Australia creates compensation fund for bad financial advice

CANBERRA, Australia – The Australian government decided on Monday to create a compensation fund for people who have lost money as a result of bad financial advice and to establish rules to help farmers hit by drought to avoid bank foreclosures.

A government-sponsored inquiry into misconduct in Australia's banking and financial services sector revealed widespread misconduct that often went unpunished.

The report of the investigation that lasted throughout the year and that was made public on Monday referred 24 incidents of misconduct to the regulators for further investigation and consideration of potential civil or criminal proceedings. against leaders and companies, including most of the big banks.

The government accepted the report's recommendation to create an industry-funded fund of last resort for individuals and businesses who have been tried by courts against financial service providers over the past decade but who have never been compensated for their losses.

Financial advisors were most likely not to pay compensation.

Nearly 300 people will receive 30 million Australian dollars ($ 22 million) from the fund, the government announced.

"For the dispute settlement system to be based on trust, it is important that when financial firms fail to fulfill their obligations and consumers and small businesses are negatively impacted," 39, compensation is actually paid, "said Treasurer Josh Frydenberg in a report.

The government has also agreed to create a national agricultural debt mediation system to help struggling farmers repay their debt.

Most Australian states already have such plans. But banks usually start these negotiations with farmers only as a last step required by law before they can seize farm badets, the report said.

"A national system would help lenders and borrowers to agree on practical steps that could allow the borrower to solve the financial difficulties that put the loan in trouble," Frydenberg said.

"The government also supports the mediation that comes shortly after the loan has deteriorated and not as a last step before the lender takes action," he added.

The government also accepted the report's recommendations to strengthen consumer protections, strengthen accountability in the financial sector and improve the efficiency of industry regulators.