Government advances RC recommendations

Oksana Patron

12 September 2022

The Government has introduced legislation to implement  two legislative measures from the Royal Commission into Misconduct in the Banking, superannuation and Financial Services Industry, including the extension the Banking Executive Accountability regime to all APRA-regulated entities and establishing a Compensation Scheme of Last Resort (CSLR).

The new Financial Accountability Regime (FAR) would hold directors and most senior and influential executives of financial institutions accountable for their decisions and conduct with “significant flow on effects for everyday Australians and the Australian economy”.

The FAR would also impose heightened accountability obligations with appropriate consequences to follow, including civil penalties for financial institutions and disqualification of senior executives as accountable persons.

The CSLR, which was set up to ensure confidence in the financial system external dispute resolution framework, would facilitate the compensation payment of up to $150,000 to eligible consumers with a determination from the Australian Financial Complaints Authority (AFCA) relating to personal financial advice, credit intermediation, securities dealing and credit provision which remained unpaid.

The scheme would be fully industry funded, through a levy on relevant financial service and credit licensees in the subsequent years of the scheme’s operation, with the Government’s contributing towards the costs of the scheme in its first year of operation starting from 1 July 2023.

The Government is also finalising the 2016 Review of Small Amount Credit Contracts, with the new legislation introducing new protections for consumers of high-cost credit products known as SACCs (payday loans) and consumer leases.

The reforms would aim to reduce the risk of financial hardship for consumers of these products, typically used by low-income households to purchase household goods.