Wednesday, 9 December 2020
Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020; Second Reading
I rise to speak on the banking royal commission bills. I think we learn a lot about this government, now in its eighth year, from its approach to the banking sector—particularly in terms of fairness in the banking sector and the treatment of consumers, and specifically from its approach to the banking royal commission. It speaks volumes about this government that, of the consecutive bills introduced from that dispatch box today, one of them was supposed to be about implementing the recommendations of the banking royal commission, while the very next bill was about undermining the banking royal commission. Not a full minute passed between the introduction of the two with the second bill all about undermining consumer protections in responsible lending—steps that the government is taking that the banking royal commission specifically recommended against. I think that speaks volumes about whether or not the government's heart is actually in doing the right thing by real people when it comes to the banking system and to the financial system more broadly.
The bills before us today have been a long time coming. It is almost five years since Labor first started championing and calling for a banking royal commission. Were it not for the subsequent royal commission, so many of the rorts and rip-offs which were uncovered by Commissioner Hayne and his team may never have come to light, which would have been a tragedy for everyone who has been impacted by wrongdoing in the financial sector.
It's important to remember that it was Labor that called for this banking royal commission in the first half of 2016. I was the financial services spokesman at the time, working closely with the member for McMahon and the member for Maribyrnong in calling for this banking royal commission. Those opposite opposed it tooth and nail for almost two years. They didn't want the stories which came forward from all the brave people who spoke at the royal commission to be heard, and we commend those people and acknowledge them and thank them for their bravery and honesty in coming forward. Those opposite fought tooth and nail for those stories never to come to light. They never wanted those stories to be made public. For almost two years they opposed it; they voted against the banking royal commission 26 times.
Only in late 2017, with the election getting closer—and only after the banks themselves had written to the government and given them a little permission slip to say they were okay with a banking royal commission—did the then Treasurer, the current Prime Minister, roll over and say that they would reluctantly agree to a banking royal commission. Between that partial capitulation at the end of 2017 and the election in May 2019, they spent a lot of effort pretending to care about the victims of misconduct in the banking system. If you go through that period, the now Prime Minister and others had all kinds of crocodile tears for victims of the rorts and rip-offs in the banking system. They pretended that they were deeply concerned about the revelations which were coming out on an almost daily basis. They pretended it was a really high priority.
Then, once the election was done and dusted, it was an afterthought once again. The foot came off the accelerator when it came to implementing recommendations. There was delay after delay, and deadline after deadline was missed. It took them until yesterday before they even realised that the parliamentary schedule wouldn't allow the passage of these bills in time for the 1 January start date. It was only yesterday that it dawned on them—such a high priority for those opposite! They're so keen to get justice and the right system for people who've been victims that they only discovered yesterday, 'Oh, we forgot to put it before the parliament, so we need to take some remedial action.' That speaks volumes as well about a government which has been dragging its feet when it comes to this.
They still haven't got it right. The member for Whitlam is here and he has amendments, and so does the member for Kingsford Smith. There are substantial issues here, which I'll leave to the member for Whitlam to explain to the House, given the pressures of time. But the government still haven't got it quite right. We want to support these bills and we want to expedite these bills, but we want to make sure that there are a couple of things which are cleaned up. My colleagues will talk about those.
I want to thank everyone who came forward in the banking royal commission, as I said, but I also want to thank the stakeholders for their engagement—not just the financial institutions but the consumer groups, the unions and others. The member for Whitlam is here, and I'll take the opportunity to thank the member for Whitlam very sincerely for all the work he's been doing in this area, as has the member for Kingsford Smith and as has the member for Fenner via the committee system. There have been hundreds and hundreds of hours of consultation and going through the detail of what's being proposed. I want to thank my colleagues for all of that work.
