Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) Share this | Hansard source

First, I would like to thank those senators who have contributed to the debate on this bill, the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019, particularly those who have expressed support for the measures in the bill, support which has been almost universal, and those who have expressed some very heartfelt and personal views about some of the measures in this bill, and particularly Senator McCarthy: thank you very much for your contribution.

The government is committed to implementing its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by extending the unfair contract terms regime to insurance contracts, by ensuring adequate consumer protection provisions apply to funeral expenses policies, and by introducing a best interests duty requirement for mortgage brokers and reforming mortgage broker remuneration.

Schedule 1 of this bill implements recommendation 4.7 of the royal commission. Extending the 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 them, it enhances consumer rights and provides consistency in financial services 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 represent real and beneficial changes to the insurance industry.

Commissioner Hayne discovered evidence of harm being inflicted upon vulnerable consumers by providers of funeral expenses policies. That harm derived from the provision of poor sales practices and the distribution of low-value products by these providers. Schedule 2 of the bill will ensure that the consumer protection provisions of the ASIC Act apply to funeral expenses policies, removing any ambiguity that may currently exist.

Schedule 3 of the bill amends the National Consumer Credit Protection Act to require mortgage brokers to act in the best interests of the consumer when providing credit assistance. This ensures the law is in line with consumer expectations when interacting with a mortgage broker.

Mortgage broker remuneration will also be reformed by requiring the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount, banning campaign and volume based commissions and payments and also capping 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 onto 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 this bill to the Senate.

Question agreed to.

Bill read a second time.