Financial systems inquiry: Home lenders, credit card users to benefit from shake-up

The Federal Government has backed moves to strengthen competition in Australia’s home lending market while flagging action to crack down on excessive credit card fees.

Key points:

Government accepts all but one of financial system review recommendations
Moves to strengthen competition and generate stronger reserves for banks
Flags crack down on unfair credit card surcharges
Promises to place tougher controls on financial advisers

The Government has also promised to tighten standards for financial advisers as part of its long-awaited response to the financial systems inquiry by former Commonwealth Bank chief executive David Murray.

Banks will gradually build up their financial reserves or “capital levels” and competition will be encouraged betweens home lenders through a process the Australian Prudential Regulation Authority began in July.

By the middle of next year, the Government will legislate to ban unfair card surcharges that are greater than the cost of lenders to accept payment by card, with the crackdown to be phased in.

“We will make the Australian Competition and Consumer Commission responsible for enforcing these surcharging regulations, to ensure consumers are treated fairly and not over-charged when they pay using a card,” a statement from Prime Minister Malcolm Turnbull and other economic ministers said.

The Government is promising to raise “professional, ethical and education standards” for financial advisers by requiring them to hold a degree, pass an exam, do continuous “professional development”, sign up to a code of ethics and undertake a professional year before they can advise clients.

“Australia can now be confident that our financial system remains the best in the world,” Mr Turnbull said.

Follow all the day’s developments from within Parliament House in our live blog.

The Government has agreed to all but one of the report’s 44 recommendations, rejecting the idea of stopping direct borrowing by superannuation funds.

The Productivity Commission will be tasked to review the superannuation system, described as “fragmented, costly and suffering from a lack of member engagement”, to develop alternative models for allocating default fund members to products.

Laws will be passed next year for stronger penalties against superannuation fund directors.

“We will also work closely with industry to provide retirees with more flexible and reliable retirement income products and move to extend the choice of fund arrangements to more employees by the Inquiry,” Mr Turnbull’s statement said.

Source: ABC News