We want the banking system to be strong, and we want it to be strong on a basis of not treating people unfairly or cutting corners or engaging in rorts and rip-offs. We want it to be strong and fair at the same time, and that's not too much to ask. That's what the Australian people expect. The banking system can be a crucial part of the economy and a crucial part of the recovery, but we need to rebuild confidence in it. The banks themselves, and other institutions, have taken some steps in that regard, which I acknowledge as well, but we want this legislation to be as effective as it can be. It makes no sense to introduce one set of legislation to implement the banking royal commission recommendations and then have the next set of legislation undermine them.
We'll make our points about responsible lending on another occasion. We're prepared to support the main thrust of this bill, where it genuinely implements the recommendations of the banking royal commission. But there are a couple of things that need to be cleaned up. We'll try to do that via the usual parliamentary processes.
It's a pleasure to rise to speak on the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 and the Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020, in recognition of the continued process of implementing the recommendations of the Hayne royal commission.
Where I'll agree with the member for Rankin is that it was very sad and disappointing to see the stories that were told and the evidence that was given at the Hayne royal commission, particularly in regard to some of our largest institutions in this country, which had garnered enormous community respect over the years and, more importantly, enormous community trust—to see that that trust had been taken for granted and that they had made decisions and done things which had an adverse impact on the very people that they were supposed to provide services to and to look after appropriately.
Always when I stand here in this House and we're passing legislation or making laws because of misconduct or poor conduct by major institutions in our economy, which our economy is actually so reliant on, I find it extremely disappointing. I would prefer that those institutions actually conduct themselves in a manner that is consistent with community standards and that recognises the level of trust and the important role they have in our society so that we don't get to this point where we have to pass laws as a consequence of their poor conduct. I would reflect too on my time and involvement in the Parliamentary Joint Committee on Corporations and Financial Services. Through that committee we identified a number of issues around poor lending practices and the way the banks interacted with customers around their loans through the GFC and subsequently. So I support the member for Rankin's comments to a degree, but I'm also pleased to see that we're now taking those next steps in relation to implementing these recommendations.
I want to focus particularly on schedule 2 of the bill, which replaces the consumer's duty of disclosure with a new duty to take reasonable care not to make a misrepresentation to an insurer and which also amends the remedies available to life insurers when avoiding life insurance contracts. That gives effect to recommendations 4.5 and 4.6 of the royal commission. Back in March of 2018, again on the Parliamentary Joint Committee on Corporations and Financial Services, we tabled a report into the life insurance industry, and we focused on areas where we felt as a committee substantial changes would be required to ensure the life insurance industry is held to account. One of the reasons for that was that we had an enormous amount of testimony—and even since the discussion has continued—around what happens at claim time for holders of insurance policies, whether it be life insurance, total and permanent disability cover or income protection insurance. People take out those policies in good faith and fill out very detailed application forms which ask a wide range of medical information. The benefit of the changes in this bill is that there's a requirement now for an insurance company, if they are not satisfied or not sure or not clear about the information that a consumer has provided on their application, to ask for further information at the time of application.
I think that is a very good move. In the event of a claim, what it does, I hope, is clear up, by virtue of the process at application time, the risk that an insurance company will turn around and say, 'Well, you didn't disclose X, Y and Z at the time of application.' I think that is a very good measure for people who are looking to take out an insurance policy. That's not a carte blanche for them to not provide the information that's sought on the application forms—and there's still a requirement to properly provide the information—but, if the insurance company accepts the application based on the information provided, if the insurance company has asked additional questions at the time of application, then, at the event of a claim, unless there is a deliberate misrepresentation or deliberate omission, it shouldn't have the opportunity to go searching far and wide for other reasons to deny the claim. We had evidence at that inquiry that that was the case.
Amongst the range of other measures in this bill—there are some seven schedules or so—I wanted to focus on this particular issue because I think this is a very important issue from the point of view of consumer protection. People pay good premiums for life insurance, TPD cover, income protection cover, trauma insurance cover. The vast majority of people do the right thing in providing the right information at the time of the application so that insurance companies can make informed decisions about whether or not they accept that cover. It was disappointing that, as we saw in that inquiry, insurance companies sought to find ways, on occasion, to deny a claim for things that were unrelated to the matter of that claim.
