Wednesday, 24 October 2018
Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018; Second Reading
I would like to make a contribution on behalf of the Labor opposition on the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018. I will start by saying that Labor's very proud of its history in making sure that consumers are properly protected in financial services and, at a level of principle, any law that would seek to strengthen protections offered to consumers is one that Labor would support.
The bill before us has a title that's probably not well understood by members of the general public, but it's very important to how financial services are designed and marketed to them. The bill before us seeks to do two main things. It seeks to impose obligations on financial service providers to comply with new design and distribution obligations, and it gives ASIC new powers to intervene where products are causing, or are likely to cause, significant consumer detriment. Just in really plain English, the bill before us would give ASIC a new power to require financial services companies to actually provide specific design requirements to ASIC to get approval for those design requirements and, importantly, to explain to ASIC who the target audience for these financial products are. That's important because one of the big issues we've had that's come out of the financial services royal commission that is related to consumer affairs is that a lot of companies have been creating financial products and marketing them hard at groups that are never going to be able to access and use those financial products—essentially, selling things like junk insurance that are not appropriate for the community of people to whom those products are being marketed. At a level of principle, this is important. ASIC has asked for design and distribution powers and product intervention powers, but we do have some issues with the way that this bill has been framed and I'll talk about those in due course.
Under the changes that are being proposed here, financial service providers would be required to specifically determine the segment of the consumer market that they'd be targeting with their service and ensure that the product is distributed in accordance with that determination. Determinations are going to be made in writing, and they'll be made publicly available. That's important for the sense of transparency and probity that surrounds this area of law. Distributors or sellers of products will be required to ensure that the sale and marketing of those products is carried out in accordance with the target market determination. If the target market determination is not complied with, ASIC will have powers to require rectification and affected consumers will have a civil cause of action to recover losses suffered as a result of breaches of the obligation.
The example that I talked about before, which is one of the ones that's come out of the royal commission that's been very high-profile, is the targeting of funeral insurance products at people who are not going to get value from those products. In this instance, it was babies and young children who were living in remote Indigenous communities in the Northern Territory. That type of misconduct in financial services is the exact target of the bill that's before the House.
The product intervention powers provide ASIC with the power to deal with financial products that are causing significant harm to consumers or are likely to cause significant harm to consumers in the future. ASIC will be able to proactively intervene by banning or preventing sale of products or making orders to require certain conduct to be avoided in relation to the product—that might be specific sales techniques, for example.
These are concepts that Labor are broadly in support of, but we do have some concerns about the detail of the bill. We bring those concerns to the table in the context of a long history and a lot of active legislating that Labor governments have previously done in the area of consumer protections. It was Labor that saw the damage that was being done to families and communities across the country through what has been revealed in Commissioner Hayne's interim report into financial services as a culture of greed. Labor advocated for a royal commission for about 600 days. We did that because the people who live in our communities, in our constituencies, were coming to us and telling us stories about the way that they were being treated by banks that were simply unacceptable. It became obvious over a period of time that this wasn't a case of a few bad apples in one bank or another but, in fact, a systemic problem that could only really be come to terms with through a royal commission.
We on the other side of the House had a very different approach, where the focus was—and always will be—on protecting the big banks and the big institutions that have caused so much harm. We had the current Prime Minister, Scott Morrison, the member for Cook, say that the royal commission was 'a populist whinge'. I have sat down and talked with victims of bank misconduct who have lost their homes, who have lost farms that have been in their family for more than 100 years, people who have suffered relationship breakdown and mental illness because of what has happened to them at the hands of the big banks. And to call that 'a populist whinge'! The Prime Minister called it 'the QC complaints desk.' I'm uncomfortable with that. With what we've seen through the royal commission, it's so obvious that this was justified and it is an important process that we're going through.
When the federal government's hand was eventually forced and the royal commission into financial services was eventually called, the commission was constructed in a way that meant a lot of the people who have been terribly hurt by financial services have not had the opportunity to share what happened to them in the royal commission. I think that's very regrettable. It is certainly not the fault of the royal commissioner, who Labor believes is doing an excellent job. But the government, having never wanted to have a royal commission into financial services, was dragged kicking and screaming into doing so, and then gave the commission just over 12 months to consider all of the misconduct across banking, across super, across insurance and across related financial services and to look at all of the regulatory systems and powers and laws that sit with the regulators. To examine all of that in just over a year is an absolutely mammoth task. Regrettably the royal commission has not been given the time that it needed to really hear the stories of Australians who've been so badly affected by this.
