Australia to create compensation fund for bad finance advice
CANBERRA, Australia (AP) — The Australians government on Monday agreed to create a compensation fund for people who lost money from bad financial advice and to set rules to help drought-stricken farmers avoid bank foreclosures.
A government-commissioned inquiry into misconduct in Australia’s banking and financial services industry found widespread misbehavior that often went unpunished.
The report from the yearlong inquiry that was made public on Monday referred 24 incidents of misconduct to regulators for further investigation and to consider potential civil or criminal charges against executives and corporations, including most major banks.
The government agreed with a report recommendation to establish a fund of last resort, paid for by industry, for individuals and businesses that have won court judgments against financial service providers over the past decade but have never received the damages owed for their losses.
Financial advisers were most likely to fail to pay compensation.
Almost 300 people stand to receive 30 million Australian dollars ($22 million) from the fund, the government said.
“For there to be confidence in the financial system’s dispute resolution framework, it is important that where consumers and small businesses have suffered detriment due to failures by financial firms to meet their obligations, compensation that is awarded is actually paid,” Treasurer Josh Frydenberg said in a statement.
The government has also agreed to create a national system for farm debt mediation to help struggling farmers meet their debt repayments.
Most Australian states already have such schemes. But banks usually only start such negotiations with farmers as a final step required by law before farm assets can be seized, the report said.
“A national scheme would assist lenders and borrowers to agree on practical measures that may lead to the borrower being able to address financial difficulties that have caused the loan to become distressed,” Frydenberg said.
“The government further supports mediation occurring soon after the loan becomes distressed and not as a last measure prior to the lender taking enforcement action,” he added.
The government has also accepted the report’s recommendations to strength protections for consumers, raise accountability in the finance sector and improve the effectiveness of industry regulators.