New bank tax under Labor will fund financial counsellors to fight banks

New bank tax under Labor will fund financial counsellors to fight banks

Labor’s proposed charge on big banks follows theCoalition government’s $6.2 billion bank taxover four years announced in the May 2017 budget, which is a 0.06 per cent levy on bank liabilities.

Half of the money from Labor’s fund would pay for free financial counselling, with the balance to be directed to other initiatives to be announced this week.

“Financial counsellors provide invaluable assistance, free of charge, to Australians who find themselves in disputes with their banks and other financial service providers,” Mr Shorten said in a statement.

“A stronger, larger financial counselling sector is just one part of Labor’s plan to restore fairness to financial services.”

The two sides of politics are trying to out-bid each other in cracking down on unpopular banks following damning revelations of customer rip-offs exposed by the royal commission.

Underlining that an election is within sight, Mr Shorten has written to Prime Minister Scott Morrison advising that his shadow ministers will seek briefings from government departments, claiming that caretaker government rules allow this three months before an election or the expiry of Parliament.

Treasurer Josh Frydenberg has unveiled a range of measures and beefing up of regulators to deal with misconduct by financiers, including new bipartisan white-collar crime penalties passed by the Parliament last week anda $30 million scheme of lastresortwhich will compensate victims with unresolved complaints going back as far as January 1, 2008, to be administered by the Australian Financial Complaints Authority.

There will be compensation of up to $500,000 for consumers, $1 million for small businesses and $2 million for primary producers.

Labor last week said it would quadruple the government’s compensation limits for individuals and double the amount for small business, and fund the compensation scheme from a new levy paid by financial institutions.

The scheme will cover misconduct by banks, insurers, financial advisers, pay-day lenders, consumer lease providers, mortgage brokers and other lenders.

Labor’s plan to establish a second financial complaints body to revisit old claims was last week slammed afterindustry participants pointed out that the Hayne royal commissionand a review by Ian Ramsay both rejected the idea.

Under othermeasures announced by Labor last week, the chief executives of the four big banks will be made to face Parliament twice a year to report on progress in implementing the banking royal commission reforms, as part of a boosted accountability regime Labor will introduce if it wins the election.

The bank CEOs already appear twice annually at the House of Representatives economics committee, under a Coalition government initiative.

Under Labor, financial institutions such as banks or insurers which are forced to compensate a customer would be “named and shamed” by the Australian Financial Complaints Authority, which will publish all determinations which are in favour of the customer.

Mr Frydenberg last week accused Labor of a humiliating U-turn on mortgage broker remuneration.

Labor backed down on its original “in principle” pledge to fully implement the Hayne commission’s recommended crackdown on commissions for mortgage brokers, such as the borrower, not the lender paying for the mortgage broker fee.

Under Labor’s compromise, the lender will pay a fixed percentage upfront fee for mortgage brokers to eliminate the conflict of interest that comes from different lenders offering different commission rates, while ensuring these upfront commissions can only apply to the amount drawn down by the borrower, not the total loan amount.

Both sides of politics will introduce a “best interests duty” for brokers and scrap trailing commissions.

Similar to Labor, the Coalition has rejected introducing an upfront fee paid by borrowers, rather than lenders, but hasn’t announced an upfront commission cap like Labor.

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