Fundamental reform of Australia’s financial services and credit regulation

Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, has released the Rudd Government’s Green Paper outlining its plans for reforming Australia’s financial services and bringing Australia’s regulation of credit into the 21st century.

The Green Paper outlines a way forward for the Commonwealth and states to transfer the remaining financial services regulation from the state level. Under the plan, financial services, including mortgages, mortgage brokers, margin lending, non-bank lending and trustee companies, will move to the Federal level.

“This is about better protection of the mums and dads who take out a mortgage and deserve to know that the brokers selling it to them are reputable and upfront with their fees and charges,” the Minister said.

“The current regulation in these areas is either duplicated, patchy, confusing, very hard to change or even non-existent.  As a result, some consumers receive poor or inadequate advice, while opportunistic product promoters use gaps in existing regulation to take advantage of vulnerable investors. The Commonwealth and the states agree that this is just not good enough in the year 2008.

“Australia needs a financial services regulatory structure for the 21st century, one which provides the highest standards of disclosure, advice and prudential supervision, and does so at a national level.

“On mortgages, it’s absolutely critical that the advice new borrowers receive is top quality and that they are not getting into debt they can’t service. I am also concerned about reverse mortgages and the number of people taking them up without a clear understanding of the implications.”

The Green Paper also seeks input on the regulation of other credit products, such as credit cards and personal loans. COAG (Council of Australian Governments) has agreed further analysis of how these additional forms of credit are regulated is needed and the Rudd Government will progress this additional work rapidly over coming months.

In addition to financial services subject to COAG action, two further important areas are included in the Green Paper – debentures and property spruikers.

The Green Paper can be found at: http://www.treasury.gov.au