Proposed legislation to crack down on hawking could impede natural conversations that are beneficial for consumers, the Financial Services Council (FSC) says.

“Natural conversations help consumers understand what products are available and also help the financial services provider understand which products may be of genuine interest to the consumer,” the FSC says in a submission to Treasury.

The proposed legislation follows Hayne royal commission recommendations and aims to ensure consumers are not cold-called by financial services providers or pressured into making an immediate decision to purchase a product they haven’t had time to consider.

“The FSC and its members have always said there is no place for pressure selling and we continue to stand by that,” CEO Sally Loane said.

“However, we have serious concerns that the draft legislation goes beyond the objective of the royal commission recommendations and restricts conversations with consumers.”

The proposed legislation says a consumer’s request for contact over a financial product should only be valid for six weeks, but the FSC says that should be extended or clarified for life insurance.

“Life insurance purchases involve more detailed application requirements and take more time than applying for many other financial products,” it says. “It is not uncommon for the consumer interaction relating to a single life insurance request to extend for longer than six weeks before the final terms are offered for issue or sale.”

The FSC says the new laws for anti-hawking should come into effect a year after they gain Royal Assent to give insurers and superannuation funds time to make changes to systems, training and monitoring.

On add-on products, the FSC says there need to be changes to the deferred sales wording to reflect cases where consumers make clear requests for contact at a given time, while it is also concerned that life cover could be unfairly captured when purchased with a mortgage for a home purchase.

“This is because under the draft definition the purchase of a life insurance product would manage the associated financial risk of the mortgage owner being unable to meet debt obligations should they become deceased or disabled,” it says.

The submission is available here.