There is no doubt that the investigative work and performance of the Commissioner and his legal team to date has exceeded our wildest expectations. The Royal Commission’s effectiveness has been a major blow for the banks and the government because they thought that the terms of the Commission and it time frame were such that it wouldn’t be overly productive. In truth, it was designed to fail because those in Office didn’t want us to find out just how ham-fisted they have been in the past where the banking sector is concerned.
Despite the restrictions placed on it, the Royal Commission’s probing of the major banks in this country has exposed the banks for what they really are; out of control rapacious wolves that will stop at nothing to devour everything we have, and this government seems incapable of stopping them.
There are no redeeming features about the way the banks have behaved. They have acted towards their customers in an unconscionable, unreasonable, self-serving, and, for the most part, coercive way that smacks in many cases of criminality. To put it in terms we all understand, “They are a bunch of crooks!” But then we knew that already so what’s new?
The worst part of all this is that whilst the banks have been behaving so badly, this and past governments have just stood by and let it all happen. To call them apathetic is being kind. We therefore have two obstacles to overcome; the banks and the government.
Whilst a certain euphoria may now well exist in our ranks because we, the past victims of these banks, have been vindicated in our assertions that, “The banks have done us wrong!” it will not change the status quo unless we are now willing to act to do something about it that is tangible.
Let’s face it. Whatever the Commission finally uncovers, we will only get more of the same, be it in a slightly different way unless we, the people, can turn the tables around somehow.
Remember that we are dealing with the most powerful institutions in this country that have been bullying us and governments past and present since deregulation. Why should anything change now? Ask yourself, what can we really expect when a new day breaks and the Commission has completed its findings? This will all be old news soon enough then. So will your stories.
Certainly, the findings of the Royal Commission will cause the banks some concern. Indeed, it’s doing so already, but the banks know from past experience that the Government will always throw them a life line. After all, a strong banking system is a necessary requisite for a sound economy. Therefore, the banks will almost certainly rise again and find new ways to extort money from their customers. It’s the nature of the beast. Cut off one head and another one grows.
It should also be borne in mind that any findings by a Royal Commission do not of themselves have legal consequences. Certainly, criminal proceedings can follow from a Royal Commission’s findings, and the Commission can make policy recommendations to the Government to change laws. Other than that, we are all back to square one though.
We will still be left with an unruly banking industry, a government that has shown no compassion for victims of banks in the past, a Regulator that has been craven in its approach to wrongdoers in the banking sector, an overabundance of consumer laws that are a minefield for lawyers to wade through, and a legal system that is so bloody expensive that even the Attorney General has said that he couldn’t afford to litigate on a personal level himself.
In the end, will the banks’ credit consumers really be in a better position than they were before the Royal Commission, protection wise? If past experience is anything to go by, the answer is a resounding, “No! They will not!”
It doesn’t matter how many laws are in place to protect investors and there are plenty of such laws at the moment. If the only avenue for compensation, other than via the courts, is controlled by banks, then what good is this to us?
We know that making a complaint about a bank to FOS, the ABA and APRA will: (1) still take years to obtain a ruling, (2) is expensive, and (3) may result in a decision that is weighted in favour of the offending bank. Also, where financial advisers are concerned, even this course in not open to us unless that financial adviser is employed by a bank.
If, on the other hand, the court system is used to try and obtain compensation, this is also no real solution because that pathway is even more expensive and even more long-winded. Further, few law firms have the expertise or resources to take on such cases, never mind win them. I have formed the view long ago that the judiciary and our court system in general are not really set up to handle consumer law cases although they will argue otherwise. When this avenue of last resort is used by aggrieved consumers, the only real beneficiaries in the end appear to be the lawyers.
So what can be done to turn this situation around that hasn’t been tried already?
To my mind, there is only one way consumers can be fully protected from wrongdoers in the banking industry! That is by having an effective compensation system that will cost a consumer nothing to make a claim, is entirely independent of the influence of the financial sector, and can offer a speedy outcome for the claimant!
In the present climate this seems like a pipedream, doesn’t it? Besides, if it were that easy, why isn’t such a system already in place? The answer is simple enough. Too many parties have a vested interest in maintaining the current situation because other people’s misery has become a cash cow for them. If we had a compensation system such as the one I have mentioned, the banks would not be able to keep most of their spoils and the lawyers would have to scratch around for clients. The insurance companies who issue professional indemnity insurance policies that, for the most part, are just worthless pieces of paper would also find themselves left out in the cold.
An industry has been created out there that would be made redundant overnight if a simple answer were found that would by-pass these interest groups. Are you getting the picture?
