The Royal Commission established an enquiry on 14 December 2017 into misconduct in banking, superannuation and financial services industry, after several years of pressure from members of the public, consumer groups, and several politicians. The aim of the enquiry is to investigate whether Australian financial services have engaged in any criminal misconduct, and whether there are sufficient mechanisms in place to compensate victims.
Since the first public hearings on 13 March 2018, a number of scandals have emerged, where the actions taken by some of the biggest financial services in Australia shed light on the unsurprising reality of their priorities. In order to meet targets, many banks have undertaken several acts of misconduct including forging documents, issuing unfair loans, briber, and lying, leaving hundreds of victims in poor financial states at the risk of losing their homes and assets.
Founder of Finance Consumers Support Association, Ms Denise Brailey, has advocated for enquiries into financial services for years. One area of particular concern for her are interest-only loans which banks devised to tempt people who were nearing retirement. Usually these people had paid off their mortgages and were looking to purchase investment property. Ms Brailey claims that these interest-only loans which did not require much documentation, tempted people to take out large loans that they could not actually afford, putting them in serious debt while the bank’s financial advisers gained commission from meeting lending targets. UBS, one of Australia’s most renowned banking analysts, confirmed in 2017 that there are around $500 billion worth of inaccurate mortgages.
The Royal Commission will be making enquiries into all these potential anomalies. Some confirmed acts of misconduct which have been exposed so far include the Commonwealth Bank of Australia admitting that their financial advisers have charged fees to dead clients, some for more than a decade, or clients who were no longer being provided with financial services. What is especially discouraging for the public has been the revelation that these financial advisors were often aware of the charges but made little or no attempt to contact family members to right the situation. AMP similarly charged their customers fees without providing financial services, and further admitted to lying to regulators such as ASIC (Australian Securities and investments Commission). As a result of these discoveries, AMP has announced the resignation of their CEO, Mr Craig Meller.
As well as investigating the big-four banks, the Royal Commission will also be making enquiries into insurance and mortgage companies such as BT Financial and Aussie Home Loans, and car financing companies. The key concern that is now on everyone’s minds is what penalties will be imposed to ensure justice and deter from future misconduct. The government has proposed new penalty regulations including increasing the maximum penalty for some serious offences to 10 years imprisonment for individuals or $9.45 million fines for corporations. They are further proposing to expand the range of offences subject to such penalties.
The Royal Commission’s interim report will be submitted no later than 20 September 2018, and their final report will not be submitted until 1 February 2019. It is clear however, in light of the misconduct unearthed, that regulations by the government and changes from financial services, can be expected. The public is able to assist the enquiry by making online submissions as an individual or entity detailing any misconduct they have encountered. The form can be found at: https://financialservices.royalcommission.gov.au/Public-submissions/Pages/default.aspx.
If you have been a victim of a financial service’s misconduct, or have any queries relating to issues featured in this article, please do not hesitate to contact us on 02 8917 8700 or fill out the enquiry box and we will get back to you ASAP.