Consumer group poll shows strong support for big penalties in new rules that will also tax brokers
Each year, consumer advocacy group Choice runs a number of surveys asking its 170,000 members to give their opinion on a wide range of topics. This quarter, the 60-year old not-for-profit group has asked Australians whether financial executives caught breaking the law should be fined – and a resounding 90% of respondents said yes.
The survey appears to have been timed to arrive as the Federal Coalition readies itself to introduce two important new bills to create a Financial Authority Regime and Compensation Scheme of Last Resort. The latter was a result of the Hayne Royal Commission and is expected to cost at least $3.7 million a year to run, following setup costs of $6.3 million. Choice is now running a online petition asking the government to toughen up its banking reforms.
The proposed CSLR would see a compensation cap of $150,000 and would apply to mortgage brokers, financial planners and three other groups. Choice is not alone in its call for tougher (and wider reaching) rules, being part of a consortium of 15 groups that include the FPA, AFA, and the Institute of Public Accountants.
“The Government’s draft bill will exclude vast segments of the financial industry, including managed investment schemes and the funeral expenses industry, leaving many victims of financial misconduct without redress,” the group said in a press release. “It will also mean that a number of large financial institutions including product providers are not required to contribute to the costs of compensation.”
Although early versions of the legislation had much larger potential fines in the FAR legislation, an aggressive lobbying campaign by lenders and other banks was successful in seeing individual penalties substantially reduced from the suggested $1,050,000.
Choice’s poll showed strong support (90%) in favour of fining executives that broke the law, and the group is pushing hard for penalties to reach seven figures again.
“The community expects strong penalties and rigorous enforcement of banking executives who do wrong. However, it is disappointing the government has backflipped on its proposal to have civil penalties of $1.05 million for leaders who break their FAR obligations,” said Choice’s banking policy adviser Patrick Veyre to the AFR.
The government is hoping to enact the CSLR by the end of this year or in Q1 2022. Companies that are required to pay levies to the CSLR can have their licenses cancelled and can even be deregistered.
Mortgage broking businesses will have to pay levies to support the scheme; Treasury offering an example of mortgage broking companies paying $1,030 for 37 representatives or $8,936 for 321 representatives.