Labor has released three bills to crack down on dodgy banks and insurers, increasing political pressure on Scott Morrison and the crossbench to press ahead with the major recommendations of the Hayne royal commission.
But the opposition has an internal issue on the future regulation of mortgage brokers, with a discussion during Tuesday’s caucus meeting, spearheaded by the backbench MP Mike Freelander, about the importance of proceeding cautiously with the Hayne recommendation to implement a user-pays system.
The shadow treasurer, Chris Bowen, who initially indicated Labor would accept the Hayne recommendation on mortgage brokers – unlike the government, which expressed reluctance about implementing a user-pays system – hedged on Tuesday when asked what Labor would do with the politically influential sector, which has launched a lobbying offensive in the wake of the final Hayne report.
That lobbying offensive has heightened concerns within Labor about the potentially negative consequences if Hayne-inspired regulations result in a diminution of competition in the home-lending market. Brokers and small banks have warned that an up-front fee, if paid by consumers, would wipe the industry out and decrease competition in the mortgage market.
“The government has said that they’ll get rid of trail commissions and then have a review of up-front commissions but that doesn’t really provide much certainty for the sector” Bowen told reporters.
The shadow treasurer said Labor was “taking our time to carefully consult with all relevant parties and we’ll have more to say in coming days about our proposed approach”.
“We will be fully transparent and explicit in our approach, not only well before the election, but in the immediate future”.
Guardian Australia understands the policy under consideration includes replacing trailing commissions with an up-front fee paid by the banks and improved transparency and disclosure of that fee.
The chief executive of consumer group Choice, Alan Kirkland, urged parties to “fix one of Australia’s most broken financial services”.
“Hayne warned us about the influence of conflicted lobbyists – they have a history of stopping great reform,” he said.
“We’ve seen the mortgage broking lobbyists out strongly in the last 24 hours, conflating their self-interest with the public interest to try to stop important changes.”
The new bills Labor brought forward on Tuesday would remove loopholes in the regulation of funeral expense policies, apply consumer credit protections to salespeople, give the Australian Securities and Investment Commission authority over insurance claims and force banks to cooperate with the bank victims’ complaints authority.
Bowen declared the reforms would prevent “shameful exploitation”. Labor followed up in question time with royal commission case studies including costly funeral plans targeting Indigenous Australians and a woman sold a lemon by a car dealership that signed her up for an unsustainable loan.
Scott Morrison responded by saying the Coalition would not “engage in reckless legislation” but is responding to all 76 royal commission recommendations “in a measured way, consulting to ensure there are no unintended consequences”.
The treasurer, Josh Frydenberg ,noted Labor’s bills implemented five recommendations, “a mere 6%” of commissioner Kenneth Hayne’s proposals. He accused Labor of preparing to “smash competition in the housing market” by taking a “sledgehammer” to 17,000 mortgage-brokers employing 26,000 people.
Labor’s financial services spokeswoman Claire O’Neil said that while some of Hayne’s recommendations were “really complicated” some were “absolutely simple”.
She said there was “no excuse” not to push ahead with reforms contained in the three private members bills, including the promise to end conflicted remuneration of financial planners by repealing grandfathered provisions.
Bowen said Labor’s bill would implement that reform by 1 January 2020, “a full year earlier” than the government has promised, after Hayne recommended it be done “as soon as is reasonably practicable”.
Labor needs key crossbench MPs including Bob Katter and Andrew Wilkie to commit to extra sitting weeks of parliament in March, or else its private members bills are unlikely to be considered before the election, expected in May.
Bill Shorten turned up the pressure on both Morrison and the crossbench, demanding the government explain what it “finds objectionable” about reforms including “making sure that people aren’t getting ripped off in car loans”.
Shorten told reporters “the same” applied to crossbench MPs including Katter.
“We know that there will be problems with insurance records. We know that there will be problems for funeral insurance. We know that there will be problems with dodgy car loans.”
“But [Katter] needs to explain … Why would we turn a blind eye and let it go for another six months?”
Wilkie at first suggested he was in favour of two extra sitting weeks but has since expressed scepticism that substantial reform can be achieved in that time; while Katter threatened to support extra sittings unless the government commits to a rescue package for north Queensland after floods hurt the cattle industry.
On Monday, Morrison revealed the government is working on a “reconstruction plan” which would deal with existing and future debt, including subsidies for farmers to rebuild their stock.
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