Labor and Katter continue to push for a royal commission, but Entsch now favours independent compensation tribunal

This article is more than 4 years old

This article is more than 4 years old

Bob Katter has blasted Liberal MP Warren Entsch over a back-flip on the proposed bank royal commission, following Entsch’s announcement that he now favours an independent compensation tribunal for bank customers.

Labor is continuing to push for a royal commission and has said the new proposal is evidence of government division over the regulation of the financial sector.

Backbench Coalition MPs have presented several reform ideas for the banking sector in response to calls for a royal commission, including the tribunal and tighter rules around credit card late fees.

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As first reported in Guardian Australia on 2 August, Entsch has backtracked from his earlier support of a bank royal commission in favour of an independent tribunal that can grant victims compensation.

Entsch saida tribunal would be better than a royal commission that could go on for years.

“The more I consider it, the less chance I think there is victims will get any sort of satisfaction in the short term,” he said. “Labor don’t know the terms of reference for a royal commission, I’ve seen nothing there that will put victims in front of a panel, in a shorter period of time.”

On Tuesday Katter said he was disappointed at Entsch’s backflip and that he continued to support a royal commission

“Entsch is dogging it,” he said. “Entschy, I plead with you to reconsider this idea of the tribunal. We need the royal commission.”

On Tuesday the shadow financial services minister, Katy Gallagher, said she had not seen any details of Entsch’s proposal but she took it as a sign “there are divisions within the government about Malcolm Turnbull’s response to the banking industry”.

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Gallagher said the prime minister had taken a “nothing to see here” attitude to bank misconduct, but Liberal members were calling for a “tribunal that goes further, which shows the legitimate concerns within the government benches about the weak response from Malcolm Turnbull on this issue”.

She said Labor’s position was to set up a royal commission, which could consider ways to compensate victims in addition to systemic issues. Compensation should not be considered “in isolation”.

“We know that there are some people on the government benches who want to see [a royal commission] ... we will continue to argue for a royal commission and work with them.”

Entsch said there was “no guarantee” a royal commission would resolve historic cases and provide justice for victims battling for a decade.

“Their only option is to go to lawyers [to sue the banks] but when they only have the clothes on their back they can’t match the spending power of the banks.

“If the disputes drag on, the banks’ problem goes away because [victims] die. Their arguments die with them - that’s why we need to establish an independent tribunal.”

Entsch’s proposal originated in a report in May from a Senate committee inquiry into customer loans that recommended the banking industry be required to fund a tribunal if financial institutions did not appoint independent experts to consider restitution for customers who feel they have been ripped-off.

Entsch said the tribunal should have the power to force banks to pay compensation to their customers and penalties should be set at triple the amount of damage to provide a deterrent.

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One third of the penalty would go to customers and the other two thirds would pay for the tribunal.

He said the tribunal needed to be independent of the banks: “I don’t trust them.”

Entsch’s proposal for an independent compensation tribunal has received support from Nationals senator John Williams, who had also previously called for a royal commission.

The Liberal MP Craig Kelly told Guardian Australia he was “sympathetic to the proposal on the basis that for a consumer to take a bank to court is virtually impossible, because the bank can bleed them out with legal fees”.

“It has to be a low-cost or no-cost model, like state tribunals, so people aren’t bluffed out of starting a case because they’re fearful of having hundreds of thousands of dollars of costs against them.”

Kelly also put credit card late fees on the agenda as another area of reform that parliament should consider looking at without a wider inquiry.

He said the high court had recently weakened consumer protections against unreasonable late fees, when it rejected a class action against ANZ for charging late fees of $35.

Kelly said it was “plain rip-off” and should be unlawful to charge penalty fees far in excess of the actual cost of late payments, which could be as little as $1 or $2.

He said the court’s decision expanded the scope of what could be considered a reasonable cost when calculating late fees, advantaging banks over small business and retail consumers.

“I believe there’s ground now to codify the common law – law of penalties needs to be tightened up to put some type of cap on what a bank could charge,” he said.

Kelly said there was no need for a royal commission to give impetus to the push because “all the detail and evidence is there”.

“It’s now up to parliament to act, rather than have a long-winded royal commission.”