The asymmetry of knowledge and power between consumers and financial services entities has been evident throughout the Commission’s work. Financial products and services have grown ever more complicated, numerous, and difficult to distinguish. Engagement with the financial services industry, by way of bank accounts, insurance and superannuation, is necessary in order to participate in society. Yet financial literacy among Australians is varied, and research suggests that people struggle with more complex financial dealings such as investments and superannuation. And the laws governing the relationship between customers and entities are frequently opaque. Each of these conditions contributes to the onset of disputes and puts customers at a disadvantage in their resolution.
Aggrieved customers can try to negotiate directly with an entity, they can commence legal proceedings, or they can go to alternative dispute resolution. In each case, the existing asymmetry means that legal assistance is often of critical importance to the customer’s position.
The majority of the consumer witnesses before the Commission who gave evidence of having resolved their dispute with an entity did so with the assistance of a legal adviser or financial counsellor. That was true of disputes resolved by direct negotiation, farm debt mediation, and recourse to FOS. That is, access to professional legal advice or counselling services assisted claimants to engage in these alternative dispute resolution mechanisms even though they were designed to improve access to justice and do not depend on claimants having legal representation. Most entities have access to expert legal advice throughout the course of a dispute, and it is unsurprising that customers would benefit from being placed on the same footing. Some consumers may not even know that they have a dispute to resolve until they speak to a financial counsellor or legal adviser.
A number of the consumer witnesses before the Commission received free assistance from the legal assistance sector or free financial counselling services. Often, perhaps in part by force of the situation that gave rise to the dispute, they could not have afforded private financial advice or legal representation. Often, the difference between the result the witness ultimately achieved and the situation that they initially faced before they received legal assistance was very large.
The legal and other assistance available to disadvantaged members of the community in pursuing claims against financial services entities is therefore relevant to the Commission’s considerations. It was not a question on which submissions were specifically called for, although a considerable number addressed it. I therefore make limited observations on this point, but I encourage that it be given careful consideration.
The legal assistance sector and financial counselling services perform very valuable work. Their services, like financial services, are a necessity to the community. They add strength to customers who are otherwise disadvantaged in disputes with financial services entities. In that sense, their role in the financial services sector is complementary to the broader recommendations in this Report that are designed to hold entities to account. Reforms to the law, and to practices of regulators and entities, will not eliminate that need though they will properly aim to reduce it. There will always be sources of legitimate dispute, and there will always be vulnerable individuals with a poor understanding of financial services or limited experience or resources who are nonetheless compelled to use these services.
As I have said elsewhere in this chapter, simplification of financial services laws is broadly supported. However, financial services laws will always involve a measure of complexity. Asymmetry of knowledge and power will always be present. Accordingly, there will likely always be a clear need for disadvantaged consumers to be able to access financial and legal assistance in order to be able to deal with disputes with financial services entities with some chance of equality of arms.
The legal assistance sector and financial counselling bodies are also recognised by ASIC as playing an important broader role in the financial services sector, for example by bringing issues to the attention of the regulator or providing a balancing consumer voice in policy development.
Information about financial counselling services is published on the websites of each of the four major banks. Information about legal assistance and financial counselling services is also included on the ACFA website.
The legal assistance sector and financial counselling services frequently struggle to meet demand, which is increasing. Some submissions identified areas where the present coverage of such services could be expanded, for example in the provision of consumer advocacy and representation for superannuation consumers. Other areas that were identified were small business assistance and community-led specialist education for Aboriginal and Torres Strait Islander communities regarding funeral insurance and other financial products.
Funding for the legal assistance sector and financial counselling services comes from various sources and structures, but is primarily Federal and state government funded, with pro bono and other donations also contributing. A portion of existing funding to some community services is sourced from arrangements such as community benefit payments under enforceable undertakings given to ASIC. However, such funding is ‘one-off’ in nature, and reliance on sources of funding that are uncertain presents a longer–term challenge for community–based services to continue to provide services and maintain expertise and scale.
Proposals have been made over time for other models of funding. For example, one submission made to the Commission contained a proposal for an industry levy to fund financial counselling and consumer legal services. The submission stated that this model was operating effectively in the United Kingdom.
I offer no views about the most appropriate sources, level or mix of funding. However, the desirability of predictable and stable funding for the legal assistance sector and financial counselling services is clear and how this may best be delivered is worthy of careful consideration. Such consideration should look at all options that may be available to supplement existing funding.
Paragraph 52(e) of the National Partnership Agreement on Legal Assistance Services defined this term to include community legal centres, family violence prevention legal services, indigenous legal assistance providers and legal aid commissions: Council of Australian Governments, National Partnership Agreement on Legal Assistance Services (Undated) Council of Australian Governments <www.ag.gov.au/LegalSystem/ Legalaidprogrammes/Documents/NationalPartnershipAgreementOnLegalServices.pdf>.
For example, through the ASIC Consumer Advisory Panel. ASIC, Consumer Advisory Panel (Undated) ASIC <https://asic.gov.au/about-asic/what-we-do/how-we-operate/external-panels/consumer-advisory-panel/>.
ASIC, Module 5 Policy Submission, 42–3 –.
For example, NAB, NAB Assist Customer Care Kit (Undated) NAB <www.nab.com.au/ personal/help-and-guidance/financial-hardship/customer-care-kit>.
AFCA, Other Places to Get Help (Undated) AFCA <www.afca.org.au/what-to-expect/other-places-to-get-help/>
CALC, Submission in Response to Initial Request, 22 January 2018, 8 [2.30]; National Association of Community Legal Centres and FCA, Interim Report Submission, 5; Financial Rights Legal Centre, Submission in Response to Initial Request, 5 February 2018, 2.
CHOICE and Superannuation Consumers’ Centre, Module 5 Policy Submission, 6, 31–2; ASIC, Module 5 Policy Submission, 42–3 –.
 National Association of Community Legal Centres and FCA, Interim Report Submission, 9; CALC, Module 3 Submission, 7 [8.1]–[8.2].
 CALC, Module 4 Submission, 9 .
 ASIC, Module 5 Policy Submission, 43 .
 National Association of Community Legal Centres and FCA, Interim Report Submission, 2 –.
 National Association of Community Legal Centres and FCA, Interim Report Submission, 2 .The UK has adopted an industry levy model to fund financial counselling and financial literacy services: Free and Impartial Money Advice, Set Up by Government (Undated) The Money Advice Service <www.moneyadviceservice.org.uk/en>.