Proposed good advice duty 'vague, poorly defined': consumer groups

Consumer advocates remain opposed to a proposed “good advice” duty as recommended by the Quality of Advice Review (QAR) but have indicated one of the suggestions around lengthy compliance statements merits further consideration.

The good advice duty is “vague and poorly defined”, the advocates say in a joint letter to Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones, who is also Financial Services Minister.

“Rather than reducing regulatory burdens, the introduction of this test would likely involve a costly transition process as firms attempt to incorporate it into their compliance practices, with a considerable period of uncertainty until the new test could be elucidated by the courts.”

The good advice duty proposal is one of 22 recommendations made by lawyer Michelle Levy, who led the review and submitted her final report to the Government in December.

Ms Levy says in the report she deliberately chose the term “good advice” because it describes simply, clearly and directly what consumers want and what the law should require. The proposal, if adopted by the Government, would apply to the provision of general insurance broking advice.

She says the proposed new duty test “would encourage better quality advice and provide consumers and advisers with a clear statement of what they can expect and what they are required to do”.

The advocates say they also “strongly oppose” the proposed weakening of consumer protection in relation to advice provided by employees of “non-relevant providers” – namely insurers, super funds and banks.

In her final report, Ms Levy says not all personal advice needs to be provided by a relevant provider but the consumer groups are not convinced.

“If the review’s recommendations in this area were implemented, employees of large firms such as call centre staff would be able to provide advice on complex matters without being subject to a best interests duty, educational qualification requirements or a code of ethics,” the joint letter says.

“This would create an environment in which the sort of conduct that led to the Banking Royal Commission could re-emerge.”

There are possible impacts for general insurance consumers too.

“We’ve seen from the Hayne banking royal commission that insurers cross-selling or up-selling inappropriate insurance caused lasting economic and social harm to people,” Choice Head of Policy Patrick Veyret told insuranceNEWS.com.au.

“It’s important that critical consumer protections in the general insurance space are not watered down or weakened.”

The joint letter is signed by Choice, Consumer Action Law Centre, Financial Counselling Australia, Financial Rights Legal Centre and Super Consumers Australia.