So that's the context in which we see the bill today. It's a bill from a government that is trying to look like it's doing all the right things and tick this box and that box, but its heart has never been in trying to address the problems that are faced by consumers of financial services—and you see a very, very different approach to this problem from our side of the parliament. The bill before us is one small part of what will be a very complex policy response to address the immense consumer harm that has been exposed in the banking royal commission.
As a result of the royal commission, we have a once-in-a-generation opportunity to reform the financial services sector for the good of the nation. It is essential that we get that reform right. It's essential that we achieve the twin objectives of protecting consumers and ensuring the continued viability and prosperity of our financial services industry. Those objectives are not mutually exclusive. If I read another article telling me that, , misconduct in financial services is somehow justifiable because we need our banks to be prudent and profitable—I'm sick of hearing that; it's not right. If there's misconduct in financial services, it's not good for the Australian economy, it's not good for consumers and, ultimately, it's not good for financial services.
Labor stands ready to do what is necessary to ensure that reforms introduced in the wake of the royal commission very significantly address the issues that have been exposed so far. I said that the general principle of giving ASIC power over design and distribution obligations and product intervention powers is one that Labor supports. That is the case. But we have very significant concerns that the bill, as it's been presented to the House, is cast too narrowly. We have referred the bill that's before the parliament now to a Senate inquiry, and we are going to be using that process to understand why it is that the exposure drafts that were provided to the public through this process were watered down, from draft to draft to draft, until we have a bill before the parliament today that does not reflect the powers that ASIC said it needed to properly address these issues.
We should be listening to ASIC right now because they're meant to be the tough cop on the beat that's helping us deal with these issues. ASIC has raised a lot of concerns about the exclusions that are provided in the bill before the House. Some of them relate to consumer-facing financial services. ASIC has asked the government to remove exclusions in the bill that prevent some services from coming within the scope, for example, of the new proposed product intervention powers.
In its submission to the exposure draft process, ASIC recommended that the government include consumer credit, covered by the National Consumer Credit Protection Act, within the scope of the design and distribution obligations. Just to put that in plain English again, the National Consumer Credit Protection Act regulates the normal financial products that you and I would probably use every day, and they're not included in this new power that we're giving to ASIC. So we can't allow any fanfare to be associated with a reform like this when the most fundamental products that guide the everyday interactions that Australians have with financial services are not even included in the scope.
ASIC was quite strident in expressing its view that consumer credit products should be covered by the design and distribution obligations. We're talking about things like credit cards. The credit card is probably the most commonly used credit product in Australia. It's the one where we're going to see significant issues around the exploitation of people who are disadvantaged and that sort of thing. Yet the government's bringing a bill before the House that doesn't even include oversight of those credit cards.
ASIC directly addressed and discredited the claim that has been made by some in the industry that existing protections were good enough already. In the submission they made, ASIC said:
… we consider that the responsible lending obligations and other consumer protections are not equivalent to, or an adequate substitute for, the proposed design and distribution obligations. We think the new obligations would provide a foundational framework for ensuring that credit providers have appropriate product governance processes and controls in place to ensure products are well designed and distributed with a view to consumers' objectives, financial situations and needs. This outcome is quite separate and distinct from the purpose of the responsible lending obligations, which is to reduce the potential for individual consumers to suffer hardship as a result of inappropriate lending.
That's sort of in ASIC-speak, but what they're really saying here is that it's great to have consumer protections which are focused on individual cases—the credit card that I might have with my bank, or the one the member for Wakefield might have with his bank—but this is about a systemic issue; this is about requiring financial institutions to say, 'This whole product set is going to be designed with a particular consumer need in mind, and we are going to market it to that particular consumer set,' and for ASIC to have some oversight of that so we can make sure that the right people are being targeted for the right products.
ASIC's proposals also included the emerging buy now, pay later sector in the scope of the bill, and it's a great opportunity for the parliament to ensure that ASIC doesn't have to keep playing catch-up with new players in financial services. ASIC has asked for buy now, pay later providers to be included, and it's pretty clear from media reports last week that a leading buy now, pay later provider, Afterpay, has actually agreed that it should be brought within the scope of this bill. So we have a situation where one of the providers of financial services who are out there trying to do something new, using a bit of technology in the way that they're going about their business, is actually saying to government, 'We want you to regulate us in this way.' And yet the government has designed a bill that specifically carves them out—specifically excludes them. Afterpay also told Fairfax newspapers that extending the bill to cover buy now, pay later providers would 'afford customers an additional layer of protection without compromising our business model'. They said that they want to come under the regulator's product intervention powers, as it would 'promote higher levels of consumer trust in newer services such as ours'. We've got a provider of financial services asking to be put within these regulatory powers, and the government is saying that they're not interested. They want to have a really narrow scope for this bill, a narrow scope for this particular oversight from ASIC.
