Banking Misdirection and the BEAR

According to Wikipedia, Misdirection is a form of deception in which the attention of an audience is focused on one thing in order to distract its attention from another. Managing the audience’s attention is the aim of all theatre; it is the foremost requirement of theatrical magic.

An article From The New Daily. suggests the banks employed this tactic by using Sundays announcements about the end of ATM fees to distract attention from the BEAR draft legislation released the previous Friday.  We had already covered the BEAR on our blog but more generally I agree the potential coverage was diluted thanks to the ATM news.

It is worth looking at the limitations of BEAR, especially as conduct relating to consumer outcomes is excluded, the focus on the rules relate to prudential matters. In the UK, who have similar measures on place, they also included consumer related bad practice.  The rules should have similar reach here, because this is actually the central issue banks need to address.

Will BEAR help consumers?

According to consumer advocate CHOICE and the Consumer Action Law Centre, not really. In a joint submission to the government, the two groups pointed out that these rules only applied to prudential matters – that is, matters relating to systemic financial integrity. They did not apply to consumer matters.

The difference between the two is best understood as follows: the global financial crisis was essentially a prudential crisis. Overseas banks were lending more than they could afford, and (to put it simply) they ran out of money.

The CBA financial advice scandal, meanwhile, was a consumer issue. It involved bank representatives doing the wrong thing by customers.

CHOICE and the Consumer Action Law Centre urged the government to imitate similar laws in the UK, and extend the BEAR to consumers. That would mean bringing in the consumer watchdog ASIC as well as the prudential watchdog APRA.

But the draft legislation reveals the government has not done this. It has also crafted loopholes that allow both itself and the regulator freedom to relax the rules in special (unspecified) circumstances.

These moves suggest the government isn’t quite as tough on banks as it would have the public believe.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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