The Coalition’s comprehensive response was delivered on 4 February, four days after having received the Final Report. In contrast, it has taken Labor 18 days to announce a compensation scheme through the Australian Financial Complaints Authority (AFCA) – copying the model outlined in the Government’s response some 18 days earlier.
It should be remembered that it was the Coalition that established AFCA in 2018, in the face of Labor criticism, and in doing so overhauled how financial disputes are dealt with in Australia. AFCA’s indexed monetary limit of $1 million and compensation cap of $500,000 was almost double the existing limits of predecessor schemes and lead to significantly enhanced access to redress for consumers and small businesses who wrongfully suffer losses.
Importantly, these caps were set following independent advice from the Ramsey Review warning that increases in the compensation cap could have an impact on competition if it results in smaller firms in some areas of financial services being unable to obtain professional indemnity insurance and therefore being unable to enter or remain in the market.
Labor’s scheme is also at odds with the clear advice from Commissioner Hayne that: “There would be no merit in allowing further access to redress in any case where the consumer or small business concerned has already resorted to dispute resolution by a court, tribunal or external dispute resolution body or has settled the dispute.”
Labor is also promising to pass the cost of compensating victims of past unpaid claims from ombudsmen schemes onto the industry. This will impose a retrospective burden on many small financial businesses that had nothing to do with the misconduct and that may not have even been in existence at the time. These businesses will ultimately have to pass these costs onto their customers.
Labor is promising a new Board made up of representatives from industry and consumer groups and an independent Chair to oversee decisions made by the scheme, notwithstanding that AFCA’s Board already comprises an independent Chair and an equal number of consumer representatives and industry experts.
When it comes to the Royal Commission, no political stunt has been beneath Labor.
In calling for additional sitting weeks to rush their flawed legislation full of loopholes through parliament they have not only acted against the clear warnings of the Law Council of Australia that “Parliament must hasten slowly” but even more importantly, they ignored Commissioner Hayne’s finding that complexity of financial services laws has been part of the problem. Their desire to rush ill-conceived laws into Parliament has been exposed for what it is: irresponsible and serving to only compound the problem.
It has taken Labor 18 days to respond to its recommendations. In those 18 days they have backed down on retrospective penalties for superannuation trustees, uncapped penalties on corporates and now look set to humiliate themselves on mortgage brokers.
All of this comes after Labor said before they had even seen the Final Report “if the royal commission recommends it, it shall be done.”