A range of new financial services law has now come into effect, including reference checking protocols, breach reporting and deferred sales for add-on insurance.
New financial services laws impacting the broking space have come into effect today (5 October), as part of a swathe of new laws resulting from the banking royal commission.
As of Tuesday (5 October), four new regimes take effect:
- Design and distribution obligations
- Deferred sales model for add-on insurance products
- Internal dispute resolution
- Hawking reforms
These reforms aim to:
- Strengthen the unsolicited selling of insurance and superannuation products, to prevent “pressure selling” to consumers
- Introduce a deferred sales model for add-on insurance products, including consumer credit insurance, to promote “informed purchasing decisions” and prevent inappropriate sales of those products
- Introduce a new breach reporting regime for credit licensees under the National Consumer Credit Protection Act 2009
- Require Australian financial services and credit licensees to provide reference checks, in a bid to ensure “consistent practices throughout the industry for sharing relevant employment information about financial advisers and mortgage brokers”
- Implement design distribution obligations to help consumers “obtain more appropriate financial products” by requiring issuers of financial products to determine an appropriate target market for these products, followed by issuers and distributors being required to sell their products accordingly
Marking the start of the reforms that have now commenced, federal Treasurer Josh Frydenberg said that “consumers and small businesses will benefit from additional protections with the commencement of a further nine recommendations of the Banking, Superannuation & Financial Services Royal Commission” and the design and distribution obligations (DDO).
“The Morrison Government remains committed to completing implementation of the recommendations of the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and in doing so ensuring Australians continue to have trust and confidence in a strong and effective financial system,” he said.
The broking industry has been busy preparing for these reforms, with aggregators and associations issuing a range of learning and training materials to members; while lenders have been making their Target Market Determinations available online, as required.