I hope the provisions in this bill will give consumers more certainty and make it clear to the insurance companies that they are responsible for to asking the questions necessary to determine whether they're going to offer that insurance cover and that, if they accept that, then in the event of a claim the claimant can have the confidence that they're going to receive the benefit of that policy and therefore have that security for themselves and their families in what would be a very difficult time.
The Ancient Greeks invented irony, but the Morrison government has taken it to a whole new level. Only the Morrison government could introduce a bill that winds back the very first recommendation of the Hayne royal commission into the banking and financing sector on the same day that they insist that the parliament pass through another bill, which purports to implement the recommendations of the Hayne royal commission. I kid you not. This is what this mob over here are doing. They've introduced a bill to undo that Hayne royal commission recommendation on the very same day as we're proposing to debate a bill to implement the recommendations of the Hayne royal commission—crazy but true. This is what this mob do. You can't trust what they say; you've got to look at the detail of what they are doing.
We can foreshadow today that we won't be buying it. We won't be backing it. We'll be backing the Hayne royal commission—the very first recommendation, the responsible lending laws, the bedrock on which every other recommendation is built. This mob over here—the very same mob that voted 26 times to oppose the royal commission and explored every other alternative and, once every other alternative was exhausted, decided to do the right thing and have a royal commission—are now trying to undo it. We won't let them get away with it.
Of course, not everybody on the coalition side agreed with what the Prime Minister was proposing to do. There is one Nationals senator who deserves an honourable mention. I refer to the former senator for New South Wales, John 'Wacka' Williams. He would be absolutely appalled at what this mob over here are proposing to do in relation to responsible lending laws. He not only was an advocate for the laws but was actually a victim. He could tell you, from his firsthand experience, the consequence of poor loan-selling behaviour and poor lending behaviour—the consequence for farmers like him and their families. He lost his farm because of this sort of shark behaviour—the very sort of behaviour that the coalition is trying to breathe life back into through the bill they introduced into the House this morning.
We won't stand for it, and I'm looking forward to listening to what John 'Wacka' Williams has to say about what this mob is proposing to do. I'd like to be a fly on the wall for some of those phone calls between him and some of his Nationals colleagues in the Senate. The Nationals should do the right thing and throw this bill out. They should vote with Labor on that proposition. I know that if John 'Wacka' Williams was still in the Senate he'd be doing exactly the same thing.
I want to talk about some of the provisions within the bill before us, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020. Before I do that, I want to thank all those who have come before us in ensuring that this bill actually came before the House—the member for McMahon and the member for Maribyrnong, who in the previous parliament campaigned tirelessly to ensure that we had a royal commission, as well as the member for Rankin, the member for Kingsford Smith and the member for Fenner, who had been working tirelessly on ensuring that the government's promises were brought to this parliament through the implementation bills. That's because we knew that, given the opportunity, the government would be backsliding at every single moment. So I thank the member for Rankin, the member for Kingsford Smith and the member for Fenner for their great work in keeping the government honest on these things.
Over the last fortnight—and I'm looking at the member for Kingsford Smith—we must have conducted consultations with over 30 organisations.
There were hundreds of hours of consultations to ensure that the details of the bill reflected what the government promised and that there were no unintended consequences. It's not perfect. It requires some amendment. I foreshadow that I will be moving an amendment in the second reading stage and that there will be some substantive amendments at the consideration-in-detail stage moved by both the member for Kingsford Smith in relation to good value on insurance products and me in relation to matters concerning superannuation trustees.
While I'm on the matter of superannuation, it's extraordinary that yesterday, in this House, we had government members saying that if you allow the government to cut your superannuation they will give you a pay rise. The fraud in that statement was revealed today, when at the dispatch box the Minister for Industrial Relations revealed the truth. The government plan to cut your superannuation and your pay, and they've introduced a bill into the House today that will enable that to happen. We won't be having a bar of that either.
