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Connexus : Issue 38
Busy agenda for regulator ASIC chief Greg Medcraft outlines his key priorities to mutuals. By Carolyn Rance ASIC chairman Greg Medcraft addresses the Abacus Chairs’ & CEOs’ Forum, with Abacus CEO Louise Petschler, right. www.abacus.org.au www.abacus.org.au 10 Connexus 10 NEWS Building the financial literacy of the Australian public is a key priority for Greg Medcraft, the former investment banker who became Australian Securities and Investments Commission chairman in May. Speaking to the Abacus Chairs’ & CEOs’ Forum in August, he outlined a program of education and legislation designed to boost user understanding of the way the financial services system works and make investors more aware of risks and the need for diversification. Medcraft used the occasion to release an ASIC consultation paper on the advertising of financial products and advice. It encourages accurate advertisements that can help consumers make decisions that are appropriate to their own circumstances. He commended Abacus for the development of its Financial Product Advertising Manual and input into the consultation paper. “The draft guidance sends a clear message to those promoting financial products that they need to do more about explaining the risks as well as the benefits of their products,” he said. “ We encourage industry to strive to do more than simply meet the minimum requirement not to be misleading and deceptive, and take an active role in ensuring ads help investors and consumers make better decisions.” Medcraft foreshadowed greater use of the internet and social media will help people of all ages become informed and confident users of financial services. The government’s new MoneySmart website is on trend for more than a million hits this year and financial literacy is being built into school curricula from kindergarten to Year 12. Government efforts to build a sustainable and competitive banking system with a confident and informed user base include legislation that empowers consumers to get a better deal and support for smaller lenders to compete with big banks. Support for mutuals Describing himself as a supporter of the mutual sector, Medcraft said the government was aware of the challenges faced by credit unions and building societies and regarded mutuals as posing low compliance risk. However, holding to account all gatekeepers to the financial services system, including ADIs, was an important part of ASIC’s role. From January 1 2011, all entities wishing to engage in credit activities must hold an Australian Credit Licence and ensure that credit contracts are suitable for the customer concerned. Legislation banning exit fees for new home loans came into force in July and, from 1 January 2012, all lenders will need to provide potential borrowers with a simple one page ‘key facts sheet’ showing how much they will pay every month and over the life of their loan and where they can shop around to compare lenders side by side. Medcraft said ASIC will focus on responsible lending in the home loan and payday lending markets; consumer leasing of domestic goods, and debt reduction and consolidation schemes. He assured his Abacus audience that concerns expressed about the tight implementation timeframe and levels of