The Australian Securities and Investments Commission (ASIC) has urged the federal government to expand proposed reforms prohibiting unfair trading practices to include financial services, highlighting the sector's unique risks and the significant harm caused by exploitative conduct.
ASIC commissioner Alan Kirkland delivered the remarks at the Australasian Consumer Law Roundtable in Melbourne on Wednesday.
He argued that the exclusion of financial services from the reforms risks creating regulatory gaps and leaving consumers exposed.
“This reform is necessary to crack down on practices that result in significant harm to consumers, to address the increasing gap between the fair outcomes that consumers expect and what the law can deliver,” he said.
Kirkland identified several features of financial services that, in his view, make them particularly prone to unfair practices. Unlike other products, financial services are often intangible, complex, and involve decision-making under significant uncertainty.
“Financial firms know this. Some exploit this by making products and processes even more complicated,” he said.
The consequences of unfair practices in financial services, Kirkland added, can be more severe than in other industries. He cited cases where misconduct resulted in consumers losing life savings or being charged excessive fees, further exacerbating financial vulnerability.
Kirkland said that existing legal provisions, including prohibitions on unconscionable conduct, have proven insufficient in addressing unfair practices.
While such conduct is likely to be unfair, he argued, not all unfair behaviour meets the stringent legal definition of unconscionability. ASIC’s failed case against a South Australian operator who tied customers to his general store through restrictive credit arrangements illustrated this limitation.
Other regulatory tools, such as design and distribution obligations and product intervention powers, are also limited in scope and application, Kirkland added.
The rise of digital financial services and the use of manipulative “dark patterns” in online platforms were highlighted as pressing concerns.
Kirkland described these patterns as deliberate design choices that distort consumer decision-making, such as making it easy to sign up for financial products but difficult to cancel or switch to alternatives.
He pointed to buy-now-pay-later services and online superannuation schemes as examples where such tactics are increasingly common.
The blurred lines between financial and non-financial services also complicate regulation, Kirkland said.
For instance, commissions on strata insurance involve both strata managers and insurance brokers, straddling regulated and unregulated activities. Similarly, buy-now-pay-later schemes linked to solar panel sales combine financial services with retail practices.
Kirkland also warned of future risks, such as the use of artificial intelligence in credit scoring systems, which could lead to opaque and potentially discriminatory practices.
Kirkland called on the government to implement a single, economy-wide prohibition on unfair trading practices, encompassing financial services.
He argued that consistent and clear rules would better protect consumers and simplify enforcement.
“In ASIC’s view, we need a simple, consistent mechanism to combat this conduct, wherever it emerges,” he said, echoing ASIC chair Joe Longo’s recent remarks.
