The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry should target unethical and inappropriate ‘quasi-advice’ in the areas of life insurance and property, consumer advocacy group Consumer Action Law Centre argues.
In part one of a submission to the inquiry, the group addresses venal marketing tactics that sellers of direct life insurance use to persuade people to purchase insurance that is often unsuitable and unnecessary. The group points out that stirring ad campaigns employed by insurers to attract clients are leading them astray.
“Exploitative advertising and marketing of direct life insurance continues to be an area of high risk and concern for vulnerable consumers,” the law centre argues. “It is particularly concerning because these policies can be expensive and a significant proportion of Australians already have group life insurance in their superannuation.”
“An example of poor selling practices is the highly emotive advertising of life insurance as ‘love insurance’, with spiels such as ‘Think of a romantic gesture…flowers, chocolates, a candlelit dinner perhaps…This type of advertising is counterproductive to any efforts to encourage people to make an informed decision to buy a suitable product.”
Property investment spruikers are also targeted in the submission. They operate in a sector that is “blighted by misconduct”, the document states. People selling property through seminars and courses, the group asserts, use “misleading conduct and pressure tactics to convince people to take part in schemes such as land banking or rent-to-buy brokering”.
The consumer advocacy group concedes that some of those responsible won’t be within the reach of the commission.
“Entities involved in this sector may or may not have an Australian Financial Services licence (AFSL),” the document states. “So some entities may be considered outside the scope of the commission’s terms of reference. However, some of these entities may be engaging in unlicensed financial services or be related to mortgage brokers, financial planners or introducers.”
The paper also expresses concern that advice on property investment is not regulated as financial advice under the Corporations Act (2001) and the Australian Securities and Investments Commission Act (2001).
“This means that property spruikers do not have to hold [an] AFSL, provided they are not found selling or advising on financial products,” the consumer group states. “However, the contractual arrangements ultimately sold by property spruikers are complex and can involve significant financial risk, for example through options, licences and of-the-plan arrangements.”
Among other providers in the cross-hairs of the consumer advocacy group are lenders that provide teaser offers on credit cards with exorbitant interest rates, and predatory debt-management firms. These firms are referred to as ‘debt vultures’ by consumer advocates, the law centre contends, because they “effectively and aggressively target vulnerable people in financial difficulty”.
Timeshare sellers are also highlighted in the report, for using high-pressure sales techniques that “could be regarded as unconscionable and/or misleading or deceptive.”
Part two of the submission is yet to be released. It will focus on “the effectiveness of redress mechanisms available to those that suffer detriment as a result of conduct in the finance sector”.
