‘Fair conduct’ rules to protect consumers
The interests of consumers are the driving force behind amendments to the Financial Markets Act 2013.
Consumers will have greater protection when it comes to financial services from 2025.
The Financial Markets (Conduct of Institutions) Amendment Bill makes changes to the current act by introducing new rules that will oversee the conduct of financial institutions such as banks and insurers.
The changes are a result of joint reviews by the Financial Markets Authority and the Reserve Bank of New Zealand, which found that insurers and banks aren’t doing enough for their customers.
To better address issues identified in the reviews, the act introduces a fair conduct principle, which will require financial institutions to:
consider consumers’ interests;
act ethically, transparently and in good faith (generally, to be truthful and not mislead);
assist consumers to make informed decisions;
ensure their services are fit for purpose for consumers generally; and
not subject consumers to unfair pressure, tactics or undue influence.
It comes as Consumer NZ’s latest Sentiment Tracker survey reveals 32% of people surveyed don’t trust banks and 41% don’t trust insurance companies.
A spokesperson for the Ministry of Business, Innovation and Employment (MBIE) said: “New Zealand is an outlier internationally in not having any general oversight of banking and insurance services.” Ultimately, the law change is to ensure the fair treatment of consumers, they said.
Other changes include a requirement for financial institutions to be licensed under the Financial Markets Authority. Financial institutions will also be required to create and implement a fair conduct programme that embodies the new fair conduct principle.
The Financial Services Council, an industry representative, said in its submissions on the bill that it supported the focus on consumers but that the additional requirements imposed on institutions would be disruptive and costly.
MBIE said in response to similar concerns: “The new regime is not intended to be ‘one-size-fits-all'. It will allow financial institutions the flexibility to design and implement fair conduct programmes that are fit for purpose for their own business models their own business models and that do not create unnecessary compliance costs.”
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