Referral and conduct of the inquiry
On 29 November 2016, the Senate referred the following matters to the
Senate Economics References Committee (the committee) for inquiry and report by
28 March 2018:
The regulatory framework for the protection of consumers,
including small businesses, in the banking, insurance and financial services
sector (including Managed Investment Schemes), with particular reference to:
failures that are evident in the:
- current laws and
regulatory framework, and
- enforcement of the current
laws and regulatory framework, including those arising from resourcing and
impact of misconduct in the sector on victims and on consumers;
impact on consumer outcomes of:
- executive and
- incentive-based commission
fee-for-no-service or recurring fee structures;
culture and chain of responsibility in relation to misconduct within entities
within the sector;
availability and adequacy of:
and compensation to victims of misconduct, including options for a
retrospective compensation scheme of last resort, and
advice and representation for consumers and victims of misconduct, including
their standing in the conduct of bankruptcy and insolvency processes;
social impacts of consumer protection failures in the sector, including through
increased reliance of victims on community and government services;
to support the prioritisation of consumer protection and associated practices
within the sector; and
On 14 February 2018, the Senate granted the committee an extension of
time to report by 26 June 2018.
On 25 June 2018, the Senate granted the committee a further extension to report
by 15 November 2018.
The committee held three public hearings, in Sydney on 26 April 2017 and
28 June 2017, and Melbourne on 22 February 2018.
Submissions to the inquiry closed on 7 March 2017. The committee
received 147 submissions, including 22 confidential submissions.
Scope and structure of the report
For most of the course of this inquiry, external dispute resolution
services were provided by the government through the Financial Ombudsman Service,
the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
As such, this report focuses, where relevant, on the prior external dispute
resolution arrangements. From 1 November 2018, the newly-established Australian
Financial Complaints Authority replaced these dispute resolution bodies.
This report focuses on a number of key issues in the current consumer
protection system. The list of key issues is not intended to be comprehensive;
rather, the report provides a 'snapshot' of concerns raised in evidence about
consumer protections, or the lack thereof, in particular areas of the banking,
insurance and financial services sector. Where relevant, the report references
work undertaken to date by the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry.
The report consists of five chapters:
Chapter 1 (this chapter) provides an overview of the conduct of
Chapter 2 details previous and current inquiries relevant to this
inquiry's terms of reference;
Chapter 3 outlines the current legislative and regulatory
frameworks governing the protection of consumers in the banking, insurance and
financial services sector, as well as government bodies responsible for
oversight and external dispute resolution;
Chapter 4 gives a snapshot of issues raised in evidence in
relation to the consumer protection system and specific sectors of the banking,
insurance and financial services industry; and
Chapter 5 outlines the work of the Royal Commission into the
Banking, Superannuation and Financial Services Industry, the committee's
conclusions, and recommendations arising from the inquiry.
The committee thanks all submitters and witnesses who provided evidence
to the inquiry. The committee also recognises that many submitters and
witnesses have experienced considerable impacts as a result of their
experiences engaging with previous and current consumer protection systems in
the banking, insurance and financial services sector. The majority of
submissions provided to the inquiry concerned individual complaints against
financial service providers or external dispute resolution services.
Unfortunately, the committee is not in a position to
resolve individual disputes. However, this evidence was invaluable in
identifying problems in the consumer protection system, and has helped to
inform the committee's conclusions.
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