These are just some of the examples of changes that Labor will be discussing with stakeholders through the Senate inquiry process. It's quite likely that we'll be looking at, potentially, some amendments to this bill that will make sure that the design and distribution obligations—which we believe have great merit—are actually doing the job that they should be doing, which is protecting Australians from being ripped off by financial services providers.
I want to comment briefly on one other matter of detail relating to consumer redress, where ASIC chooses to exercise its product intervention power. The use of the product intervention power will require that ASIC is satisfied that the financial product in question has resulted, or is likely to result, in significant detriment to consumers. Labor is concerned about the matter of retrospectivity of the product intervention powers. To be more specific, we're concerned for consumers who are affected by what ASIC later determines was a serious harm or detriment but might find that they are outside of recourse because of the way that this legislation has been framed.
Currently, the bill presented to the House only allows for ASIC to intervene to require changes to future conduct of regulated entities. So contracts entered into by companies that ASIC later identifies as having caused serious harm and detriment to customers are actually not within the scope of the powers. To put it another way, the customers whose experience will form the evidence base upon which ASIC decides to take action would be left behind when ASIC chooses to intervene in that product. The practical effect is that, if ASIC becomes aware that consumers are being harmed in a significant way, it won't be able to require the company to remediate customers who have already been affected by that conduct. I just note that as an area of concern. Again, that's something that we'll be exploring through the Senate inquiry. Under the bill as currently drafted, if you're a consumer who gets ripped off or exploited and your story spurs ASIC took intervene, you might be left with no recourse, and that seems to be a bit of a gap in the legislative approach that's been taken.
In conclusion, the bill before us relates to a power that ASIC has asked for, and that is a power that will enable them to require financial service providers to actually explain how they've designed a product, who that product is targeted to and how it's going to be sold, so ASIC can ensure that some of the terrible examples of misconduct that we have seen through the royal commission can't happen under Australian law. One of the most awful examples that many people listening today will remember from the royal commission is an instance where a company that was operating in the Northern Territory, in rural and remote Australia, was targeting its products to Aboriginal people—some of the most vulnerable consumers in the country—and were creating a financial product that was of no use to those people. It's an extraordinary example of misconduct. And, would you believe it, recent reports tell us that the company is still out there, still operating and still marketing these products at some of the most vulnerable consumers in the country.
We have to make changes. We have to make changes to the law and we have to make sure that the law, as it stands currently, is enforced. We are supportive of giving ASIC powers that it is telling us it needs to properly regulate financial services. But, when ASIC asks us for this power, it is not good enough for us to say, 'Thanks for the idea. Now we're going to carve out this section of the market, that section of the market and this other section of the market through the exchanges that the government is having with big business.' It's simply not good enough. This has to stop. When we talk to people about some of the issues in financial services, the issue that comes up again and again and again is the power of business—as they deal with governments like that which sits opposite me in the chamber—to get themselves carved out of oversight and out of regulation. We just can't allow that to continue to happen in this parliament.
I'll flag again that we're very worried that products that are regulated by the Consumer Credit Protection Act have been carved out of this bill. The fundamental products that all of my constituents use when they engage with a bank are not part of the oversight mechanism that's being proposed here. That's not good enough. Other organisations, like 'buy now, pay later', which is a really big issue—a big emerging area in the market—is not part of this bill. I'm very worried about that.
We're worried about some of the other aspects of the bill. We're supportive of the overall principle, but I flag that we're probably going to come into this chamber and discuss significant amendments to this so we can make sure that ASIC, who are trying to protect Australian consumers from the harm that's being done, are able to do their job properly. Thank you.
I appreciate the opportunity to make a contribution in support of this legislation. I pick up from where the previous speaker, from the neighbouring electorate of Hotham, spoke. The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 is not some grand experiment; it is simply a recognition of a power that ASIC has asked for to try and make sure we strengthen the financial products in the marketplace that consumers should be able to comfortably rely upon, knowing full well that financial products are geared and orientated towards them.
I recently had the privilege of serving as the chair of the House of Representatives Standing Committee on Economics, including grilling some of the bank CEOs in the previous fortnight about some of the worrisome cases that have emerged out of the royal commission into banks and financial services organisations. When you go through the royal commission's report, it highlights a number of themes, including, of course, explicit examples of where financial institutions have done wrong. I don't think there's anybody in this chamber who thinks that, where there is wrong, there shouldn't be recompense and a pathway through remediation and redress. When people have what, in the end, are numbers on pieces of paper but their livelihoods are taken away from them because of misconduct or misjudgement or inappropriate conduct by banks, yes, there are dollars and cents that disappear, but, really, it's lives and the hard work and earnings of people that disappear. In fact, it is their accumulated effort, often over many years—particularly when people put their private homes down as a basis of security to be able to do things like grow their own business or try and secure a greater sense of opportunity for themselves and their family for generations to come.
