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    NEW ASIC REPORT FURTHER EVIDENCE OF NEED FOR A ROYAL COMMISSION

    The corporate watchdog has released yet another scathing report into the big financial advice firms, finding that they have not done enough to report misbehaviour by their financial advisers.

    Only one week ago the CEOs of the big four banks lined up in Canberra to reassure community that the banks were changing their ways, however, the ASIC report paints a very different picture.                    

    Key findings of the report released today include:

    • Failure to notify ASIC about serious non-compliance concerns regarding adviser conduct;
    • Significant delays between the institution first becoming aware of the misconduct and reporting it to ASIC;
    • Inadequate background and reference-checking processes; and
    • Inadequate audit processes to assess whether the advice complied with the "best interest" duty and other obligations.

    ASIC also noted:

    “…many of the institutions we reviewed did not ensure that their internal processes consistently supported the value of ‘doing what is right’ for the customer. Many of the failings we identified led, or had the potential to lead, to poor outcomes for customers.” – Financial advice: Review of how large institutions oversee their advisers, page 15.

    Dodgy financial advice and poor professional conduct have been at the centre of many of the financial scandals in Australia so it staggering to learn that despite warnings over many years, the big firms are dragging the chain in reporting to the regulator or improving processes within their own organisations. 

    How much longer and how many reports will it take before Malcolm Turnbull stops protecting the banks and instead stands up for banking customers? 

    Labor will continue to fight for a royal commission because we know it is the only way to shine a light on the misconduct and cultural issues in the banks that have led to thousands of Australians, including small businesses, being ripped off or treated unfairly by them.

    FRIDAY, 17 MARCH 2017

    Senator Katy Gallagher is Labor's Shadow Minister for Small Business and Financial Services.


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    Labor calls for high-calibre talent on new standards body

    This will be another important year for the financial advice sector, which faces the serious work of implementing the reforms passed earlier this year. In some ways, passing the laws was the easy bit. Making sure the new arrangements work for the profession will be just as important.

    Labor supported recent legislation to strengthen professional standards for financial advisers because we believe it will strengthen the profession, address some of the shortcomings in the quality of financial advice that has plagued the sector in recent times and weed out the poor and shonky operators. This has certainly been the experience when similar bodies have been established across other professional groups.

    Under the new law, financial advisers will be required to hold a degree or equivalent qualification, undertake a professional year, pass an exam, undertake continuous professional development and comply with a code of ethics. There is an obligation on the Australian Financial Services licensee to ensure that advisers comply with the new education standards and are covered by a compliance scheme. The legislation protects the use of the terms ‘financial adviser’ and ‘financial planner’, in recognition of the unique skill set that providing financial advice requires.

    The reforms include the recognition of a new standard-setting body that will detail the new education standards and develop a code of ethics for financial advisers. Labor will be watching the appointees to the board of the new standards body closely. This board will have a great deal of responsibility in setting the new degree requirements that financial advisers have to meet. Labor expects people of a high calibre with significant experience to be appointed to the board, to ensure that these new standards are set at a robust level.

    I was pleased to see the support across industry and consumer groups for this legislation. These reforms have been a long time coming. It was back in May 2014 that the Financial Planning Association (FPA) released a white paper that put forward a plan to prepare the profession for higher professional standards. And it was in September 2014 that the Financial Services Council called for an independent body to have control of education and professional standards for financial advisers.

    With the financial services industry firmly in the political and public spotlight, the challenge before the profession in building and maintaining public confidence is not insignificant and I am hopeful that these laws, supported by all sides of politics and the financial planning industry, will assist with meeting that challenge.

    Keen to engage with sector

    As the financial planning industry adapts to the changes to professionalise the industry and the financial costs that come with that, Labor is keen to engage with the sector on ways to ensure that personal financial advice is something that remains accessible and affordable for people. This is especially relevant for women and those on lower incomes, who we already know experience financial exclusion to a much greater degree than others and are arguably more in need of the specialist advice that financial planners can provide.

    Since taking on the shadow minister for small business and financial services role, I have learnt a great deal about this incredibly important industry. I would like to thank everyone who has invested time and energy in bringing me up to speed on the major issues. In such a complex, changing and politically charged policy space, the expertise and advice that advisers and the FPA have given me in my first few months in the role has been invaluable.

