In a submission to the current Senate inquiry into the FOFA amendments, the ABA said it worked closely with the former Labor government to “ensure basic, retail banking products and retail banking is not adversely impacted”.
“Unfortunately, these changes were not finalised before the federal election last year. It was recognised that retail banking was not the focus of the FOFA reforms,” said the submission.
“We are now working with the current government on finalising these changes and making sure the law establishes clear obligations for banks and other financial services providers.”
However, the ABA is “very concerned” around the legal and regulatory uncertainty with some of the FOFA provisions.
“The FOFA reforms, despite attempts to address the overreach of the law into retail banking, will substantially impact on banks, making it more costly and less efficient if certain technical amendments are not made,” said the ABA.
As the legislation currently stands, retail banking customers will face “convoluted bank-customer relationships and poor customer experience” because they will not be able to talk to a single representative about their financial needs, said the submission.
The ABA went on to stress the importance of consumers receiving information about ‘Tier 2’ products (general insurance products, basic banking products and consumer credit insurance) and distinguished it from financial advice on ‘Tier 1’ products (managed investments, shares, superannuation, etc).
“The FOFA reforms should not apply to financial product advice on ‘Tier 2 products’,” said the submission.
Instead, FOFA should only apply to personal advice provided to a retail client, said the submission.
“Therefore, the ABA supports the proposed amendment to introduce a limited carve out for general advice from the conflicted remuneration provisions,” said the ABA.
The ABA said it was “very concerned” about the delay in making regulations and finalising the technical amendments it has been seeking “for some time”.
“It is important for the federal government to make regulations to give effect to a number of clarifications and corrections needed immediately to ensure the law does not result in inadvertent and adverse consequences for retail banking,” said the submission.
“In the very least, the federal government must make specific changes to various regulations to further extend the commencement for another year … to permit these necessary clarifications and corrections to be finalised without exposing banks and banking groups to non-compliance or the need to make expedited and costly compliance changes across their retail banking businesses and their workplace agreements,” said the ABA.
