David Littleproud (Maranoa, National Party, Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management) Share this | Hansard source

I present a replacement explanatory memorandum to the Financial Sector Reform (Hayne Royal Commission Response-Stronger Regulators (2019 Measures)) Bill 2019.

Firstly, I would like to thank those members who have contributed to this debate. The government is committed to implementing its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by extending unfair contract terms to insurance contracts; ensuring that adequate consumer protection provisions apply to funeral expense policies; introducing a best-interest duty requirement for mortgage brokers; and reforming mortgage broker remuneration.

Schedule 1 of the bill implements recommendation 4.7 of the royal commission. Extending an unfair contract terms regime to insurance contracts will ensure that consumers and small businesses are protected from insurers using unfair terms in standard form contracts. By preventing insurers from including unfair terms in insurance contracts and providing a mechanism to enforce, it enhances consumer rights and provides consistency in financial service regulation. The bill has been tailored to the specific features of insurance contracts to ensure its effectiveness. Applying the unfair contract terms regime to insurance is an important component of the reforms to this sector which, together, represents real, beneficial change to the insurance industry.

Schedule 2 of the bill ensures that the consumer protection provisions in the ASIC Act apply to funeral expenses policies. Many vulnerable consumers have been harmed by the poor sales practices adopted by funeral expenses policy providers. These reforms will subject providers of funeral expenses policies to the Australian financial services licensing regime.

Schedule 3 of the bill will impose a duty on mortgage brokers to act in the best interests of the consumer when providing credit assistance regulated by the National Consumer Credit Protection Act 2009. The reforms being introduced to mortgage broker remuneration will require the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount, ban campaign and volume based commissions and payments, and cap soft-dollar benefits. Further, the reforms introduce a limit to the period over which commissions can be clawed back from aggregators and mortgage brokers to two years and prohibit the cost of clawback being passed on to consumers. Collectively, these reforms will mitigate the incentive for mortgage brokers to suggest loans that are not in the best interests of the consumer and will improve consumer outcomes. I commend the bill to the House.

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