Customers should expect fairer treatment from financial service providers as a result of the policy, the government says
The Financial Markets Authority’s (FMA) power to curb unfair treatment of consumers will be given a boost by a new regime to be introduced by the government, Commerce and Consumer Affairs Minister Kris Faafoi said Wednesday.
The proposal for policy changes comes as the government takes aim unfair practices such as target-based sales incentives, which put profits ahead of people. These practices have been identified in recent reviews by the Reserve Bank of New Zealand and the FMA, which have also highlighted problems in the banking and insurance system, including weak systems for managing risks, Faafoi said.
“We will soon introduce new legislation to Parliament which will require banks, insurers and other financial service providers to put systems in place to make sure they treat their customers fairly,” he said.
The regime to be introduced by the government includes a new conduct licensing system for banks, insurers, and non-bank deposit takers such as credit unions. These entities will be required to meet high standards of customer treatment and will be banned from giving incentives based on meeting sales targets.
Faafoi said that incentives for meeting selling a certain number of insurance policies can lead to sales staff pressuring customers into buying unsuitable products. He said that removing these incentives, like overseas trips or bonuses, will provide better protections for consumers from misconduct.
The regime will be given teeth by strong enforcement tools, the minister said. This includes giving the FMA power to direct licensed institutions to change behaviour and improve their systems and processes. The FMA will also be able to suspend or vary the conditions of a licence, Faafoi said.
“New Zealanders need to be confident that the financial advice, products and services they are buying will be appropriate to their circumstances and meet their needs,” he said.