In this 7 minute video, I summarise the current state of financial services and credit regulation in Australia and what is happening in 2021. There is a transcript below.
Date: 1 January 2021
Hello, I’m David Jacobson. Today, I want to give you a preview of what’s ahead in 2021 for financial services and credit regulation but first, let’s look at where we are now.
The financial services and credit market has become more complex.
Regulation is now managed by a number of regulators, starting with ASIC, whose responsibility includes product intervention and enforcement.
APRA, the Australian Prudential Regulation Authority sets standards, including credit standards, which will become relevant to non-ADIs as well.
Treasury sets policy and increasingly is taking over policy development from ASIC and APRA.
The Australian Competition and Consumer Commission deals with competition and consumer protection issues in the wider market, as well as in consultation with ASIC and APRA, in respect to financial services.
The Office of the Australian Information Commissioner deals with privacy and increasingly, privacy is an important aspect of financial services and credit.
Over the last few years, we’ve seen AUSTRAC take a more aggressive role in the enforcement of the anti-money laundering provisions and AUSTRAC compliance is now an important feature of financial services and credit. And the Australian Taxation Office also maintains a role.
In respect of dispute resolution, the Australian Financial Complaints Authority, whilst not strictly a regulator, is an important stakeholder in the process.
Products are increasingly diverse, ranging from pure credit products to deposit and transaction accounts, non-cash payment products, products involving insurance, financial advice products and third party products, which are integrated together with other products, which now become hybrids or increasingly difficult to categorize as credit or deposit or transaction products.
Product design and development is important. Who is the target market? What are the benefits to consumers and what are the compliance requirements?
Delivery channels have become more varied starting from face-to-face delivery of products in branches or [email protected] or through merchants, products can now be delivered online, telephone, mobile phone, smartphones, ATM’s and other computer networks. And contact centres are an important delivery point.
Relationships are now more varied as well. Starting with financial services providers’ own products through their own license and through their own employees, financial services and credit are now provided through representatives and distributors through referrals. And there are other third party product issuers who provide products to financial services providers in addition to their own products. Telcos now play a role, as well as software providers, platform operators, and merchants themselves.
As products themselves change, as well as the delivery channels and relationships, so will regulation change. Regulation will not only change, it will increase as time goes on.
2021 will be the year that many of the Financial Services Royal Commission recommendations take effect. We’ll be seeing changes such as an extension to the prohibition of hawking of financial products, the introduction of greater regulation of mortgage broker commissions, and a mortgage broker best interest duty. We’ll see an extension of the ban on conflicted remuneration. We’ll see greater enforcement of industry code provisions, an extension of licensing to insurance claims handling and settling, and a cap on commissions for add-on insurance for motor vehicles. All of these will occur in January.
In March, is the expected change to the National Credit Act Responsible Lending Obligations. And in April, we’ll start to see new changes to credit risk management standards. We’ll see an extension of licensing to debt management firms in April, as well as an extension of the unfair contract terms to insurance.
In June, there’ll be amendments coming into force under the Anti-Money Laundering Act. And this will be the start of changes to AML/CTF regulation. We’re likely to see the interaction of a compensation scheme of last resort in respect of dispute resolution and an extension of the banking executive accountability regime to superannuation and insurance.
In July, we’re likely to see the commencement of changes for small amount consumer credit contracts and consumer leases, as well as further developments in respect of financial advice regulation.
Importantly, in October, we’ll see changes to the breach reporting regime, as well as the requirement for reference checking for mortgage brokers and financial advisors and the requirement to notify clients of suspected misconduct.
This will go hand in hand in October with the new product design and distribution obligations, as well as changes to internal dispute resolution and a deferred sales model for add-on insurance. At the same time, there are likely to be changes in respect of electronic document execution and we’re going to be monitoring changes to the mandatory credit reporting regime and the e-payments code.
Other changes are currently being considered with respect to the Privacy Act and Retail Payment Regulation.
All in all, 2021 is likely to be a quite busy year.
If you’d like more information about any of these changes or how I can help you prepare for the changes, please call me at any of the contact points listed on the screen. Thank you.
If you found this article helpful, then subscribe to our news emails to keep up to date and look at our video courses for in-depth training. Use the search box at the top right of this page or the categories list on the right hand side of this page to check for other articles on the same or related matters.
Author: David Jacobson
Principal, Bright Corporate Law
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.