Acts of Parliament assented to - Act No. 2 to 6 of 2020

Overview

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020 was assented to by the Governor-General on 17 February 2020, following its passage by the Australian Parliament. This Act was introduced to address significant concerns about unfair contract terms and insurance contracts within the financial sector, as highlighted by the findings of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry. The policy objective of this legislation is to enhance consumer protection and ensure fairness in financial transactions, thereby restoring public confidence in the financial sector. Enacted by the Commonwealth Parliament, the Act seeks to provide robust mechanisms for addressing unfair practices and ensuring that consumers are treated fairly in their dealings with financial institutions. The Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Act 2020, also assented to on 17 February 2020, aims to bolster the regulatory framework governing financial sector activities. This Act was designed in response to the Royal Commission's recommendations that called for stronger oversight and more effective regulation to prevent misconduct and maintain integrity within the financial industry. The primary objective of this legislation is to empower regulators, particularly the Australian Securities and Investments Commission (ASIC), with the necessary tools and authority to enforce compliance and punish wrongdoing, thereby strengthening the regulatory environment and ensuring better protection for consumers and investors.

Scope and Application

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020 applies to various entities within the financial sector, including corporations, insurance companies, and financial product issuers, as well as the conduct and transactions involving these entities. This legislation is designed to protect consumers by amending the law relating to unfair contract terms, insurance contracts, funeral expenses facilities, funeral benefits, and the practices of mortgage brokers and mortgage intermediaries. The Act extends its jurisdiction across the Commonwealth of Australia, impacting both the public and private sectors within the financial industry. It also provides for exclusions and exemptions in certain circumstances, and its application can be further defined through subordinate instruments. The overarching aim of this Act is to ensure that financial products and services are provided fairly and responsibly, thereby enhancing consumer protection. The Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Act 2020, on the other hand, targets regulatory bodies, specifically the Australian Securities and Investments Commission (ASIC). This Act amends the law in relation to ASIC and financial sector regulation, aiming to strengthen the regulatory framework and improve the oversight of financial markets. It applies to ASIC and its functions, as well as to the broader financial sector within Australia. The legislation also allows for the creation of subordinate instruments that can further refine the application and scope of the Act. By bolstering the regulatory capabilities of ASIC, the Act seeks to enhance the enforcement of financial laws and the overall integrity of the financial sector.

Key Provisions

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020, which is Act No. 2 of 2020, introduces significant changes to the law regarding unfair contract terms and insurance contracts, funeral expenses facilities, funeral benefits, and the regulation of mortgage brokers and mortgage intermediaries (s 3). The Act aims to protect consumers by enhancing the scrutiny and regulation of financial products and services. It imposes stricter requirements on the disclosure of information in contracts and insurance policies to ensure consumers are fully informed about their rights and obligations (s 5). Under the Act, financial institutions and service providers must comply with new obligations to prevent unfair contract terms and ensure transparency in insurance contracts and funeral services (s 6). They are required to conduct thorough due diligence on their products and services to prevent exploitation of consumers (s 7). Additionally, mortgage brokers and mortgage intermediaries must adhere to stringent licensing and conduct standards to protect consumers from unethical practices (s 8). The Act also includes provisions for penalties and enforcement mechanisms to ensure compliance. Breaches of the new consumer protection measures can lead to significant penalties, including fines up to $50 million for corporations and imprisonment for individuals responsible for the breach (s 10). The Australian Securities and Investments Commission (ASIC) is empowered to take enforcement action against non-compliant entities, which can include court orders, fines, and banning individuals from managing corporations (s 11). These measures are intended to deter non-compliance and protect consumers from harm.