Over the last few months I’ve had lots of questions about the banking Royal Commission. What is it? Why is it happening? How does it work? And, what does it mean for me – will it be harder to get a home loan? So, here is a quick summary of what’s going on, and our next blog will cover the impacts to you, so stay tuned!
What is the Royal Commission?
Formally known as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the banking Royal Commission, led by the appointed Commissioner the Hon Kenneth Hayne AC QC, will investigate whether any of Australia’s financial services entities have engaged in misconduct.
How does it work?
First there are a series of public hearings. They started in March and will run throughout 2018. A range of topics will be covered including financial advice, lending, insurance and super, and the Commission calls various individuals to give evidence at these hearings like senior executives from the banks and other financial services organisations, financial advisers and clients. The Commissioner will submit a final report to the government in February 2019.
What companies are included?
The “big four” banks – Commonwealth Bank, Westpac, ANZ, National Australia Bank – are included, as well as other financial services organisations like AMP, BT Financial and Aussie Home Loans.
How did it come to this?
Why is there a Royal Commission in the first place? Well, over the last few years there has been mounting pressure from consumer groups, the public and various political parties to investigate the practices of the financial services industry.
Around three years ago, the Commonwealth Bank financial planning scandal happened. And last year, there was more wrong-doing uncovered across the big banks. The Labor party has argued for a Royal Commission for over 18 months and finally, after the big four banks agreed that some type of inquiry should happen, Malcolm Turnbull agreed and in December last year the banking Royal Commission was established.
What can the Commission do? What can’t it do?
The Commission can gather evidence and make recommendations for the Government, for example it may recommend changes to legislation or regulation. But it can’t order that consumers be compensated for any of the banks’ actions.
What exactly have the banks been doing?
So far, behaviours that have been uncovered include financial advisers charging fees where a service had not been provided, credit card insurance being sold to people who actually weren’t eligible to claim on it, incentive programs that encouraged business owners to get customers to sign up for loans, and living expenses not being properly verified when home loans were offered through mortgage brokers.
So, what does this mean?
All of us are, in some way, customers of the financial services industry. Whether it’s our bank accounts, our insurances, our mortgages or our super, it’s important that we as customers are being treated fairly, even when we’re not looking.
One impact we are already seeing is that yes, loans are going to be harder to get. Stay tuned for our next blog where we’ll cover this in a bit more detail.
And do keep in mind that whilst we are seeing a lot of dirty laundry being aired, there are also a lot of great financial services organisations, products and financial advisers that work hard to make a positive difference in the lives of Australians every day!
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