But there are other themes that came out of this report from the royal commissioner, including challenges and competition. I know during the hearings last week, in particular, the member for Mackellar outlined concerns about what the royal commission raised and about whether there needs to be a greater injection of competition between the big banks as part of securing a more consumer orientated financial services system in this country. There were also big questions about the alignment of incentives. So, when people within financial services organisations go out into the marketplace and provide products for people, are they acting in the best interests of the consumer—meaning offering them a product that they want but, more critically, that they may need and that then goes on to meet their need? Or are people incentivised to provide products in the marketplace and to sell those products on to consumers based on what delivers them—the broker—profits, bonuses and a better financial outcome for themselves at the expense of the consumer?
I'm a great believer in the free market. I always have been. It's not because of some grand ideological obsession, though some people have accused me of that in the past. I see a South Australian member—the member for Wakefield; is that right?
That's the one—who taunts me from the other side, but when I'm making a serious point. I'm a great believer in the free market. I think it delivers better for people. In the end, when incentives are aligned to deliver an outcome for people, the capital will flow because, ultimately, the greatest incentive that any business can meet is consumer demand through goods and services. But, when you have malinvestment or misalignment of incentives, you will get a distortion against people. And that's the great task of the people in this chamber, this building—to make sure that there is an alignment incentive for business and enterprise to grow and prosper, because they're delivering the best outcomes for people. That's why the recommendations out of this royal commission will be critical. It actually gives us a pathway of what we seek to redress. But, as part of the task of doing that, as the royal commissioner outlined, in getting the incentives right, in having financial products that meet consumer need—the task that's necessary to make sure that we have a banking system that does grease the wheels of our economy; that does build confidence; that does mean that people, for the first time, are able to go off and buy their own home; that does mean that people are able to go off and get the investment finance they need to grow their pie, to create greater opportunity for others, to get the capital that people need to be able to grow their business so that they can take it from an idea to something that may then go on to flourish and blossom, to take the capital they need to go on and employ more people and create greater opportunities for the rest of their fellow citizens—you need a system that has as its anchor and at its heart confidence. You need confidence from people in this chamber, confidence because we think they're doing the right thing, but also confidence of the Australian people. The only way you're going to deliver that is that it be well but lightly regulated, appropriately regulated, targeted in regulation. But also, as the royal commissioner has outlined, rather than going through a discussion around adding in new burdens, it's actually removing complexity so that banks and financial institutions know what they have to do, but, equally, that there is no excuse.
One of the great outcomes of the hearings from last week—and I see the deputy chair of the economics committee here now, and I hope he would agree with me—is that, if we are to go down the pathway of simplifying regulation in the financial services sector, there must then also be a complementary discussion about the punitive measures. I know the Treasurer has taken steps in this area recently as well. If you want to build the confidence of the Australian people in the system, that's how you do it: by recognising that, firstly, there are trade-offs, but also that these companies have to understand that the weight and the eyes of the nation are upon them, and that we trust them to do a critical and important role. Great power—and great concentration of market power, as exists in the banking sector—comes with a great responsibility. And I don't think that's unreasonable. I don't want to see people doing the wrong thing, and I would hope that the culture within these organisations is not geared towards doing the wrong thing either.
We have a bill before us that focuses on what we can do to make sure that financial service instruments and products are more consumer oriented. It enables the regulator to take appropriate action to make sure that there is transparency in the marketplace so that financial products deliver what consumers reasonably expect. It's not a particularly radical proposition, but it's clearly a timely one. The question for us now is where we go from here. I know there's a lot of partisan politics around—different views of things like the banking royal commission. Let's just accept it. Occasionally you'll get howls and crows from the members on the other side saying, 'Why weren't you this? or, 'Why weren't you that?' And one day, I'm sure that will be comfortably returned—
Don't worry, we're not done with you yet—sorry, Deputy Speaker; when I say 'you', I don't mean you, I mean the member for Wakefield. But the question now is: how do we as a parliament rebuild a sense of confidence at the heart of our economic system? That's what this legislation is seeking to address. Not in isolation, but as a critical part of rebuilding the confidence in the regulatory system so that ASIC can do its job.
I know that the royal commission also highlighted question marks about how ASIC were doing their role. There are differences of opinion amongst members about whether the burden and the obligation, and the volume of work that ASIC have—and, yes, sometimes there are debates around resources as well—raise a question about whether regulators can do their task. But when regulators come to us and say, 'We need a power to be able to do our job better,' we don't take it at face value—because I'm not a big fan of independent regulators, is the truth. But our task, then, is to at least seriously consider the consequences, the benefits, and whether we should go through it.