    I look forward to strengthening the relationship with financial advisers and their representative bodies in 2017.

    This article first appeared in Professional Planner on March 16, 2017.

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    SPENDING ON PLASTIC OVERTAKES CASH – MALCOLM TURNBULL NEEDS TO ACT ON CREDIT CARD PROTECTIONS

    An RBA survey, released today, shows that the number of credit and debit card payments have eclipsed the use of cash and is a stark reminder to Malcolm Turnbull that he can no longer continue to ignore the need to boost consumer protections on credit cards.

    Almost 12 months ago Malcolm Turnbull promised to reform credit card laws but to-date nothing has happened.

    Treasury even confirmed in the recent Senate Estimates that these reforms were not on the Government’s legislation priority list.

    With more Australians signing up for credit cards and using credit or debit cards as their most common form of payment method on spending less than $10,000, its essential that the appropriate protections are in place to ensure Australians aren’t getting ripped off.

    Banking customers have been paying the price for credit cards with hidden fees and charges, high interest rates, expensive reward programs and late payment fees for way too long. With Australians paying a whopping $5.5 billion each year in annual interest costs alone it’s time for the Prime Minister to deliver on these much needed reforms. 

    Labor is supportive of these reforms and urges the Government to prioritise credit card reform legislation and bring it to the Parliament as soon as possible.

    THURSDAY MARCH 16, 2017.

    Senator Katy Gallagher is Labor's Shadow Minister for Small Business and Financial Services. 

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    HITTING THE BRAKES ON ADD-ON INSURANCE

    Shadow Minister for Small Business and Financial Services Katy Gallagher and Shadow Consumer Affairs Minister Tim Hammond MP have backed-in calls from the ACCC and ASIC for insurance companies to do better when it came to the sale of add-on insurance sold by car dealerships.

    Labor’s calls come in response to yesterday’s announcement from the ACCC that insurance companies’ proposal to limit commissions on add-on insurance was anti-competitive and would not solve the anti-consumer problems in the current market.

    The insurance companies’ proposal came off the back of concerns raised in a number ASIC reports about the treatment of consumers by insurance companies when selling ‘add on’ insurance during the motor vehicle sales and finance processes.

    ASIC identified a number of commonplace practices in which consumers are being sold products that are poorly designed, bad value for money, and in many cases inappropriate for consumers. ASIC’s findings included:

    -          Car dealers earnt $602 million in commissions, whereas consumers only received $144 million in successful insurance claims

    -          Commissions to car dealers were as high as 79 per cent of the value of the premium

    -          Premiums are often packaged up into one single premium payment, added to the cost of finance. This led to research showing that most consumers of add-on insurance were not even aware they were covered. Premiums were often not refunded if finance contracts were concluded early

    -          Some policies were sold wherein it is impossible for the consumer to receive a claim payout that is greater than the cost of the premium

    -          Some policies were sold to consumers who were never eligible to make a claim under the policy

    -          Motor vehicle consumers are principally interested in the purchase and financing of their new vehicle, and so are not usually in a position to properly assess the details of multiple complex insurance policies. The high-pressure environment of car sales also inhibits good decision making.

    “The evidence given in last week’s Senate Estimates hearings show that there is more to do than simply cap commissions. Insurance companies aren’t doing themselves any favours by trying to make the minimum-possible change,” Senator Gallagher said 

    “Labor stands ready, willing and able to work with ASIC, the ACCC, the Government and insurance companies themselves to deliver better outcomes for consumers of add-on insurance products,” she said

    ‘ASIC has called on insurers to reduce commissions paid to those who sell add-on insurance, and the ACCC’s ruling does not prevent individual insurance companies from unilaterally lifting their game,’ Mr Hammond said.

    ‘ASIC has also called on insurance companies to improve the design, targeting and value-for-money of their add-on products, move away from single upfront premiums, and provide refunds to consumers who were sold insurance policies in circumstances that were unfair.

    The ACCC’s media release can be found here: http://www.accc.gov.au/media-release/accc-denies-authorisation-for-insurance-companies-to-jointly-set-a-cap-on-sales-commissions

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    BANK HEARINGS PROVE NEED FOR A ROYAL COMMISSION

    The last three days of bank CEO committee hearings have been another exercise in diversion from the real problems facing bank customers and have proven beyond doubt that only a Royal Commission into the sector will provide the scrutiny and accountability that's needed. 

