Consumers let down by government failures on the banking RC

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February 02 2021
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In the two years since the financial services royal commission, super fund members, bank customers and insurance policyholders have all been let down by the federal government’s failure to implement its findings, a legal group has stated.

The banking royal commission chaired by Kenneth Hayne gave 76 recommendations to the government, with less than half of them being implemented, while four have been completely abandoned in the two years since it was founded.

At the time, the Morrison government created an implementation roadmap setting out how the government will deliver on its comprehensive response to the royal commission, which it said would “restore trust in Australia’s financial system”.

“In the government’s response, released in February this year, we committed to taking action on all 76 royal commission recommendations and, in a number of key areas, going further,” Josh Frydenberg said while presenting his roadmap.

However, the Australian Lawyers Alliance (ALA) said that despite promising reform, the government is yet to deliver.

“A majority of the reforms have been delayed and, unbelievably, some have been abandoned completely,” ALA spokesperson Josh Mennen said.

While the government has highlighted the challenges of the COVID-19 pandemic and the economic impacts that have forced them to delay implementation, the ALA said consumer protection is needed now more than ever.

“That doesn’t pass the ‘pub test’ given consumer protections are needed more, not less, during times of financial uncertainty and turmoil,” Mr Mennen said.

“For example, the long-promised ‘compensation scheme of last resort’ has not yet been introduced.”

“The scheme will help consumers who have proven they were given negligent financial advice only to find the advice firm has gone bust and can’t pay up.

“This compensation would have been invaluable for those struggling during the high unemployment and economic turmoil wrought by the pandemic,” Mr Mennen said.

With February 1 marking the royal commission’s second year anniversary, law firm Maurice Blackburn also pointed out the importance of consumer protection during this period.

Maurice Blackburn’s principal, Kim Shaw, highlighted that the federal government has used COVID-19 as the reason for delay on a number of recommendations, but the fact remains that many of these recommendations are now more important than ever in ensuring consumers are properly compensated for harm caused and protected from poor behaviour.

“It abandoned key recommendations from commissioner Hayne to protect consumers against unfair or irresponsible lending and to ban commissions for mortgage brokers – both of which were crucial measures that have become even more important in the wake of COVID-19,” she said.

“As the royal commission demonstrated, banks’ relaxed lending standards and brokers’ involvement in loan sales resulted in widespread debt overcommitment, and our firm has represented hundreds of consumers who have fallen victim to these issues through irresponsible lending.

“Yet, rather than act on the recommendations from commissioner Hayne to address these issues, the federal government continues to try and make it easier for banks to lend money and provide credit without further necessary protections – measures that risk causing considerable problems for consumers when they can least afford it,” Ms Shaw concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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