Consumers can expect improved justice and recourse should they be victims of wrongdoing by the financial services industry as the result of a Senate Committee report that has built upon the Banking Royal Commission’s recommendations.
The report recommended direct recourse for consumers should a financial adviser go bust, suggesting changes to both the Bankruptcy Act and that credit licence holders comply with model litigant provisions throughout legal proceedings to help rebalance the legal process toward the public.
It suggested that the Act be changed so that consumers facing bankruptcy because of a bank or brokers’ wrongdoing could still pursue compensation from those that caused the bankruptcy, which currently wasn’t possible as the consumers’ legal rights became the property of the trustee in bankruptcy.
The Committee also recommended that membership of the Australian Financial Complaints Authority (AFCA) be expanded to capture more industry players, such as pay day lenders and professional indemnity insurers of financial services providers.
According to major plaintiff law firm, Maurice Blackburn, these changes would help improve access to justice for victims of financial wrongdoing.
The firm’s superannuation and insurance principal, Josh Mennen, pointed to the changes to professional indemnity insurance as particularly positive.
“Many consumers on the receiving end of poor financial advice try to pursue the insured wrongdoer, but find they can’t pay out on a claim. By adding professional indemnity insurers under the membership banner of AFCA means these insurers also would be held to account in having to meet claims from consumers if the insured wrongdoer is unable to pay,” he said.
“This will in turn lessen the burden on the partly taxpayer funded compensation scheme of last resort. That means more money will be available to compensate victims of financial misconduct when they are otherwise unable to recover their losses.”
Money Management previously reported that professional indemnity insurance was becoming more difficult to obtain in Australia, which these recommendations could impact should they be legislated.