On 6 February 2020 the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019 was passed by both Houses of Parliament. The Act is awaiting Royal Assent. Background.
UPDATE: Royal Assent given on 17 February 2020.
It addresses four recommendations from the Financial Services Royal Commission, including a best interests duty for mortgage brokers , banning unfair contract terms in standard insurance and applying consumer protection provisions to funeral expenses policies.
Mortgage brokers
Schedule 3 to the Bill amends the National Credit Act to require mortgage brokers to act in the best interests of consumers, and inserts provisions related to conflicted remuneration for mortgage brokers.
The maximum value of upfront commissions will be linked to the amount drawn down by borrowers instead of the loan amount; campaign and volume-based commissions and payments will be prohibited; and soft dollar benefits will be capped.
It applies from 1 July 2020.
UPDATE May 2020: Mortgage brokers changes commencement delayed until 1 January 2021.
ASIC Credit (Deferral of Mortgage Broker Obligations) Instrument 2020/487
Insurance unfair contract terms
Schedule 1 to the Bill gives effect to recommendation 4.7 of the Financial Services Royal Commission to extend the existing protections of the unfair contract terms regime under the Australian Securities and Investments Commission Act 2001 to insurance contracts governed by the Insurance Contracts Act 1984.
Schedule 1 commences on 5 April 2021.
Funeral expenses facilities
Schedule 2 to the Bill gives effect to recommendation 4.2 of the Financial Services Royal Commission to ensure that the consumer protection provisions of the Australian Securities and Investments Commission Act 2001 apply to funeral expenses policies.
Schedule 2 commences on the day after the Act receives the Royal Assent.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