    The hearings saw CEO after CEO appear before the committee and refuse to answer direct questions, release important reports or take genuine responsibility for the failings of their banks. 

    Whilst many questions were left unanswered, the hearings did establish the following: 

    • NAB CEO Andrew Thorburn, revealed that 1,138 employees had been disciplined for breaches of their code of practice;

    • The CBA boss, Ian Narev, reminded us that 40,000 customers had been charged for financial advice that never actually received the advice;

    • The CBA also admitted that no executives had lost their jobs over the CommInsure scandal, the rate rigging investigation or the financial advice scandal;

    • NAB and CBA brushed off reports of former staff saying that they had been subjected to intense pressure to push unsuitable products on customers;  
    • All CEOs refused to make public the number of executives earning above $1 million;
    • Westpac doesn’t allow customers the option to cancel credit cards online so that they can ‘have a conversation’ with customers and no doubt convince them to keep cards or sell new products; and

    • The Australian Bankers’ Association refused to disclose how much the banks are spending on their slick advertising campaign, but admitted that Labor’s calls for a Royal Commission had “galvanised” the sector to make reforms.

    Bringing the banks to Canberra for a three hour chat is completely inadequate and is merely a diversion from the real issues facing banking customers.

    Malcolm Turnbull should stop protecting the banks and establish a Royal Commission now. 

    Labor will continue to fight for a Royal Commission because only a Royal Commission will provide the scrutiny that's needed to get to the bottom of poor banking culture and provide independent recommendations to restore confidence in the banking sector.

    WEDNESDAY 8 MARCH 2017

    Senator Katy Gallagher is Labor's Shadow Minister for Small Business and Financial Services. 

    This is a joint release with Matt Thistletwaite, Labor's Shadow Assistant Minister for Treasury.

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    BUSINESS AS USUAL FOR THE BIG BANKS

    Ongoing scandal and systemic issues within Australia’s big banks have reconfirmed the dire need for a Banking Royal Commission.

    Fronting the House Economics Committee banking inquiry on Friday, National Australia Bank (NAB) chief executive Andrew Thorburn confirmed mistakes had been made and that bankers “sometimes don’t get [it] right”.

    Today’s testimony coupled with a seemingly endless supply of questionable conduct proved nothing has changed and it’s business as usual for the big banks.

    What we have witnessed today is the fine art of ducking and weaving by the NAB chief executive who shared little information about the cultural issues in his bank and answered direct questions with long-winded and unrelated answers.

    Committee members asked direct questions, expecting direct answers but all that was provided in response was waffle and attempts to convince customers that all is well with the bank’s culture.

    It’s concerning that NAB has owned up to the fact that 1,138 employees or almost 3 per cent of its total workforce has faced disciplinary action for breaches of the code of conduct with five senior executives facing action and two being dismissed.

    It appears that the big banks are either unable or unwilling to stop their shonky behaviour. These bankers are not living in the real world.

    Time and time again it appears the only way to ensure the banks are acting ethically is to expose their behaviour in the media. This is not a sign of good banking culture.

    Labor will continue to fight for a Banking Royal Commission because we know that it is the only thing that can deliver the systematic, structural and cultural change that the banking and financial services sector needs.

    FRIDAY, 3 MARCH 2017 

    Senator Katy Gallagher is Labor's Shadow Minister for Small Business and Financial Services. 

    This is a joint release with Matt Thistletwaite, Labor's Shadow Assistant Minister for Treasury.

     

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    WHAT WILL IT TAKE BEFORE THE PRIME MINISTER CALLS A ROYAL COMMISSION?

    What will it take to for the Prime Minister to accept there needs to be a Royal Commission into Australia's banking system?

    Below is just a sample of the cases over the last 12 months where poor practice, unprofessional conduct, illegal activity, overcharging and failures in consumer protections has been identified within Australia's big banks.