That's what we're doing in this piece of simple legislation today, as a result of the Financial System Inquiry. It recommended the introduction of design and distribution obligations and a product intervention power so that improved design and distribution practices would allow interventions to be made where there is a significant consumer detriment. So this is a bill that should be welcomed. It should be a bill that's a standard, or the foundation of, potentially, more to come. It should be part of a package of what we do in this place—absent the concerns of partisan politics—to focus on what we need to do to have the financial service system that this country needs to build and to grease the next stage of economic development of our nation's future.
This bill, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018, amends the Corporations Act to introduce design and distribution obligations in relation to financial products, and a product intervention power for the Australian Securities and Investments Commission to prevent or respond to significant consumer detriment. Labor is backing these measures. We'll back any measures that protect consumers from harm caused by dodgy financial advice or financial products that are sold by unscrupulous financial advisors—and that's why we are supporting this bill.
We have to get this right and we have to do this properly. We need to understand the genesis of this reform and some of the other reforms that have been introduced into this place by the government. A lot of those measures have been knee-jerk reactions to the fact that the government, for many years, opposed a royal commission. This measure, the BEAR and others have been rushed and have been hurried through the parliament without proper consultation in the view of many that work within the industry, including those that have been harmed by the financial misselling of products. This was all to avoid a royal commission. We all know that the now Prime Minister, as Treasurer, opposed a royal commission up hill and down dale, saying that there was no need for one and that those calling for one were being overly dramatic in doing so. That's why we want to get this piece of legislation right and we want to make sure that it acts in the interests of customers and consumers. That's why Labor has referred this bill to the other place for inquiry.
Labor has been listening when it comes to the unscrupulous advice of financial advisors, the dodgy products that have been pushed on consumers and people being forced into products that aren't in their best interests. Labor has been listening for many, many years, and we've acted. We acted when we were in government, through the FOFA reforms. We acted in opposition in calling for a royal commission. We've also been out there defending the funding and the resources of the regulator, the Australian Securities and Investments Commission predominantly, to ensure that they have the necessary resources and are a tough cop on the beat to crack down on the misselling of products that are aimed at in this bill. ASIC has asked for other amendments, through the exposure draft process, that haven't been incorporated into this bill.
Again, I will say that it has been rushed, including regarding the buy now, pay later providers and having at look at whether or not they should be brought within the scope of the bill. We should look at consumer credit and funeral expense products being covered by the design and distribution obligations. But, of course, the Abbott-Turnbull-Morrison government has given no encouragement to one of our key regulators. They have tried their best to gut ASIC and to undermine its ability to uncover and prosecute unconscionable conduct. We all know what occurred in the Abbott government's first budget in 2014, where they dramatically cut the funding for ASIC. That resulted in job losses and resulted in a loss of expertise for people who were grounded in the pros and cons of identifying financial fraud, the misselling of products and dodgy behaviour and a loss of expertise in making prosecutions. A lot of the people left the organisation in the wake of those 2014 budget cuts.
It's clear now, after some of the evidence that has been uncovered this week by the Labor Party through estimates, that the Liberals have cut nearly $200 million from the ASIC budget in five years. That is $200 million of funding cut from the regulator whose job it is to police the financial services sector. That was after all of the scandals and rip-offs, after the CommInsure rip-offs, after the dodgy behaviour that was going on in the Commonwealth Bank in their wealth management arms and after all of the banks being involved in bad advice for wealth management and having to go into reviews of their financial advice and their products. That was after the banks having to pay back customers, having people banned, having to pay fines, having to enter into enforceable undertakings, having the AUSTRAC allegations against the Commonwealth Bank and having the largest corporate fine in Australia levelled against the Commonwealth Bank. After all of these scandals that we've had in financial services sector over the course of the last decade, this government goes and cuts ASIC's budget by $200 million. They cut the budget of effectively the police who look after this industry, and yet they want to come in here and talk about reforms such as this and say that they're listening to the people who have been the victims of financial fraud in this country.
I'll tell you who the frauds are: it's those people who sit opposite in this place, particularly those National Party MPs. It blows me away that some of them have the hide to be interviewed by TV stations and radio stations about them being the ones who have been calling for a royal commission into banking and financial services in this country when they've come in here and, on 26 occasions, voted against a royal commission into banking and financial services in this country. Yet they slink back off to their electorates in the bush and, when they're confronted with those facts about voting against a royal commission, they say: 'Oh, no. That's not us. That's the Liberals, you see? That's the Libs. They don't want a royal commission. We want a royal commission. We're tough on financial fraud and financial services. We want a royal commission.' But they're spreading mistruths because they came in here and they voted against a royal commission. They joined with their coalition colleagues in voting against a royal commission on 26 occasions. That's the reason why we've had rushed legislation such as this. It was done to avoid a royal commission. The government put in place a number of reforms simply to avoid a royal commission.