Is it really quite that simple to turn this whole situation on its head? In theory, it is quite feasible but a shift of mindset by all concerned is required before this can be achieved.
When I did some consultancy work for the government back in the eighties, I found that many civil servants were incapable of thinking outside the square because they had been programed to act within a certain framework. That’s what we need to do now; look outside the square. We need to consider this problem from a different angle if we are going to find a solution that will work.
If our goal is to have an effective compensation system that will cost nothing to use, is entirely independent of any outside influences, and can offer a speedy outcome for the claimant, how do we go about achieving this?
First of all, we need to ask ourselves:
• What is the number one thing that all Australians need when dealing with banks and financial advisers? Protection!
• Whom do we need protecting from? Rogue elements within the financial sector!
• Do the current avenues for compensation match up to our goal? No, for the reasons I have previously stated!
Then we need to ask ourselves:
• How do people in our society protect themselves against risk? By being insured!
What I am now about to propose is a radical departure from the norms that currently exist for consumers who are seeking compensation when elements within the financial sector are perceived to have done the wrong thing by them. For this to work, the Government would have to stop standing by and become a major player. A government department would need be set up that will have overall control of all aspects dealing with consumer compensation.
For want of a better title, I would call this new Government Department, ‘THE CONSUMER PROTECTION INSURANCE AND COMPENSATION DEPARTMENT’. This Department would provide a “Consumer Protection Insurance Cover to all those that are consumers of the banks and financial advisers and process all compensation claims. I see it working this way:
1. This Government Department would handle all aspects of Consumer Protection Insurance including providing “consumer protection insurance” cover and handling all claims relating to such. It could be an off-shoot of ASIC.
We know that ASIC is not performing at the top of its game. Any fool can see that. Its track record thus far is an indicator of ASIC’s inability to perform its primary role as a regulator efficiently or effectively. We also know that ASIC is woefully underfunded despite Government’s assurances that it is not. It has been overburdened with a great many tasks for far too long now and has simply lost its way. This new Department would relieve ASIC of a great deal of its current workload.
2. The Department would be funded in part by the fees it charges for providing consumer protection insurance cover. It would also be funded by penalties imposed on the financial sector and the banking industry by the Government.
Fines such as the $700 million dollars the CBA has to pay out could be allocated to the set-up costs of this Department and future fines and penalties for misconduct by the banking industry and financial sector (financial advisers) could also go towards this Department’s operating costs.
3. The fees that this Department would impose for issuing a consumer protection insurance cover would be split between the consumer and the banking industry or financial sector on a 50/50 basis.
The cost would be a reasonable one for both the consumer and the financial sector.
4. The Department would issue a ‘Government Consumer Protection Insurance Cover’ to all consumer credit customers of banks and clients of financial advisers.
If an individual or a business is the victim of any deceptive, fraudulent business practice, or contractual breach that takes place during a financial transaction, that individual or business could then lodge a claim with this Department.
5. The Department’s legal experts would consider the merits of any claim it received and be empowered under the law to decide whether compensation should be paid and the amount of that compensation.
The department’s legal team would be permanent staff members rather than being seconded in from outside legal firms. They would also be experts in consumer laws.
6. The claimant would be paid the amount determined by the Department’s legal team when handing down its Decision.
This means that the claimant would not have to wait for any outcome through the court if the alleged offender opted to go to court rather than abide by the Decision of the Department’s legal team. However, if the claimant decided instead to wait for a court verdict on the off chance that he or she would be paid more, they would only be entitled to what was finally awarded rather than what they would have received if they had accepted the Department’s pay-out when it handed down its decision. If the Department loses its case, the plaintiff would get nothing. Therefore, this second option would be at the claimant’s own risk.
7. If the offending party did decide to Appeal the Department’s decision, all costs from that point would be worn by the Department, the offender or both depending upon the court’s decision
The Department’s legal team would have two main functions: (1) to establish the merits in law of each individual claim that the Department received and decide on a compensation sum, (2) to prosecute every case to finality through the courts, where the alleged offender did not agree with their Decision, in order to establish legal precedents. By so doing, this would strengthen consumer laws or identify weaknesses or loopholes in our consumer laws that need re-drafting because cases were lost through some legal technicality or other. Settlements, once legal action has commenced, would not be countenanced for these reasons.
8. The Decision by the Department would be made and the claimant informed within 6 months of the complaint having been lodged with the Department.
One of the key issues at the moment is the amount of time it takes to process claims through the normal channels. In most cases, we are talking years rather than months and this is completely unacceptable.
