Wednesday 11 September 2019
ASIC has provided its second update on its actions in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission).
The Update outlines a number of measures across the organisation by which ASIC is implementing the seven priorities highlighted in its Corporate Plan 2019-23, one of which is to prioritise the recommendations and referrals from the Royal Commission.
ASIC suing mid-tier banks for use of unfair contract terms
True to a pledge that it’ll be less reticent to metaphorically don the wigs and robes going forward, ASIC has commenced proceedings in the Federal Court against Bank of Queensland and Bendigo and Adelaide Bank concerning unfair contract terms in small business contracts.
ASIC alleges that certain terms used by both institutions were unfair, as the terms:
- cause a significant imbalance in the parties’ rights and obligations under the contract;
- were not reasonably necessary to protect the banks’ legitimate interests; and
- would cause detriment to the small businesses if the terms were relied on.
ASIC has concluded its Responsible Lending hearings in Sydney and Melbourne. Areas that licensees commonly appeared to want new or revised guidance on included:
- Evaluating serviceability, including classifying income and expenses; use of benchmarks; and the extent to which it can be assumed that a borrower does willingly and wilfully change their lifestyle post loan approval (see also ASIC’s response to Westpac case judgement)
- What constitutes an assessment versus a recommendation, and the documenting of each.
Stay tuned for ASIC’s reply, particularly an updated RG 209 by the end of this year.
ASIC has called for public input on its proposed guidance on companies’ new obligation to implement a whistleblower policy.
Public companies, large proprietary companies and corporate trustees of registrable superannuation entities must implement a whistleblower policy and make it available to their officers and employees by 1 January 2020.
This requirement was introduced as part of the reforms to the corporate sector whistleblower regime that commenced on 1 July 2019. Don’t hold your breath for too long; consultation is only open for another week until 18 September 2019.
ASIC is consulting on a proposal to use its new product intervention power to ban the sale of binary options to retail clients, and to apply restrictions on the sale of CFDs. While most measures align Australia with action taken by other jurisdictions, unique ones relating to real-time disclosures have served as hair-raising warnings to the sector. Comments close 1 October 2019.
Coincidentally, ASIC has released a related report, REP 626 Consumer harm from OTC binary options and CFDs.
ASIC has released consumer research, REP 627 Financial advice: What consumers really think, which focused on the overall use of financial advisers, motivators and barriers to seeking personal advice, and consumer attitudes towards the financial advice industry.
While Australians believe financial advisers can offer significant expertise on financial matters, ASIC’s research shows that many don’t seek advice because they are put off by assumed high costs, significant distrust of the industry, and a perception that financial advice is only for the wealthy.
This report was soon followed by REP 628 Looking for a mortgage, which sets out findings from research ASIC commissioned to better understand consumer experiences and expectations when taking out home loans.
After seemingly slow starts and fierce operational decision-making over whether to get a full banking licence, take the interim restricted ADI route, or piggy-back ride on an existing bank, consumers should expect a flurry of product launches from neobanks soon.
With Volt graduating to a full licence in January 2019, and Judo and 86 400 being awarded theirs in recent months, Xinja earning its this month should see challenger banks racing each other to join the likes of Up and Douugh in offering new transaction accounts and loans to consumers and small business.
In a consultation letter, APRA has outlined its proposed approach to implementing end-to-end product accountability under the Banking Executive Accountability Regime. The proposal aims to enhance customer experience and outcomes by addressing a Financial Services Royal Commission recommendation that ADIs should assume responsibility for all steps in the design, delivery and maintenance of all products offered to customers, and any necessary remediation of customers in respect of any of those products.
Consider APRA’s approach complementary to product governance provisions included in the design and distribution obligations that ASIC-licensed financial services organisations will soon be subject to.
It’s been a busy month for Treasury’s inbox, with submissions likely flooding in as it consults on a number of topical issues, including:
- Digital Platforms Inquiry
- Mandatory Comprehensive Credit Reporting and Hardship Arrangements
- Mortgage broker best interests duty and remuneration reforms
- Regulation of mortgage brokers as financial advisers (which could create an environment in which a stronger case can be made for FEP to deliver a mortgage and finance broking qualification)
- Reforms to the sale of add-on insurance products.
Here’s a refresher on other key matters, in case you didn’t find them all that gripping the first time around: