Senate debates

Wednesday, 5 February 2020

Bills

Financial Sector Reform (Hayne Royal Commission Response — Protecting Consumers (2019 Measures)) Bill 2019, Financial Sector Reform (Hayne Royal Commission Response — Stronger Regulators (2019 Measures)) Bill 2019, National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019; Second Reading

6:56 pm

Photo of Richard ColbeckRichard Colbeck (Tasmania, Liberal Party, Minister for Aged Care and Senior Australians) Share this | | Hansard source

COLBECK (—) (): I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

FINANCIAL SECTOR REFORM (HAYNE ROYAL COMMISSION RESPONSE—PROTECTING CONSUMERS (2019 MEASURES)) BILL 2019

The Financial Sector Reform (Hayne Royal Commission ResponseProtecting Consumers (2019 Measures)) Bill 2019 (the Bill) continues to fulfil the Government's commitment to implement the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission). The Bill will extend unfair contract terms to insurance contracts, ensure adequate consumer protection provisions apply to funeral expense policies, introduce a best interests duty requirement for mortgage brokers, and reform mortgage broker remuneration.

Unfair contract terms in insurance contracts

National unfair contract terms laws currently protect consumers and small businesses who purchase financial products and services through standard form contracts. Until now, insurance contracts have been exempt from regulation by these laws.

Schedule 1 will increase protection for consumers and small businesses purchasing general and life insurance products. It will give effect to the Royal Commission recommendation 4.7 and bring insurance's regulation into line with that for the rest of the financial services sector.

Ensuring consumers and small businesses can purchase or renew their insurance policies with confidence is important. Insurance cover for homes, motor vehicles, building contents and income protection helps limit loss and support households and, in turn, the broader economy.

Deterring insurers from drafting unfair terms in standard contracts and providing a remedy in cases where they are found will support fair treatment of consumers and small businesses.

Funeral expenses facilities

The Financial Services Royal Commission uncovered evidence of significant harm caused to vulnerable consumers by the poor sales practices adopted by funeral expenses policy providers.

The exemption in the Corporations Act that has allowed these providers to escape the scrutiny of the Australian Securities and Investment Commission (ASIC) will be removed. They will be subject to the Australian financial services licencing regime.

Schedule 2 of this Bill will also ensure that the consumer protection provisions in the ASIC Act apply to funeral expenses policies, clarifying any ambiguity that may exist on this matter.

Mortgage Brokers

Schedule 3 of the Bill introduces a best interests duty for mortgage brokers that will ensure that consumers' interests are prioritised when a mortgage broker provides credit assistance, as regulated by the National Consumer Credit Protection Act 2009.

The Government is also reforming mortgage broker remuneration, and the Bill provides for a regulation making power to this end. The Regulations will require the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount; ban campaign and volume-based commissions and payments; and cap soft dollar benefits.

Further, the period over which commissions can be clawed back from aggregators and mortgage brokers will be limited to two years, and passing on this cost to consumers will be prohibited.

After careful consideration, the Government decided to delay consideration of aspects of Commissioner Hayne's recommendations for mortgage brokers – namely moving to a borrower-pays remuneration structure – until a review is carried out in three years' time.

That review will be conducted by the Council of Financial Regulators and the Australian Competition and Consumer Commission (ACCC). It will examine the impact of the recommendations that have been agreed to and implications for consumer outcomes and competition of moving to a borrower pays remuneration structure for mortgage broking.

Implementation of these reforms, as recommended by the Royal Commission, is a critical component of restoring trust and confidence in Australia's financial system and is part of the Morrison Government's plan for a stronger economy.

Full details of the measures are contained in the explanatory memorandum.

FINANCIAL SECTOR REFORM (HAYNE ROYAL COMMISSION RESPONSE—STRONGER REGULATORS (2019 MEASURES)) BILL 2019

This Bill forms part of the Government's comprehensive response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which is set out in the Financial Services Royal Commission Implementation Roadmap released on 19 August 2019.

Since the release of the Royal Commission final report, the Government has implemented 16 of the commitments it outlined in its response. We have:

              Through this Bill, the Government is further delivering on our commitments by implementing the recommendations of the ASIC Enforcement Review Taskforce Report.

