Change laws to penalise banks - Whiteley
Industry Super Australia (ISA) is urging a change in the law to ensure that banks which inappropriately offer commercial inducements to have employers switch default superannuation funds are actually exposed to a civil penalty.
The call has been made amid confirmation by ISA chief executive, David Whiteley that his organisation has obtained legal advice from its Melbourne law firm, Arnold Bloch Leibler that while regulators may find that bank has breached the law with respect to offering such inducements, no civil penalty then exists to be imposed.
He said the legal advice provided by the law firm had confirmed that regulators had no power to seek a civil penalty for breach of section 68A of the Superannuation Industry (Supervision) Act 2003 (Cth), which makes it unlawful for banks to offer business banking deals and other discounts to persuade employers to switch their employees' superannuation contributions into bank-owned super funds.
"The law (SIS Act section 68A) prohibits a bank from offering business banking discounts and other incentives to employers in exchange for access to employees' superannuation," Whiteley said. "Yet there is no civil penalty for breach of section 68A of the Act to deter this behaviour."
What is more, he claimed employees had little practical recourse if their employer was persuaded to switch their super to one of the bank-owned superannuation funds.
"Given such deals are generally commercial in confidence, most employees would not be in a position to prove that incentives were offered to an employer to switch to a bank-owned product," Whiteley said.
The ISA chief executive said the recent Financial System Inquiry report had recommended a review of penalties to ensure the regulators were properly equipped to keep financial institutions accountable and that after recent bank scandals, the community was also calling for a higher standard of consumer protection which could be enforced by regulators.
"It would obviously be in the best interests of employees to change the law to prohibit a bank-owned super fund from providing default super services where it is also the provider of business banking services to the employer," Whiteley said.
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