We've all seen through the process of the royal commission the powers that they've had to get to the bottom of what has really been going on in financial services in this country over the course of the last decade. The government's response was: 'It's okay. We'll just empower the House of Representatives economics committee. They'll be able to do the job of a royal commission. We'll get the bank executives in once a year and we'll give the House of Reps economics committee the opportunity to question them.' Some of the evidence that came out of those inquiries was insightful. We had one last week. But what was uncovered was that that committee didn't have the probity powers or the time to really delve into what has been going in financial services in this country and provide the opportunity for victims to have their say and for justice to be done. That's the great beauty of this royal commission. They've had the necessary time, the powers and, indeed, the expertise of the royal commissioner and the counsel assisting to really delve into what is going on in financial services in the country.
Despite the depth of the ASIC cuts and their curtailed ability to help police financial services, this government continued to cut their budget and take zero action when it came to looking at a royal commission. We know that this government is out of touch. That's evident from the results of the weekend by-election. But it's desperately evident that they're out of touch on this issue of financial fraud and financial services. How could they be otherwise in opposing the FOFA reforms when they were originally planned, in saying there was no need for a royal commission and then in rushing legislation before the parliament before the royal commission has had an opportunity to report?
Australians will never forget that this government resisted those urgent calls for a royal commission into banking and financial services for 600 days. For 600 days, they opposed a royal commission. It was only after they got the green light from their mates in the banking sector that the Liberals and Nationals reluctantly relented and agreed to a short, sharp royal commission. Even now, there have been further calls from some of those victims. There have been thousands of submissions to the royal commission—9,000 to 10,000 submissions. Only 27 victims have had opportunity to put their case. If we're going to restore confidence and trust in banking and financial services, what do we say to those thousands who haven't had the chance to verbally put their case before the royal commission and have their concerns listen to? How are we going to restore that trust and confidence without the opportunity for those people to have their say? That's why Labor has been calling on the Prime Minister and government to consider extending the terms of reference to allow all of those Australians who have been the victims of these shocking rip-offs and financial fraud to have their say in the commission.
This government has a history on issues such as this of opposing the necessary reforms to crack down on dodgy financial advice. When Labor was in government, there were numerous inquiries into some of the collapses that occurred in this area. Trio Capital, Westpoint, Opes Prime, Timbercorp—there were all of these financial collapses where thousands of Australians lost their life savings. In some cases they'd retired and put all of their super into these products, maybe re-mortgaged their houses to go into further hock, on the advice of these financial advisers, and they lost the lot. They lost not only their retirement savings but their kids' inheritance as well.
In the wake of that, Labor acted, and acted strongly, in implementing the FOFA, Future of Financial Advice, reforms. What did the member for Warringah do at the time, and the likes of Senator Cormann, who was part of the inquiry that looked at the FOFA reforms? They opposed them. They opposed the catch-all provision—in the best interests duty—that ensures financial advisers act in the best interests of their clients. Believe it or not, up until that time there was no legal obligation on financial advisers and banks to act in the best interests of their clients. Guess what? Many of them didn't. And we're seeing the consequences of that now. Labor proposed that you had to act in the best interests of your client, and we put that in legislation.
We also proposed that a client had to opt in to the continuation of a financial service or financial advice on a two-yearly basis. Again, part of that provision was opposed by this government and its members. They voted against it in the committee inquiry and in the parliament. Do you know whose evidence they relied on in their argument, Mr Deputy Speaker? You can go and have a look at the dissenting report, which was drafted by Senator Cormann and other senators, from when the Parliamentary Joint Committee on Corporations and Financial Services looked at this issue. They relied on the evidence of AMP. They said: AMP believe this would be disastrous for financial services in this country and would result in 30,000 jobs going in the industry. Well, we now know why! We now know why, after the evidence of AMP that was uncovered in the royal commission—of charging fees to dead people; of providing ongoing advice through legacy products when people weren't getting any services at all, and then having that looked at by a law firm on an independent basis and seeking to change the report that was going to ASIC. As a result of that, they had the royal commission recommend criminal charges.
