A wide-ranging Banking Royal Commission essential to stop scandals and ensure reform
30 November 2017
Maurice Blackburn Lawyers today welcomed the Federal Government’s announcement of a Royal Commission into the banking and financial services sector, but said it must be wide-ranging to end scandals and to bring about substantial reform in the finance sector.
Maurice Blackburn Principal Josh Mennen said systemic financial scandals had been rife within the industry for a number of years as a result of a deeply-ingrained culture that has financially ruined thousands of Australians.
“It’s essential that the Royal Commission’s terms of reference include the ability to closely examine the systemic practices that contributed to these devastating outcomes for people right across Australia.
“This must include a focus on the financial advice cross-selling models, that saw customers being pushed into taking up the banks' in-house superannuation and insurance products for more expensive fees and greater commissions, despite this often being against the best interests of the customer.
“These conflicts of interest and skewed incentives led to poor customer outcomes and they continue to do so.
“Indeed, many bank advisers have been prohibited from recommending non-affiliated products, even where they were better for the customer.”
Mr Mennen also called for the Royal Commission to investigate the banks’ unfair lending practices.
“A decade of lending complacency has left thousands of Australians over-committed, putting them at imminent risk of default. This is particularly so for the notorious interest-only mortgages that the banks offer to customers without proper assessment,” Mr Mennen said.
“It’s notable that the draft Terms of Reference released by the Treasurer today do not appear to cover mortgage brokers, banks’ subsidiaries or pay-day lenders. It’s a very conspicuous omission in what should be a thorough and forensic examination of the banking and financial sector.”
Mr Mennen says in his professional experience the insurance industry is also rife with dubious systemic issues and work practices that in effect financially crush vulnerable Australians.
“The Royal Commission should also look at the insurance industry’s underwriting and claims practices with a focus on mental health discrimination and harsh and unfair claims assessment tactics,” Mr Mennen said.
Mr Mennen has also called for the Federal Government to remove the requirement that the Commission make its final report within 12 months.
“That is an unnecessary restriction which could hobble the investigation from the outset.”
“This must be a Royal Commission with sharp teeth - the Government has an obligation to the thousands of Australians who have suffered at the hands of bad practice and bad leadership.”