Going to the matters before the House in the bill, schedule 1 of the bill provides certain provisions of financial services industry codes can be made as enforceable code provisions where provisions within industry codes relate to specific commitments made by a code subscriber to the consumer. ASIC is given the power to approve these codes and will have the power to designate certain provisions within those codes enforceable—not just as a matter of contract but enforceable under the statute. Different penalties provide for voluntary codes as well as mandatory codes.
Schedule 2 of the bill deals with an insurance matter. The member for Kingsford Smith will go into this in some detail. It will, in short, prevent insurers from cancelling a life insurance contract on the basis of nondisclosure or misrepresentation unless the insurer can show that it would not have entered into the contract on the basis of that information. I want to bring members back to some of the examples that were seen and exposed by the Hayne royal commission. We heard from the member for Forde, for example, who suggested in his contribution that there were rare examples where claims against a life insurance contract weren't honoured. In fact what the Hayne royal commission discovered was that at least in one and perhaps in many other life insurance companies there was a system—in fact, a program—of denial of claims based on outdated, erroneous and disputed medical advice that even the medical advisers within the company suggested was out of date and improper. This matter was brought to the attention of the royal commission. This schedule of the bill implements that recommendation of the royal commission, not before time.
Schedule 3 of the bill implements the government's commitment to an industry-wide deferred sales model for add-on insurance products. That's an important measure. We are willing to work with industry on some of the areas that require special exception or special attention. The regulations that will be made pursuant to this bill facilitate that. We will work cooperatively with the government on ensuring that any carve-outs that exist are in the interests of consumers. I know the member for Kingsford Smith is going to have more to say about that shortly.
Schedule 4 of the bill provides ASIC with the power to impose a cap on commissions that can be paid for add-on insurance. That's an important measure. We've seen in some instances the commissions that were being paid to the salespeople flogging the insurance product were far in excess of any other claims that were made. More was going out and into the pockets of the people selling the product than was going back in terms of claims to the people who took the insurance out. Improper, wrong, needs to be scratched out—this schedule of the bill will do that.
Schedule 5 of the bill responds to the Hayne commission's recommendation to prohibit the hawking of superannuation and insurance products. This provision is absolutely critical. Nobody could not have been moved when they heard the evidence in relation to this issue of a young man with disabilities—with Down syndrome, I believe—taking a call from an insurance salesperson attempting to sell him a life insurance product that he never understood and didn't need with the behaviour driven by a commission. It was absolutely abhorrent, heart-wrenching evidence. The father has subsequently become an advocate for the full implementation of the Hayne commission recommendations and a staunch opponent of the government's proposals to wind back recommendation 1.1 on the responsible lending laws. It's an important provision.
There are some matters of detail that we may need to revisit on the issue of antihawking. We note that the antihawking provisions go specifically to phone based selling, direct-selling mechanisms. Of course, we know in modern marketing and sales there are a whole bunch of other mechanisms that may need to be considered down the track if industry does not respond appropriately on this issue.
Schedule 6 of the bill is going to prevent organisations from calling themselves an insurer unless they in fact are. It doesn't seem like a remarkable imposition, but the commission heard evidence, particularly in the area of so-called funeral cover or funeral insurance, where people, particularly in Indigenous communities, were being flogged products on the basis that they were insurance that weren't; they were certainly unconscionable and junk products. It's an important schedule to the bill.
Schedule 7 is going to enhance consumer protections by making insurance claims handling a financial service. This goes to the claims for fulfilment process to ensure that that falls within the rubric of ASIC regulation—again, it's important.
Schedule 8 will prohibit superannuation trustees from having a duty to act in the interests of another except from those arising in its role as a trustee. This is about dealing with embedded conflicts of interest within a trustee of a superannuation fund. Again, the royal commission heard lots of evidence of this, particularly within vertically integrated and retail based insurance funds and their trustees.