That was the sort of evidence—from those sorts of people—that the government relied on to justify their arguments against FOFA. It says everything about their approach to protecting consumers and acting in the best interests of Australian bank customers and those seeking financial advice in this country. We know that when it comes to proper regulation, when it comes to cracking down on their mates in the banking industry, their heart's not in it, because it's not in their DNA to do that sort of thing, to regulate that sort of behaviour.
Today, here we go again. We've had ASIC and consumer groups calling for the government to have a look at this. There's going to be a Senate inquiry, and we encourage those who have issues with this piece of legislation to have their say. They've raised some concerns about the exclusions in the bill. They're asking why consumer-facing financial services are excluded from both design and distribution obligations, along with product intervention powers. Even the likes of Afterpay, a multimillion-dollar company, have reversed their position and are now calling to be covered by the legislation, yet the Abbott-Turnbull-Morrison government has given up on this issue. Only Labor is listening to the victims and to our corporate regulator and key stakeholders. Only Labor is acting in the interests of Australian consumers and financial product clients.
I'm very pleased to rise to speak on the Treasury Laws (Design and Distribution of Obligations and Product Intervention Powers) Bill 2018. This bill will ensure that financial products are targeted and sold to the right consumers and that, where products are inappropriately targeted or sold, ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers. When I consider how we all interact with the financial system and the banking system, it changes throughout our lives. I look back to a small bank book where we made physical deposits and went into a bank branch to do so. Now we see the credit cards and the current financial products out there. It's a massive change, and they change as our needs change throughout our lives. Whether it's through bank products, insurance or retirement planning, credit cards or loans throughout our lives, in a number of ways we interact constantly with the banking and financial system.
I look back to my own time, initially when my husband and I got married as very young people who decided to take on what was an enormous responsibility: two very young people buying our very first dairy farm. The day that we got married was the actual day that we took ownership of the farm. My husband had been very blunt with me. He said, 'Please don't marry me for my money, because it's all printed in red.' As I've said previously in this chamber, he was entirely correct. It was a great challenge being two young people living in what was a better version of two Army huts joined together that had come from the Harvey ag school, from the internment camp where the Italians had been interned during World War II. We didn't have much to work with. It was a great decision to make.
My husband, as a young man, had worked for the local bank branch in Harvey for some time and the opportunity came. He was a passionate farmer. We had a great relationship with the local bank manager. That's what you could do at the time. His name was Mr Roenfeldt. I remember him very well. Here we were, two young kids, and he said, 'I know what you two can achieve.' He had the power of decision-making at the time—that's how it was—and even though Charlie and I had only $12,000 of equity between us, the debt we were taking on in those days was $118,000, which was massive. It was amazing how the world around us said, 'You two kids will fail.' But, as the bank manager, Mr Roenfeldt said to us, 'If you do, it'll take you at least two years to go broke, if you go broke—and I don't think you will—and you'll have two years worth of milk in your pockets and it'll give you a start in what's next.' What wonderful advice that was at the time. We took a very direct approach to income generation and keeping our costs low in our business. That's how we were able to grow our business.
There was the relationship with the bank manager. For our decisions, there was us, the bank manager and our accountant. That is what we used to make good decisions for all of our life in business. This was at the time when interest rates, at one point, went from 17 per cent to 23 per cent. When your interest and payments are $1,300 a month and you struggle to earn $2,000 a month in milk, it was a tough ask. We had a rundown old property that we were trying to build up, we had a very rundown herd and very little infrastructure, so it was a really tough job. But, when the next property became available, the bank manager said to us, 'You two kids need to have another go because you haven't got enough dirt where you are. If you're going to expand your business, you're going to need to get into this space.' It was a very direct discussion that we had with him. It took us a lot of years to get a weekend off or a milking off, but that's what it took to start and grow the business.
I must admit that, as you would understand, Mr Deputy Speaker, a lot of people said that we would fail and there were times when we didn't sleep much at night. I see that in so many other small businesses—not just dairy farming or farming but small business altogether—and we rely very much on that relationship with our financial providers, with the providers of loans and others.
So it really grieves me when I hear about—and I've seen—the change over the years in how banking services are provided and even the relationships that exist between the customer and the bank itself. I'm really hurt for everyone by the lack and loss of trust and even a loss of respect in our banking sector and the loss of those very close relationships that we were able to work with in those early years. I believe that there are still people who have very sound relationships with their financial service providers and banks, and they are able to do very good business that supports what they need to do as well. But I'm also concerned, I must admit, that there doesn't appear to be a lot of respect in the banking sector for customer loyalty. That's something that we've noticed even in our own business over the years. We've heard a lot of evidence at the royal commission that's concerned so many of us.
