Last week, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry issued its final report. The report made a number of recommendations for change (76 to be exact!), which the government has agreed to action (stay tuned..).
We have broken down a few of the key recommendations and how they could affect you and your business, if they are implemented.
1. Stopping Unfair Bank Charges
The Commission’s report found that banks have been charging their customers the same fee multiple times in the same transaction. The report has recommended that banks should be required to notify customers each year to let them know what fees they have been charged and why, to stop banks unfairly charging you and your business the same fee multiple times.
2. Better Protections For Farmers
As is all too apparent at the moment for our Queensland farmers, an unpredictable season of scorching droughts or flooding rains can have devastating effects on agricultural businesses. The report recommended that new laws should recognise the unique financial needs of these businesses in a number of ways, including:
(1) that managers responsible for handling distressed farm loans be required to be experienced agricultural bankers, who understand the unique challenges that come with running a farming business;
(2) that if an area is declared to be a natural disaster zone or in the middle of a drought, the default interest payments that would usually have to be paid on loans should be waived in these areas, giving the farming business a better chance to get back on its feet. Let’s hope this recommendation is implemented as a matter of priority, given the current situation; and
(3) the establishment of a national scheme to provide professional advice and assistance to farmers struggling with debt, including giving business owners access to financial advisors familiar with the agricultural industry, to help them negotiate the repayment of their debts as soon as possible.
3. Fairer Insurance Policies
Insurance paperwork can be long and intimidating. The commission discovered that insurance companies were denying claims because the client forgot to disclose something that was (often) irrelevant to their claim anyway.
The report recommends changes in this area, so that if someone makes an honest mistake and forgets to disclose something, insurance companies will only be able to deny the claim if they can prove that the missing information would have meant they would not have insured them, effectively closing the loophole which currently allows insurers to avoid honouring policies.
4. Protecting Small Businesses From Bad Financial Advice
Trusting an agent to give your business good financial advice can be daunting as it is hard to know how good an agent is until you have worked with them. The report recommends introducing compulsory registration for all financial advisors, with a new disciplinary body to oversee the industry. This will help to provide business owners with peace of mind that their business is in good hands and ensure you are getting accurate advice from a competent advisor.
The report recommends creating an industry funded compensation scheme to pay compensation to consumers and small businesses who bring a successful claim against a financial advisory firm who is no longer operating. This will provide you and your business with another layer of protection in the event that you do receive bad financial advice.
5. Major Changes For Mortgage Brokers
If you are a mortgage broker, then the industry is set for a major shake-up. Under the Commissioner’s recommendation:
(1) Borrowers rather than lenders will pay mortgage brokers for their services;
(2) Lenders will be banned from paying trail commissions to brokers for new loans – this will obviously see the end of a significant income stream for mortgage broking businesses; and
(3) Mortgage brokers found acting in the interests of the bank and not the intending borrower will be subject to fine and penalties.
The Enterprise Legal team is keen to see when and what the implementation of the Commission’s recommendations will look like. To stay up to date with these changes, email email@example.com to subscribe to our email updates and make sure you follow us on Facebook.