The ASIC (Australian Securities and Investments Commission) has updated its regulatory guidance on the prohibition of hawking financial products in the country.
The regulatory guide (RG 38) portrays the changes in the anti-hawking system under the Financial Sector Reform 2020, commencing on the 5th of October, 2021. It also clarifies how the reform affects commercial practices and how an industry can comply with it.
In 2018, ASIC identified bad sales behavior and poor customer outcomes by assessing unsolicited life insurance sales calls, where 40% of the consumers reported feeling pressured to buy a product.
In 2019, the ASIC passed legislation prohibiting the unsolicited selling of direct life insurance and consumer credit insurance.
In July 2021, ASIC issued Consultation Paper 346 Updates to RG 38 The hawking prohibition in July 2021, asking stakeholder opinion on proposed RG 38 (21181MR) updates. ASIC received 19 written submissions and carried out a meeting with industry and consumer groups on multiple occasions.
The proposed reforms were designed to tackle the harm caused to consumers by unwanted products sold to them through cold calls or other unwelcome contacts.
ASIC Deputy Chair Karen Chester said, ‘These updates put in place fairness measures, so customers are not offered items they don’t want or need. The prohibitions mean a consumer’s need will determine how any business offer products. ‘
The reforms introduced by the government mean that customers will have more choice over how and when they are offered products, instead of being amidst a situation where they feel
forced to make snap decisions. Under the new law, ASIC will have the power to deal with businesses that pressure people into purchasing products that aren’t beneficial for them.
The guideline clarifies industries on how to comply with the system and how the reforms influence business operations. With the constructive responses from the industry and other stakeholders obtained throughout the consultation process, ASIC improved its guidelines. Additionally, ASIC also shared 12 samples of the input received.
ASIC has said that at the start of the new obligations, which start during the first week of October, it will take a fair attitude if industry players make best efforts to comply (21-213MR).
Key features of the reforms include:
- All financial products (as specified in the Corporations Act 2001);
- A definition of “unsolicited contact” that includes any “real-time engagement in the manner of a conversation or discussion” without consumer agreement, in addition to in-person meetings and phone conversations;
- Consumer assent to contact must be voluntary, positive, clear, and reasonable to comprehend;
- The consent be only valid for six weeks from the date it is given and that the consumer has the right to withdraw it at any time; and
- A statutory right of return for customers who have been subjected to hawking.
The Treasurer has approved regulations exempting certain products from the hawking regime since ASIC published its consultation. RG 38 provides a summary of products that are exempt from the hawking prohibition under the Corporations Regulations.
For further reading: ASIC, 21-257MR ASIC publishes guidance on hawking reforms, [media release], 23rd September 2021.