The Turnbull government will ban businesses from charging consumers excessive surcharges on their credit cards, and move to inject more competition into the superannuation industry, responding to the Financial Systems Inquiry headed by businessman David Murray.
Under planned legislation, the surcharges will not be allowed to be more than the cost to the business of accepting payment by card.
The Australian Competition and Consumer Commission (ACCC) will enforce the regulations to ensure consumers are treated fairly and not overcharged.
The government is also promising action to improve the standards of financial advice, an area that in recent years has been subject to extensive malpractice and controversy, amid deep concern especially from retirees.
The government’s response to the Murray inquiry, which reported last year, was announced by Prime Minister Malcolm Turnbull, Treasurer Scott Morrison, and Assistant Treasurer Kelly O'Dwyer at a joint news conference. Most recommendations have been accepted, and several measures have been added.
The report and response cover the resilience of the financial system; superannuation and retirement incomes; innovation; consumer measures; and the regulatory system. Measures to improve the resilience of the banking system are already in train.
Turnbull said the surcharge issue “has been the subject of considerable consumer concern”.
“Quite plainly, where a merchant says if you use a credit card it’s an extra 2% or 3%, that carries with it an absolutely crystal clear, irrefutable representation that the merchant is seeking to recover his or her costs,” he said.
“In some cases they may be, in other cases they’re not.
"We think that consumers are entitled to a very fair deal here … in other words, to get exactly what they are being represented to be getting, which is an additional charge that recovers no more than the merchant’s costs.”
Morrison said that in some cases surcharges could be more than 10%. In future merchants would have to pass the “fair dinkum test” – “the fair dinkum cost of what someone is actually absorbing and passing on”.
To improve the financial advice industry, advisers will have to have a degree, pass an examination, undertake continuous professional development, subscribe to a code of ethics and undertake a professional year before they can advise clients. There will be some transitional arrangements as the tougher requirements are put in place.
“These higher standards will, for the first time, place financial advising on a similar footing to other professions and in doing so increase consumer trust and confidence in the sector”, the ministers said in a statement.
The Abbott government had its regulations watering down the Labor government’s more stringent rules thwarted by the Senate.
The superannuation measures are to improve competition, efficiency and transparency – which the government says will improve after-fee returns for fund members. The Coalition believes that industry funds have too much of an advantage under present arrangements.
The Productivity Commission will be asked to develop and release criteria to assess the efficiency and competitiveness of the superannuation system. It will “develop alternative models for a formal competitive process for allocating default fund members to products”.
The government says it will work with industry to provide retirees with more flexible and reliable retirement income products and “to extend the choice of fund arrangements to more employees as recommended by the inquiry”.
Last month legislation was introduced to alter super funds’ governance arrangements, requiring at least one-third of trustee boards to be independent directors, including an independent chair.
Morrison said the government was putting “Australians in the driver’s seat of their own money and no-one else, and that’s as it should be.
"It does end the closed shop when it comes to mandatory superannuation contributions and how they are directed off into funds, and it will give Australians greater choice about where they invest their own money for their own retirement.”
Morrison described the Murray report as “a common sense report. It has common sense recommendations, a health check on where our financial system is at.”
In terms of the financial system itself, it makes it stronger by embedding deeper protections within the system, whether it’s on capital adequacy, improved governance and standards right across the system and empowering our regulators to be able to enforce the protections that are in that system, protect consumers and Australians and our economy at the end of the day.
“It does provide Australians with greater choice and greater control over their own money, whether it’s their superannuation or anything else.”
Turnbull acknowledged work done by former treasurer Joe Hockey and former assistant treasurer Josh Frydenberg but stressed “this response is a response of the Turnbull government to this inquiry”.