Schedule 9—I want to give the member for Kingsford Smith the opportunity to talk in a moment, and we've got an agreement with the government that we'll keep our comments reasonably brief. However, I do want to say something briefly about schedule 9—that is, the government's implementing measures in schedule 9 beyond those things recommended by Hayne. They are going to have a significant consequence, which, if not remedied, will visit a lot of mayhem and perhaps disaster on the industry. They need to be fixed. We want to work with the government to fix this issue, and I'll have some amendments which deal with that shortly.
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House:
(1) notes the Government:
(a) has acted consistently to delay action to protect Australians from financial sector misconduct, including by voting against a Banking Royal Commission 26 times; and
(b) intends to ignore the first recommendation of the Hayne Royal Commission by repealing the responsible lending obligations put in place by Labor in 2009 to protect Australian consumers from financial sector misconduct; and
(2) further notes the bill still leaves important recommendations of the Hayne Royal Commission to be implemented".
The original question was that this bill be now read a second time. To this the honourable member for Whitlam has moved as an amendment that all words after 'that' be omitted with a view to substituting others. If it suits the House, I will state the question in the form that the words proposed to be omitted stand part of the question.
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.
In 1935 a banking royal commission was held to look at the critical impact on the Australian economy of problems in the banks. It was two generations later that Labor found itself in the position of again calling for a royal commission into the banking sector in Australia. Those calls were ignored by the government, which called it a 'populist whinge' and resisted for more than 18 months a royal commission into the banks. When Ken Hayne finally lifted the lid on the misconduct it was clear to everyone that the call to have a royal commission had been the right one and that the Liberals had been wrong to vote 26 times against a banking royal commission. Yet here we are today with the Liberals advocating against the No. 1 recommendation of the Hayne royal commission, recommendation 1.1: 'the National Consumer Credit Protection Act should not be amended to alter the obligation to assess unsuitability.' Does Australia really need more irresponsible lending? Is that the real need of the Australian economy right now—a surge of irresponsible lending? Well, consumer groups don't think so. The banks themselves didn't ask for it. And, when we asked the Australian Securities and Investments Commission as to whether they had been consulted, Sean Hughes told me:
I'm the commissioner with responsibility for credit, and I was first advised when I read the Treasurer's media statement through the media on the morning of 25 September.
So CHOICE, Consumer Action Law Centre, Financial Counselling Australia, Financial Rights Legal Centre say it's the wrong idea. If there are problems around complexity, let's engage with stakeholders. But the government has no credibility in standing up for consumers when it is calling for a surge in irresponsible lending in a country whose household debt levels are among the highest in the world, and in the wake of new research that's come out in recent weeks showing that more indebted households can be a drag on growth.
There are other issues that the House economics committee has explored this year. ASIC has told us that they remain frustrated with the pace of compensation schemes. ASIC internal briefing documents say:
… the institutions have demonstrated a willingness to spend large amounts of money on external consultants and management time, rather than comprehensively deal with the problem.
With $3 billion of compensation still waiting to be paid to customers, I'd urge the big banks to spend less money on paying consultants to delay payouts and more money on consumers. Even if a few people end up being slightly overpaid it is better to put the matter to rest.
We've explored the issue of loyalty taxes, such as Suncorp's loyalty tax that can cost its loyal consumers thousands of dollars a year. Westpac's former CEO, Brian Hartzer, was one of the strongest to push back against me when I called it a 'loyalty tax', but that's what it is. It is a bank charging two different prices for the same product—one to customers who've signed up previously, another to new customers. As RateCity's Sally Tindall points out, 'Over 50 per cent of banks' home loan "books" are typically funded by deposits,' so when rates go down banks are cutting rates for depositors and savers. It's simply not fair for them to be charging one price for their loyal customers and a lower price for new entrants and demanding that customers shop around in order to get the best deal.
