ASIC bans financial services from cold calling as scams skyrocket
Cold calling by financial services salespeople trying to flog unwanted products to unsuspecting customers has been made illegal as scams soar across the country.
The Australian Securities and Investment Commission (ASIC) brought in the ban in its role as financial regulator following recommendations of financial sector reforms by the banking Royal Commission.
Cold calling laws protect consumers from being sold unwanted financial products
The anti-hawking ban, which commenced on 5 October 2021, prohibits financial salespeople from cold calling consumers with unsolicited sales pitches. The new laws aim to protect consumers from being sold financial products they don’t need or want. (See The hawking prohibition, ASIC, September 2021.)
Under section 992A of the Corporations Act 2001, a person must not make unsolicited contact with a consumer to offer a financial product for sale. Further, section 992AA of the Corporations Act states that if a person contravenes section 992A, the consumer has the right to return the product and receive a full refund.
Financial services industry can no longer circumvent cold calling laws
The crackdown follows years of banks and insurance companies taking advantage of loopholes in laws governing unsolicited sales to consumers.
There has been tremendous damage caused by financial services salespeople cold calling consumers and exploiting them. They often use unscrupulous methods to trick people into signing up for policies that turn out to be worthless.
There is also danger in dodgy online approaches, slick marketing emails and cross-selling to existing customers for worthless timeshare deals, loans for solar panels and shoddy renovations.
Commonwealth Bank fined $700,000 for breaching anti-hawking laws
In 2020, ASIC announced it was drawing a “line in the sand”, banning cold-calling sales of life and consumer credit insurance.
It came as the Commonwealth Bank was fined $700,000 for 87 breaches of anti-hawking legislation. The bank was ordered to refund $12 million to 30,000 customers. This was the first conviction against a major bank since the banking Royal Commission.
ASIC takes Commonwealth Bank to court for misleading customers into buying insurance
In October 2021, ASIC reported that the Commonwealth Bank had pleaded guilty in the Federal Court to 30 charges of making false or misleading representations to 165 customers when selling consumer credit insurance through branches, by telephone and online. (See CBA pleads guilty to criminal charges for mis-selling consumer credit insurance, ASIC, October 2021.)
ASIC took the bank to court for telling customers they could make a claim against their insurance policies when some or all of the claims were not available to them. The matter has been adjourned to a future date. The maximum penalty for each offence is $1.7 million.
Money lost through scams almost doubles in one year
According to Scamwatch, Australians lost over $323 million to all sorts of scams in 2021, up 84 per cent from the previous year. A third of these were through cold calling sales via telephone.
More than 2,800 people reported they’d been duped by a fake pet sale in 2021. These people lost $3.5 million, 78 per cent more than in 2020 – a sad outcome of the search for companionship during the pandemic lockdown.
In the same year, Australians lost around $13 million to online shopping scams, with 26,000 reports being lodged with Scamwatch. Most of the dodgy deals were done through fake online stores selling goods that were never delivered.
Ways to protect yourself from being scammed online or over the phone
Before you make a purchase, search the company name and check the site is genuine. Only pay through secure payment services such as PayPal or credit card transfer. It may be possible to get reimbursed through your credit card if you’ve been scammed.
It’s also a good idea only to use a debit card that has a few hundred dollars on it for online purchases. That way you don’t lose more than what’s on the card if your account is hacked.
If you or your business have been scammed or fallen victim to cold calling, it’s wise to seek legal advice on what can be done to get your money back. Consumers have considerable rights under consumer law. To learn more, visit the Australian Consumer Law website.