products, particularly those that were exposed in the royal commission, where the premium paid is greater than the sum that's insured. They include things like tyre and rim insurance as an add-on for the sale of a motor vehicle. These products will now not be able to be sold for at least four days after a customer has committed to purchasing the principal product or service. The schedule allows the minister to exempt certain products from the deferred sales model granted by the regulations. This is an area where some of the stakeholders—in particular, consumer groups—have raised some concerns, particularly around the sale of travel insurance. The minister indicated in his second reading speech that he planned to exempt travel insurance from these provisions. But many of those consumer groups have raised concerns about travel insurance and the huge mark-ups and commissions that are received by travel agents, in particular, when selling some of this insurance. I foreshadow that it is my intention during the consideration-in-detail stage to move an amendment to ensure that, before making the regulations for that purpose, the minister must ensure that he or she is satisfied that the class of add-on insurance products has historically been good value.

Schedule 5 prohibits the hawking of financial products, mainly superannuation and insurance. Hawking is defined narrowly as offers to sell made as part of an unsolicited conversation such as a phone call, face-to-face sale or real-time chat. Basically, in these circumstances the customer will have to take active steps and consent to being contacted—that is the key—for such product sales to occur.

Schedule 7 requires claims handling and settling services to be licensed as financial service providers under the Corporations Act. This is aimed at ensuring that those handling an insurance claim on behalf of an insurer are subject to the same licensing conditions, which should address concerns that claims are not being handled efficiently, honestly and fairly.

These are important reforms. The government's reluctance to act on introducing many of these reforms, and the fact that they voted against the banking royal commission 26 times, is shameful. It's plain to see that this government was dragged kicking and screaming into acting on the complaints of the tens of thousands of Australian consumers who've been ripped off in the financial space.

This bill still leaves some important recommendations by the royal commission that haven't been dealt with. As I mentioned earlier, it is shameful that the government intends to ignore the No. 1 recommendation of the royal commission, and that is to ensure that Australia maintains its responsible lending obligations and laws on banks and financial institutions so that predatory lending—that virus that spread throughout the world in the lead-up to the global financial crisis—and the effect that it had on many families, workers, businesses and the international financial system, can be avoided in the future. This reform, if the government gets away with it, in removing those responsible lending obligations, could see the beginning of another round of predatory lending in Australia that could lead to collapses and people being ripped off. That's why Labor is deeply concerned about that proposal.

It should never be forgotten that this government voted against a royal commission 26 times. It was only due to the actions of Labor, whistleblowers and consumer groups that many of these reforms are here before the parliament today.

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