Brokers and payday lenders could form part of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, according to unconfirmed reports.
Fairfax Media is reporting that the letters patent for the recently announced royal commission will be expanded to include mortgage brokers and payday lenders, however the Prime Minister and Treasurer are yet to confirm whether this is the case.
The Sydney Morning Herald published a story this morning emphatically stating: “The royal commission into the banking and financial services sector will be expanded to include mortgage brokers and payday lenders as part of the largest investigation into the financial system in Australian history.
“Commissioner Kenneth Hayne will now be empowered to investigate all agencies that hold an Australian credit licence, including unscrupulous lenders outside of the major banks, during the 12-month inquiry.”
The Adviser has contacted the Prime Minister’s office and Treasury for confirmation, but has not yet received comment.
Royal commission background
On Thursday (30 November) Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announced that the government would launch a royal commission into the banks and released a draft terms of reference document
According to the document, the commission must inquire into several areas, including:
• The nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf);
• Any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations;
• Whether any findings of misconduct are attributable to the particular culture and governance practices of a financial services entity or broader cultural or governance practices in the industry or relevant subsector, and are the result from other practices, including risk management, recruitment and remuneration practices;
• The effectiveness of mechanisms for redress for consumers of financial services who suffer detriment as a result of misconduct by a financial service entity; and
• The adequacy of existing laws and policies relating to the provision of financial services.
Other areas will look at the internal systems of financial services entities, forms of industry self-regulation, the effectiveness and ability of regulators of a financial services entity to identify and address misconduct, and whether there should be any change to legislation to minimise the likelihood of misconduct.
The commission will also look at the use of superannuation members’ retirement savings for “any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members”.
Brokers divided on royal commission
A survey of Australian mortgage brokers conducted on behalf of MyState Bank last month found that the third-party channel is “split” over the issue of having a royal commission into the banking sector.
According to the survey, which was conducted prior to the government’s announcement last week, 38 per cent of respondents were in favour of a royal commission.
From those in favour of an investigation into the banking sector, 14 per cent said that it was “definitely needed” while 24 per cent said that it was needed “on balance”.
Conversely, of those against a high-level inquiry into banking, 17 per cent of brokers believed that a royal commission would be unnecessary and 24 per cent suggested that there were “other more important issues to address”.
Twenty per cent of brokers were undecided on the issue.
More to come.