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FSC rejects civil penalties, code interference

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The Financial Services Council (FSC) has rejected the idea that civil penalties should apply to a voluntary industry code.

Civil penalties are inappropriate for code breaches, and remedies should be limited to the statutory right to compensation for loss, it says in response to a Treasury consultation.

Voluntary codes were not developed with civil penalties in mind, it argues.

The FSC says conduct subject to civil penalties should be set out in legislation. And it rejects the involvement of either the Australian Financial Complaints Authority (AFCA) or the Government.

It says AFCA’s powers should not be extended to adjudicating on penalties for code breaches, and the Government should not be able to write a voluntary industry code, because it may discourage some companies from signing up.

The Government should only mandate a code to resolve an identified industry issue that is known to be detrimental to consumers, which the mandated code would resolve.

If civil penalties apply to systemic breaches of enforceable provisions, the Government must ensure due process can take place, and these are not appropriate for AFCA to order, the submission argues. Only a court should award such penalties.

Only provisions that can be met all the time should be enforceable, such as minimum standard trauma medical definitions. Failure to apply these to a customer’s claim would have significant financial consequences for the claimant.

There must be some way of making provisions binding on all industry participants, otherwise it will distort the market, the FSC says.