The Australian Securities & Investments Commission (ASIC) is reviewing how to use new powers allowing it to stamp out financial and credit products it perceives as damaging for consumers.
The ‘product intervention power’ could allow ASIC to implement temporary actions such as banning a product or product feature, imposing sale restrictions or amending product information.
The corporate watchdog was awarded the powers in April 2019 and is now beginning consultation prior to deployment, hoping to use the powers in August 2019.
ASIC Deputy Chair Karen Chester said the powers were vital to ASIC’s regulatory toolkit, but emphasised they must be used within the appropriate guidelines.
“ASIC can now step in and respond to significant consumer detriment in a targeted and timely way,” Ms Chester said.
“Australia is joining regulators in other jurisdictions like the US, the UK, the EU, Hong Kong and Taiwan with product intervention powers.
“But there are also important checks and balances – it is a temporary intervention power and we must consult before each and every use.”
The powers were recommended by the 2014 Financial System Inquiry and are unique in their focus on damage reduction to consumers, rather than punishments after a breach.
ASIC is also only able to use powers on a market-wide basis to address industry-wide problems and must consult before intervening on each individual case.
The products believed to be under the microscope are term deposits with automatic rollovers, junk insurance and consumer credit insurance.
Consumer advocates welcome new powers
CHOICE CEO Alan Kirkland welcomed the new powers, believing product intervention powers were one of the biggest missing pieces of law in Australia.
“We’re glad to see ASIC move fast to signal how it will use these powers, because the sooner they are used, the sooner consumers will be protected from dangerous financial products,” Mr Kirkland said.
“We hope to see these powers used to curb or stop the sale of products that are outright ripoffs, like consumer credit insurance, funeral insurance and tricky life insurance policies.”
Mr Kirkland also reiterated that the fundamental message for financial institutions is to make sure their products and practices don’t cause significant harm to consumers.
“If you do that, you’ve got nothing to fear.”
Consumer Action Law Centre CEO Gerard Brody is also supportive of the changes, telling the Australian Financial Review the new laws are “a vast improvement on the current process”.
“This is a really positive development. We have a hit list of products that cause considerable consumer detriment that they could use this power in relation to,” Mr Brody said.
The products on Mr Brody’s hit-list include credit repair companies and buy-now, pay-later schemes.
ASIC is now looking for public input into its new powers by 7 August 2019 and aims to release its final regulatory guide in September 2019.