Govt passes law to protect consumers in banking and insurance sector
- New financial conduct scheme will ensure customers are treated fairly
- Banks, insurers and non-bank deposit takers to be licensed by the FMA in relation to their general conduct
- Sales incentives based on volume or value targets like bonuses for selling a certain number of financial products banned
The Government has tightened up protections for New Zealanders across the banking and insurance sectors to ensure they get a fair deal.
“The Financial Markets (Conduct of Institutions) Amendment Bill has passed its third reading tonight and will establish a new financial conduct scheme that ensures financial institutions put customers before profits,” Minister of Commerce and Consumer Affairs David Clark said.
“This work comes at an important time as the Government supports Kiwis through the current cost of living crisis, and will help to ensure they’re not unknowingly paying for services they do not need, or taking on debt they cannot afford.
“People place a lot of trust in their banks and insurers which play an integral part in their lives, and this new regime will help to tilt the balance back towards the consumer by protecting them from bad behaviour that could leave them vulnerable.
“It follows reviews by the Reserve Bank of New Zealand and Financial Markets Authority which found banks and insurers in New Zealand lack focus on good customer outcomes, and have insufficient systems and controls to identify, manage and remedy conduct issues.
“For example, the reviews found a major imbalance in power between financial institutions and consumers, products which had been designed without good customer outcomes in mind, sales incentives based on volume or value targets and generally weak systems for managing risk.
“There was also a lack of accountability when it came to ensuring good conduct is maintained by financial institutions.
“Further, New Zealand has been an outlier internationally in not having conduct regulation of banking and insurance services. This important regime will fill that gap.
“This new regime puts customers firmly at the centre. It will ensure that New Zealanders can be confident that the financial products and services they are buying will be appropriate to their circumstances and meet their needs.
“We strengthened the bill along the way to ensure that it still provided competition and choice within the industry.
“We are committed to supporting Kiwis through both short and long term cost of living pressures, which has also included protecting people from loan sharks saddling borrowers with debt they cannot afford,” David Clark said.
The FMA will work with financial institutions to ensure they are prepared for the new regime, and licensing applications are expected to open in mid-2023. The Ministry of Business, Innovation and Employment will also develop supporting regulations. The regime is expected to come fully into force in early 2025.