      • 14 Jan 2016: ASIC banned former ANZ bank adviser for ten years for misleading and deceptive conduct
      • 20 January 2016: Westpac paid $1 million after ASIC raised concerns about bad credit limit practices
      • 4 February 2016: ASIC banned former NAB bank adviser for seven years for amending change of adviser forms without the knowledge of the client
      • 7 March 2016: ANZ paid $212,500 penalty for breaching responsible lending laws when offering overdrafts
      • 7 March 2016: Allegations surfaced of a case where CommInsure abruptly stopped income protection payments to a customer and only began paying them again when media inquired.
      • 5 April 2016: Westpac subsidiary paid penalties of $493,000 after breaching consumer protections
      • 8 June 2016: ASIC banned former ANZ financial adviser for being under qualified to deliver financial services
      • 2 September 2016: CommSec paid $700,000 in infringement notice penalties and refunds $1.1 million in brokerage
      • 5 September 2016: ANZ to refund nearly $29 million to more than 390,000 accounts as a result of unclear fee disclosures
      • 8 September 2016: Westpac refunded $20 million in credit card foreign transaction fees, as ASIC warns consumers on foreign transaction fees for Australian dollar transactions
      • 27 October 2016: ASIC report Financial Advice: Fees for no service revealed 200,000 people were charged for financial advice they never received with ASIC estimating that $178 million could be paid in compensation
      • 28 November 2016: ASIC banned former Westpac financial planner for eight years with a customer remediation process recovering $1.12 million across 29 former clients.
      • 13 September 2016: Westpac refunded $9.2 million after failing to waive bank account fees for eligible customers
      • 14 December 2016: The Federal Court ordered fines of $9 million for ANZ Bank and $6 million for Macquarie Group over "very serious" attempts by traders to rig a key benchmark rate in Malaysia's foreign exchange markets.
      • 21 December 2016: CBA and NAB made a collective $5 million in payments for their conduct in wholesale spot foreign exchange businesses
      • 6 February 2017: National Australia Bank's wealth arm was forced to pay $36.5 million in compensation to its customers, after wrongly charging fees to superannuation fund members and wrongly denying insurance claims
      • 3 February 2017: Small Business and Family Enterprise Ombudsman Kate Carnell finds that the big banks have been unfair in their dealings with small businesses on loans. 

    How many more Australians have to become victims of banking misconduct before this Prime Minister will act?

    In the interests of all Australians Malcolm Turnbull cannot keep ignoring his responsibility as Prime Minister - it’s time for him to stop protecting his banking friends and establish a Royal Commission now.

    FRIDAY, 3 MARCH 2017

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    HOMELESS YOUTH NEED ONGOING SUPPORT

    Today is National Youth Homelessness Matters Day, a day which reminds us to keep focussed on working to reduce the level of youth homelessness in our community and to ensure that young people who are homeless or at risk of becoming homeless are well supported with a service system designed and resourced to help them. 

    Every night in Australia 105,000 people are homeless and more than 40 per cent of those people are under the age of 25.

    There are many reasons why young people become homeless. Violence, relationship breakdowns, poverty and substance abuse/misuse can all leave many young people feeling that they have no option but to leave their homes even if that means becoming homeless as a result.

    Combatting youth homelessness and breaking the cycle of disadvantage that homelessness can generate is a crucial element of any plan aimed to reduce the numbers of people who are homeless overall. 

    Ensuring that young people who are homeless have access to supports and services that enable them to secure permanent and appropriate housing should be a policy and program priority for governments at all levels.  

    Whilst governments must all work together to reduce homelessness, it is not something that governments alone can "fix". The range and complexity of problems which lead to homelessness and finding solutions for them require a whole of community effort.

    Governments can fund services and set policy priorities but delivery of those services and the staff and volunteers that work within those services are resources pulled from within our community. It is these people who support young people every day who are homelessness and who deserve particular acknowledgment on National Youth Homelessness Matters Day.

    Unfortunately, over the past three years the Abbott-Turnbull Government has not given rising levels of homelessness or reducing the number of homeless people in Australia the priority attention it deserves and has instead cut funding for services and peak bodies like Homelessness Australia, National Shelter and Community Housing Federation of Australia who all worked to combat homelessness in Australia. 

    Today is a day for all Australians to show their support for reducing the levels of young people who are homelessness by participating in National Youth Homelessness Matters Day - share your thoughts on social media with #YHMD2016.

    WEDNESDAY, 13 APRIL 2016

    Senator Katy Gallagher is Labor's Shadow Minister for Mental Health, Shadow Minister for Housing and Homelessness and the Shadow Minister Assisting the Leader on State and Territory Relations.

