Precedent (Australian Lawyers Alliance)
FINANCIAL SERVICES AND CONSUMERS’ RIGHTS AND REMEDIES
By Ben Zipser
Most Australian adults typically engage as consumers in a multitude of financial services transactions every year, such as arranging car, home, disability or life insurance; borrowing money or guaranteeing personal loans; purchasing shares; putting money into their superannuation; and investing money in a financial product, often on the advice of their financial advisers.
When grievances about financial products or services arise, consumers have two sources of remedies: the complex regulatory scheme contained in Chapter 7 of the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the National Consumer Credit Protection Act 2009 (Cth); and the common law.
This edition of Precedent provides a flavour of the issues that can arise for consumers concerning financial products and services, and the remedies available.
Andrew Serpell provides a useful overview of three ways of pursuing a complaint and seeking a remedy in relation to a financial product or service: lodging a complaint with an external dispute resolution scheme; commencing legal proceedings in court; or claiming against a compensation scheme. One aspect of the complex regulatory scheme mentioned above was the introduction of effective external dispute resolution schemes to assist in resolving disputes between providers of financial products and services and customers. There are now two schemes operating in Australia: the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman. Dr June Smith’s article provides tips on helping consumers to engage effectively with FOS.
Two contributions consider insurance products, which are regulated by Chapter 7 of the Corporations Act. Alexandra Kelly provides practical insights into disputing an insurer’s decision to reject a claim. Josh Mennen considers regulatory reform to the sale and promotion of life insurance products by financial advisers. His article covers the topical issues of conflicted remunerations, churning, and vertically integrated advice (where an adviser recommends a financial product that is offered by entities with which they are associated).
Two articles consider the provision of credit, a financial product regulated by the National Consumer Credit Protection Act. The first concerns the Code of Banking Practice, which established minimum standards of prudent and ethical conduct and is binding on most Australian banks. Chris Curtis considers the circumstances in which the Code may assist borrowers and guarantors to obtain relief in relation to loans and guarantees that are regulated by the Code. One type of credit involves the provision of small loans for short periods, commonly referred to as ‘payday loans’. These are often provided by non-traditional lenders to borrowers experiencing financial stress. Cliff and Cerilea Baker examine the effort of regulators to impose responsible lending practices on credit providers in this market.
In the last ten years there have been a number of scandals where clients have lost their life savings owing to poor and inappropriate financial advice, or the collapse of financial product providers. In 2012, the federal government introduced regulatory reforms known as the Future of Financial Advice reforms in an effort to improve the quality and reliability of financial advice. In her article, Melody Gao covers key aspects of the reforms, such as the introduction of a statutory best interest duty, a ban on conflicted remunerations and the establishment of a public register for financial advisers. In their article, David Blackall, Jolyon Sykes, John Telford and Clifton Baker consider the failure of the Trio Capital Group, and specifically the role of the regulators and the part played by FOI laws in exposing the details behind the collapse.
Jan Saddler provides a useful overview of limitation periods for commencing actions that apply to claims against the suppliers and providers of financial products and services, while Phillipa Alexander has written an informative article on the solicitor’s lien for unpaid costs.
This edition of Precedent offers a spread of articles relating to a variety of financial products and services, which should be of interest to both consumers and their legal advisers.
Ben Zipser is a barrister at the Sydney Bar. One of his practice areas is financial services disputes. He wrote the chapter on financial services professionals in Walmsley et al, Professional Liability in Australia (3rd edition, 2016). PHONE (02) 9231 4560 EMAIL firstname.lastname@example.org.