9. If the alleged offender successfully appeals the Decision of the Department, then all legal costs and monetary considerations, including the payout to the claimant, will be met by the Department.
On the other hand, if the alleged offender loses, then that person or organisation will have to pay a set sum for the administration costs incurred by the Department plus the amount of the compensation that was paid by the Department to the claimant. Naturally, the Department would retain all proceedings it was able to recover.
What would such a system achieve for both the consumer and the taxpayers that will ultimately pay for such a service? A great deal as it turns out.
• It will offer a fair, reasonable, free-of-charge, independent, and speedy determination for any consumer that has a genuine complaint.
• It will reduce the number of cases of this nature that are being litigated every year through the court system, thereby alleviating the burden on our legal system.
• It will ensure that consumer laws would be established through precedent rather than remaining uncertain because offenders have settled beforehand to avoid just that.
• It will prompt the offenders (mostly banks) to deal with matters of this nature immediately because delaying matters would no longer serve any useful purpose.
• It will provide additional revenue to the government because insurance of this kind always generates a profit due to it being a blanket cover paid by many but only a few will ultimately claim against.
• It will diminish considerably, in the course of time, the number of court actions because the banks will stop contesting the Decisions of the Department once our consumer laws have firmed up and precedents have been set.
• It will ensure that justice is dispensed to all rather than the few that can afford to take legal action.
• It will obviate the need for consumers to rely on the professional indemnity insurance that financial advisers need to take out, which has a fancy name, but is quite ineffective as a means of compensation. Insurance companies that offer such cover impose time restrictions and clauses that all but preclude claims by an adviser’s clients. The Storm
Financial case remains a classic example of this.
• It would dry up litigation because fewer banks would be willing to go to court, knowing that the monetary clout they had in the past that forced claimants to settle would now count for nothing.
• It would ensure that thousands of consumers in this country, many of whom are elderly self-funded retirees, would not be left destitute. No longer would they be left in a position of helplessness; not having the money to sue the reprobates in our society that target them because they are seen as easy marks.
• It would mean that the control the banks now exert over consumers through the ABA and the banking codes would count for nothing because banks would be taking on the Government rather than a bunch of disgruntled consumers.
• It would remove the need for consumers with a complaint to employ lawyers because the Department would be recovering the amount of their claim, not them.
• It would restore public confidence in our financial institutions.
I would go so far as to say that if this type of compensation system were introduced, it would change the financial landscape in this country forever. The onus would then be squarely on the banks and the government to carry the costs of legal action if any, and wear the delays before disputes are settled in court if matters were to proceed that far.
The benefits of such a system to the consumers in this country would be enormous with no downside unless you happen to be a banker, a lawyer or an insurance company. Consumers would no longer be victimised by the system but rather be placed at the front of the line as they should have been all along.
The only objectors to such a system would, of course, be the Government, the banks, the financial advisers and the lawyers; many of whom are presently making a considerable amount of money at our expense. Their opposition to a system that would tip the balance in favour of the consumers will be fierce because they have much to lose. However, if something like this is not introduced, we will be the losers instead.
Thanks to the Royal Commission, the whole of Australia now knows just how low these banks will sink. Therefore, we, the past victims of these banks, are no longer alone. We must therefore act now rather than later when the banks creep back into the shadows and time dims people’s memories.
By us, I mean every Australian because we are all in this together. The tax payers in this country are footing the bill for all these financial scandals in inquiry after inquiry, hearing after hearing. The Royal Commission alone cost some fifty-two million dollars. The Storm Financial disaster cost investors (75% of whom were elderly self-funded retirees) three billion dollars. How much more of our wealth has to go down the drain before we put an end to all this? How many more lives will be destroyed before we awake to the dangers our banking system poses to our future financial well-being?
Before I go any further and propose a strategy for getting our voice heard with regard to my proposal, I need to know whether such an idea is acceptable to those consumers that have an interest in protecting their futures from predatory banks and dubious financial advisers.
You should, of course, bear in mind when you consider my proposal that I don’t have all the answers. I wish I did. This proposal is off the top of my head and it is only a rough outline of how such a system would operate. With some thought, I have no doubt that it can be hued into something that will be substantive and workable. The principles behind it, I believe are sound and doable.
Having consider all the possibilities, I can see no other way of turning the tables on the banks and the financial sector. If you can, I would appreciate hearing about it.
Well! Is this a goer or not! Do we take it forward or put it in the too hard basket?
Your comments below would be apreciated.FRANK AINSLIE – 11th June 2018