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    CLOSE THE GAP DAY

    Labor has used the tenth Close the Gap Day to draw attention to the unacceptably high rates of Indigenous mental illness and suicide.

    Shadow Minister, Shayne Neumann, said Aboriginal and Torres Strait Islander people experience mental illness at nearly three times the rate for non-Indigenous Australians and are twice as likely to die by suicide.

    “Close the Gap Day focuses attention on the need to increase the health and life expectancy of Aboriginal and Torres Strait Islander people to that of non-Indigenous people by 2030,” Mr Neumann said.

    “Health cannot be addressed in isolation though. The risk of self-harm in Aboriginal and Torres Strait Islander communities is compounded by poverty, entrenched disadvantage and inter-generational trauma.

    “It is a national tragedy that Aboriginal and Torres Strait Islander adults and young people feel they have no other option than to take their own life.

    “It is time to make Indigenous health a priority, particularly if we are to Close the Gap in life expectancy.”

    Shadow Minister for Mental Health, Senator Katy Gallagher said a Shorten Labor Government will commit to the National Health Commission’s target to reduce suicides by 50 per cent over the next ten years and develop an Aboriginal and Torres Strait Islander Mental Health Plan to improve mental health and prevent suicide of Indigenous Australians.  

    “The best policy outcomes will be achieved if we partner directly with Aboriginal and Torres Strait Islander communities and work with them to develop a culturally safe and respectful approach to reduce suicide rates,” Senator Gallagher said.

    “It can be a struggle for any person with mental illness to access services but that is even more complicated when they are living in remote communities.

    “By implementing a number of the Mental Health Commission’s recommendations, Labor will ensure that people experiencing mental illness can access better co‑ordinated services, both clinical and non-clinical.”

    Shadow Parliamentary Secretary for Indigenous Affairs, Warren Snowdon said Aboriginal and Torres Strait Islander people living in remote communities faced additional challenges.

    “Aboriginal and Torres Strait Islander people living in remote communities often feel incredibly isolated, with limited access to health and early intervention services,” Mr Snowdon said.

    “Something is clearly wrong and if we want to prevent more young lives being lost, we must face up to the challenges of substance abuse, family violence, inadequate housing, unemployment and poverty – especially in remote communities,” Mr Snowdon said

    “This needs to be undertaken community by community in partnership with service providers and governments at all levels to address the alarming rates of mental illness and suicide.”

    THURSDAY, 17 MARCH 2016

    Senator Katy Gallagher is Labor's Shadow Minister for Mental Health, Shadow Minister for Housing and Homelessness and the Shadow Minister Assisting the Leader on State and Territory Relations

    This is a joint release with Shayne Neumann MP, Labor's Shadow Minister for Indigenous Affairs and Warren Snowden MP, Labor's Shadow Parliamentary Secretary for Indigenous Affairs.

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    GOVERNMENT DELAYS RESPONSE TO HOUSING AFFORDABILITY REPORT

    The chaos and dysfunction gripping the Turnbull Government has resulted in the government putting off any response to a key housing affordability report until well after the next election.

    Whilst the Prime Minister and Minister Porter dither and refuse to engage on this issue more than one million people across Australia live every day in rental or mortgage stress. 

    The Government has confirmed in a letter to the Senate President that it will not be responding to the 40 recommendations from the Senate inquiry Out of reach? The Australian housing affordability challenge’ any time soon despite the report being tabled more than ten months ago.

    The Prime Minister has refused to prioritise Australia’s housing affordability challenges and this latest admission is yet more evidence that the Turnbull Government has no plan, no ideas and no solutions to deal with the real problem of declining housing affordability across the country.

    Labor has released its positive plan to promote housing affordability and allow first home buyers to have a chance to get into the market. Labor, if elected, would only allow the benefits of negative gearing to apply to new properties from July 1, 2017 and would reduce the capital gains tax discount from 50 per cent to 25 per cent.

    The Senate report provided the government with sensible and well thought through recommendations to help guide housing affordability policy and if the Turnbull Government was serious about supporting the great Australian dream of home ownership they would have prioritised a response to the report and got on with tackling a problem that affects millions of Australians.

    WEDNESDAY, 16 MARCH 2016

    Senator Katy Gallagher is Labor's Shadow Minister for Mental Health, Shadow Minister for Housing and Homelessness and the Shadow Minister Assisting the Leader on State and Territory Relations

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