The new laws ensure that financial service providers have a very customer-centric approach to making initial offerings of products to consumers, like the product that Mr Roenfeldt offered us all those years ago when we were two young people trying to start a business and we needed good and sound advice. We depended on that good and sound advice from that local bank manager, and that's what we got. It was almost as though he was as invested in our business because he was local, because he cared and because he could see two young people having a red-hot go. He was very much part of our early journey. I know we lost Mr Roenfeldt a lot of years ago, but I want to thank him and those bank managers like him who actually were and are there for people like us who are having a go.
This new law also will give ASIC the powers to enforce new arrangements, which include the ability to request necessary information and, where necessary, issue stop orders where there is a suspected contravention of the law, and to make exemptions and modifications to the new arrangements. The government is acting in way that will give far more confidence and opportunities to people like us, starting out in business or already in business, and to people who are consumers just seeking a credit card or simple banking products.
There will be and are, as a result of this bill, civil and criminal penalties applying to contraventions of the new arrangements. The combination of civil and criminal penalties allows ASIC or the prosecutor, as the case may be, to take a proportional approach to enforcing the new obligations, and they are, as I said, important.
Equally, while the royal commission is continuing, the government through legislation like this is strengthening our financial laws to ensure that banks and financial institutions are actually held to account. We are getting on with the job of protecting consumers—consumers just like me and my husband in those early years. I see great young people and small-business people out in my community who are doing exactly what we did a number of years ago. They need to have just as much confidence in the providers of their financial products as we had in our local bank manager.
This particular treasury laws amendment bill is yet another step. It's targeted so that these products are those that are appropriate, and, if they are inappropriate, ASIC can, of course, step in. It fulfils the government's commitment to implement two recommendations from the Financial System Inquiry. The design and distribution obligations and the product intervention power will ensure that financial products are targeted and are sold to the right consumers. Whoever walks in the door of those institutions, or however they take those products and access those products, the products need to be the right products for that particular consumer. Whether you're a farmer or a small-business person or someone requiring a number of services from an institution, they need to be the right ones for you, and you need people to deal with who are prepared to provide that level of service.
This was particularly relevant in the examples we saw in the royal commission, where products that were totally inappropriate were sold to unsuspecting people—for instance, the fees for no service. This resulted in the most severe financial difficulties for people, where they couldn't meet the obligations they had signed up for. Where products are inappropriately targeted or sold, ASIC will be empowered to intervene. That intervention power will only be used to prevent harm to consumers. We want to avoid instances like those raised in the royal commission.
I want to see more people have the confidence that we did back when we bought our first property. Our government is committed to fostering an environment where businesses adopt and maintain a customer-focused culture, a customer-centric culture, where the relationship is a trusting relationship and where the advice provided is the best advice for the consumer's particular circumstances, where we, as the users of those particular products, can have a fair go and actually have confidence that the advice we're being given is the right advice and the right product in the particular circumstance.
Our approach to banking and financial services reform has focused on ensuring that the financial system is resilient, efficient and fair. We all interact with the banking system, and these reforms will benefit every single one of us. It means that we can approach the financial system with far more confidence that those who we're dealing with in the financial sector have genuinely approached the product that we're seeking with we the consumers in mind. In the same way that we went to see that wonderful bank manager, Mr Roenfeldt, all those years ago and said, 'We want to buy a dairy farm. We want to build a business. We want a future in this community. There are a range of products that we are going to need throughout our life, and we need a bank or a lending facility to help us through that,' I want others to have the confidence we had in that relationship and in the products that we got. There were things we could and couldn't control, as I said, throughout that process, with interest rates et cetera, but the actual products that were designed and the discussions that we had with our institution, meant that it was almost like we were in it together—and that's how it should be.
The government is really determined to encourage issuers and distributors to have an absolute customer-focused approach when they're designing, when they're marketing and when they're distributing financial products. I'd ask each one of those people, with whatever product they're providing or offering to the consumer—at the desk, at the table, online or wherever it is—to put themselves in the consumer's position and think: 'If it was me, what is the product that I would need to be able to do my business, to be able to stay in business, to be able to grow my business or to simply be able to access something as simple as a credit card?' We know only too well what happens if that's not the case, and ASIC will be in a position to intervene should that be necessary. This bill sets out exactly how and when ASIC will be able to intervene. The product intervention powers are a really important part of this bill before the House this evening.
What an amazing situation we find ourselves in today, to be finally discussing this piece of legislation, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018. I want to pick up on the remarks that were made by the member for Forrest, because I thought she made some very interesting observations about the way banking used to be done and the way in which people used to be able to place trust and faith in their bankers. Only a few weeks ago, I held a meeting in my electorate with a number of customers of banks—farmers, small business owners, former small business owners, and people who just borrowed money to buy a home. I did this because of the short time that was being made available—