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Changes coming for financial services consumers

    
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Changes coming for financial services consumers

In case you missed it, the Federal Government have announced significant changes to consumer protections in the banking and financial services space. While the new Bank Levy received all the headlines, there are a number of huge changes that are a big deal for consumers, lawyers and financial counsellors alike.

Firstly, the Government is introducing a new one-stop, financial complaints shop called the Australian Financial Complaints Authority (AFCA) – an external dispute resolution scheme amalgamating the current Financial Ombudsman Service, the Credit and Investments Ombudsman and the statutory Superannuation Complaints Tribunal. Beginning from 1 July 2018 AFCA will be free to consumers to pursue disputes  with all financial firms who will be bound to join as members by law. There will be a transition process but this has yet to be finalised. The Government has also announced debt management firms will be required to be members of the scheme and there will be further investigation into the establishment of a last resort compensation scheme.

Second, regulations will be introduced to reign in some of the more grievous credit card practices. Affordability assessments will be based on a consumer’s ability to repay the credit limit within a reasonable period. Credit providers will be banned from making unsolicited offers of credit limit increases. How interest is calculated will be simplified and online options to cancel cards or to reduce credit limits will be mandated.

Third, the government is planning to introduce a mandatory comprehensive credit reporting regime if credit providers are not reporting at least 40 per cent of their data by the end of 2017. This is a huge change with massive potential negative repercussions for the most financially vulnerable Australians.

Finally the maximum fines have been increased for those businesses who breach the Australian Consumer Law up from $1.1 million to $10 million.

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