I asked questions about the Banking Code Compliance Committee's recent report, which kept confidential which banks had done worst. It turned out NAB had the highest number of breaches of the major four. I asked each of the major four CEOs how they would defend their pay packets relative to the pay of a teller. In an era in which CEO pay has skyrocketed relative to average earnings it seems appropriate to ask these CEOs how they feel about the rising pay disparities within their organisations. Just a couple of generations ago it would have only taken a decade or so for a teller to earn as much as the CEO earned in a year. Now it would take multiple careers for a teller to earn what the CEO takes home in a single year.
I have asked all the major bank CEOs why they don't adopt the same full-fee transparency for international remittances as TransferWise does. Why they are burying the true cost of transferring money overseas in the exchange rate spread, rather than simply reporting to customers the total of the flat fee and the exchange rate spread relative to the mid-market rate? Come clean with people. When you're dealing with some of the most vulnerable customers in Australia—a migrant taxi driver who might be working extra shifts to send money back to Fiji—why should a big bank be pulling the wool over their eyes as to what they really pay when they send money overseas?
I've asked about the buy-now pay-later scheme and I got a response from the CEO of the Commonwealth Bank, Matt Comyn, who said, 'It looks like credit to me.' It's an issue I hope the Standing Committee on Economics will explore more next year. I've been critical of the decision of some banks to fly very close to the wind on dividends. While New Zealand banned bank dividends, Australia said that there would be a cap equal to half of earnings. CBA went almost right up to that cap, something I believe was a mistake at a time when they were receiving such significant taxpayer support. We also had an extraordinary hearing with ASIC in which the chair, James Shipton, announced that he was stepping down. The government appropriately initiated an inquiry by Vivienne Thom, but it's occurring at a glacial pace. At a time when we have a recession and a pandemic, the government is leaving ASIC leaderless for a full two months. An inquiry that could have been done in a fortnight is taking months, and the Australian corporate watchdog is being left leaderless.
In the area of superannuation, an area I know the member for Whitlam and the shadow Treasurer have been assiduous on, I focused on the issue of AMP charging product providers as much as $22,000 to be on the AMP approved product list. I've been critical of OnePath and their decision to white-label a low-cost Vanguard product, which had a cost of just 14 basis points, and charge customers much, much more. It does raise the broader question, which the members for Fraser, Cowan and Dunkley have raised on the House Economics Committee, of how a for-profit superannuation fund adheres to the best financial interests duty. Mercer has been a particular disappointment. When I confronted them in the hearings about their high administrative costs, they claimed:
… the numbers you're quoting are not consistent with my understanding of what the total fees would be.
They then pledged to take it on notice and came back with an answer that said that they've undertaken a review and they don't think fees are the main measure of value of competitiveness. It's a pathetic response. Don't try to pull the wool over the eyes of the committee in the hearing, saying that we've got the wrong facts, and then come back with an answer to a question on notice that effectively says, 'Yes, the facts are right, but we take a different interpretation of them.' That sort of treatment of the committee is completely inappropriate. The committee will continue to pursue the issue of high fees in superannuation funds, particularly funds like Mercer that think that it's alright to be charging fees on a $10,000 account balance ranging from 2.11 to 2.32 per cent. These are startlingly high fees.
Finally, we've pursued the issue of insurance, an issue that the member for Kingsford Smith has focused on strongly—in particular, payout rates from certain funds that are as low as 55 per cent among those who were advised. We've also pursued the issue of junk funeral insurance provided by Youpla, formerly the Aboriginal Community Benefits Fund, who showed a distinct lack of remorse when they came before the committee and appeared to be unprepared to deal with the reality of the Hayne royal commission.
Firstly, I would like to thank those members who have contributed to this debate on the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 and the Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020. The government is committed to implementing its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and is delivering on 21 of its commitments through this legislation. The reforms in this legislation represent a critical component of restoring trust and confidence in Australia's financial system. I commend these bills to the House.
The original question was that this bill be now read a second time. To this the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.
Question agreed to.
Original question agreed to.
Bill read a second time.