              Our regulators need the resources and powers to strengthen their enforcement and supervision, and take on the expanded responsibilities recommended by the Royal Commission.

              The Royal Commission found that some financial institutions had engaged in conduct that fell well short of community expectations. This is not acceptable.

              This Bill is part of the Government's clear message to those financial institutions that complying with the law is not negotiable. It will provide ASIC with a range of new powers which support its enforcement of the law.

              The Bill amends the law to:

                        ASIC is responsible for investigating serious indictable offences involving corporate criminal misconduct – those that carry a prison sentence of 12 months or more. This Bill harmonises and aligns ASIC's various search warrant powers with those contained in the Crimes Act, removing the current requirement for ASIC to 'forewarn' those under investigation which provides an opportunity to destroy or conceal evidence of misconduct.

                        The Bill also amends the law to allow ASIC to access and receive telecommunications intercept material to investigate and prosecute serious offences, bringing them into line with other agencies responsible for investigating serious offences.

                        Strengthening ASIC's licensing powers, will ensure that credit and financial service licensees, and the people who control them, are fit and proper to be carrying on a financial services business. Ensuring that controllers, such as significant shareholders are fit and proper is essential in deciding whether a licence should be granted or retained.

                        This Bill also amends the law to allow ASIC to ban a person from performing functions in a financial services or credit business where they are not a fit and proper person and provides new grounds for ASIC to ban a person, for example where they have twice been linked to a refusal or failure to give effect to a determination of the Australian Financial Complaints Authority.

                        The measures in this Bill have been the subject of extensive public consultation, both by the ASIC Enforcement Review Taskforce and in their exposure draft form. The Legislative and Governance Forum on Corporations was consulted in relation to the Bill as required under the Corporations Agreement 2002 and the National Credit Agreement 2009.

                        Full details on these measures are contained in the Explanatory Memorandum.

                        NATIONAL CONSUMER CREDIT PROTECTION AMENDMENT (MANDATORY REPORTING AND OTHER MEASURES) BILL 2019

                        This Bill will implement the Government's Comprehensive Credit Reporting regime.

                        It will deliver benefits to lenders and borrowers and drive competition in the lending market, while preserving and enhancing important security and consumer protections.

                        This Bill will place Australia in line with many other developed nations who already have comprehensive credit reporting regimes in place.

                        Schedule 1 of this Bill requires our largest banks (those with total resident assets of over

                        $100 billion) to provide comprehensive credit information to credit reporting bodies from 1 April 2020. By mid-2021 our largest banks will have supplied comprehensive credit information on all consumer accounts to every eligible credit reporting body.

                        The Bill will also ensure the security of consumer credit information - an issue of high importance to the Government - by strengthening the already strict provisions in the Privacy Act relating to how consumer credit information is handled.

                        The Bill requires that credit reporting bodies store credit information within Australia, or according to alternative requirements in Regulations if established.

                        Schedule 2 of the Bill incorporates the results of a review by the Attorney General into the treatment of financial hardship information, providing the legal certainty required for this information to be shared. Based on this review, the Bill establishes a new type of credit information in the Privacy Act that will indicate consumer credit contracts that are affected by a financial hardship arrangement.

                        The Bill also requires Government to complete independent reviews of the mandatory regime and the credit reporting provisions in the Privacy Act prior to 1 October 2023.

                        Under the comprehensive credit reporting regime, consumers will have better access to credit, and will be able to use their reliable credit history to seek more competitive rates. Those consumers who possess a poor credit rating will be able to demonstrate their credit worthiness through future reliability.

                        Credit providers will have a more complete picture of a consumer's financial situation. This will help them to better price credit and meet their responsible lending obligations.

                        The Government has consulted widely with credit providers and consumer groups. The Legislative and Governance Forum on Corporations was also consulted in relation to the Bill, as required under the National Credit Agreement 2009.

                        This Bill is another example of the reforms implemented by this Government that are designed to increase competition in the financial sector. Other initiatives include:

                              Our Government will continue to support stronger competition in the financial sector by ensuring the market works effectively for the benefit of all Australians.

                              Full details of the measure are contained in the Explanatory Memorandum.

                              Debate adjourned.

                              Ordered that the bills be listed on the Notice Paper as separate orders of the day.