Financial safeguards for consumers a step closer
Fast-tracked measures to protect consumers in their dealings with banks and insurers have been released today, with the Government on schedule to have them introduced to Parliament this year.
Commerce and Consumer Affairs Minister Hon Kris Faafoi said improved protections were needed to ensure customers got a fair deal and appropriate services.
“Everyone should be able to rely on their banks and insurers. Unfortunately while some have put consumer interests first, the recent reports by the FMA and RBNZ showed that there major issues in the life insurance sector and poor conduct and culture in the banking sector that needed to be addressed.
“What we propose is a suite of new measures that will put the consumer at the heart of decision-making and make good outcomes the bottom line. These measures include a ban on target-based remuneration and incentives, imposing new legal duties on financial institutions and ensuring products sold to consumers are fit-for-purpose and sold to the right people.
“We are also going to create new enforcement tools so that when these rules aren’t met, providers face appropriate consequences.”
The FMA and RBNZ reports had highlighted issues across the sector.
“The reviews highlighted weaknesses both in how issues are managed and a gap in how financial institutions are regulated. This makes it harder for regulators to deal with failings such as sales taking priority over good consumer outcomes, weak systems and controls to manage conduct risk, and a lack of accountability to ensure good conduct.
“These issues are serious because they harm consumers and reduce confidence in our financial system. They are similar to the issues highlighted by the Australian Royal Commission, though not to the same extent.”
Kris Faafoi says the financial sector reforms fit well with a broader programme of work underway to improve the regulation of New Zealand’s financial system and to prioritise customer interests. This includes the Financial Services Legislation Amendment Act to ensure a consumers interests are met by providers of financial advice, changes to the Credit Contracts and Consumer Finance Act to target irresponsible lending, and a review of insurance contract law.
The proposed changes to the insurance contract law will be consulted on at the same time as the broader financial sector measures.
“Insurance contract law is decades beyond its best-by date. Consumers should be able to have confidence that they’re covered when the unexpected happens so we are going to make changes.”
The Government is also considering making the unfair contract terms protections in the Fair Trading Act apply to insurance, which gives consumers additional safeguards.
Further information on the proposals for financial sector reform and for improved insurance contract law is available here.