The Financial System Inquiry Interim Report devoted a section to the topic of the consumer protection framework in financial services, covering both consumer credit and financial products.

This graphic is a useful summary of the current consumer protection position (click to enlarge).

This graphic summarises financial services regulation (click to enlarge).

The Report provides options in respect of both consumer credit and financial advice.

Consumer credit
The options are:
• No change to current arrangements.
• Improve the current disclosure requirements using mechanisms to enhance consumer understanding, including layered disclosure, risk profile disclosure and online comparators.
• Remove disclosure requirements that have proven ineffective and facilitate new ways of providing information to consumers, including using technology and electronic delivery.
• Subject product issuers to a range of product design requirements, such as targeted regulation of product features and distribution requirements to promote provision of suitable products to consumers.
• Provide ASIC with additional powers such as:
– Product intervention powers to prescribe marketing terminology for complex or more risky products.
– A power to temporarily ban products where there is significant likelihood of detriment to consumers.
• Consider a move towards more default products with simple features and fee structures.

Financial advice
The options are:

• No change to current arrangements.
• Raise minimum education and competency standards for personal advice (including particular standards for more complex products or structures such as Self-managed Superannuation Funds), and introduce a national examination for financial advisers providing personal advice.
• Introduce an enhanced public register of financial advisers (including employee advisers) which includes a record of each adviser’s credentials and current status in the industry, managed either by Government or industry.
• Enhance the Australian Securities and Investments Commission’s power to include banning individuals from managing a financial services business.
• Rename general advice as ‘sales’ or ‘product information’ and mandate that the term ‘advice’ can only be used in relation to personal advice.