Financial hawking laws in Australia
As of the time of publishing (October 5th) the law in Australia for the hawking of financial services has changed significantly.
If you work in or around the finance industry you’re already aware that cold calling to sell unwanted financial products is now illegal.
Based on discussions with our clients, industry peers, and finance firms we’ll explore the impact these laws have had and how financial services companies are approaching them.
It should not be construed as providing legal advice in any way. You should seek your own legal advice regarding financial hawking and your business. Differing situations have exceptions and/or additional considerations.
What is hawking?
In telecommunications hawking is essentially cold calling of prospects either at complete random or from a list of existing contacts with the objective aim of selling them a product or service.
You’ve likely received a call before as I have from your bank claiming to want to speak regarding additional insurance, superannuation, or other such offers.
Although the term could be applied to any business running cold calling prospecting, hawking has recently become more attached to those with financial commodities to offer.
This sub-category of telesales is known amongst the Australian finance industry as a lucrative one, drawing operators from major banks, medium-sized businesses, and small startups all calling every day Australians to hawk their wares.
Selling people insurance or offering comparisons on their super with the option to swap over to a higher performing fund tugs at everyone’s desire for financial stability for them and their loved ones; and while the offerings themselves may be entirely legitimate the relative high performance of the tele-teams unfortunately also attracted a string of bad operators.
Many players (including large banks, and smaller enterprises) had teams who either slowly fell into or started out as falling far short of ethical practices we expect as Australians. In one a person with down syndrome who took long periods of time struggling to answer questions posed to them was sold life insurance, having been taken advantage of for an agents commission.
This amoral and deplorable behaviour by not only the agent on the phone but the company employing them through not blocking the sale rightfully drew the attention of the government and surfaced during the Banking Royal Commission which ran from 2017 to 2019
As a result of recommendations from the Commission the hawking of unwanted financial products and services is now illegal, with those found in breach liable for fines surpassing $13,000 or up to six months in prison.
This move by the government has for the most part been the decisive killing blow to the bad industry actors who caused this to begin with, but was indiscriminate in that it also demolished legitimate companies that conducted themselves to ethical standards.
We’ve witnessed many smaller operators already shuttering their doors, some rightfully due to their behaviour being extremely questionable, while other highly genuine businesses have followed suit out of either fear of potentially heavy-handed enforcement or directly not being able to adapt to the new regulatory compliance framework set forth above.
Some businesses though have chosen to continue, their products and sales practices are highly vetted to ensure agents handle themselves as expected. This law did not end their operations, but did add additional restrictions and operational headaches to them.
Approaches to the law
The key word in the new rules is unwanted. Their consent to receive the sales pitch must be “positive, voluntary and clear”, with an exception to all these new restrictions for when a consumer has a pre-existing relationship with the company offering the product.
These two pathways alone create a large enough gap for companies to continue operating in an altered capacity, for consumers who’ve already engaged and qualified (or at least shown an interest) in the product from the telesales team it can be said these have a pre-existing relationship.
This same provision means it’s unlikely you’ll stop receiving unsolicited calls from your bank in the long run, though the behaviour of their agents is guaranteed to be more rigorously scripted.
As for the “positive, voluntary, and clear” requirement, we believe this will create new mini-industries where ordinary Australians will instead be cold called and kept on the phone for unrelated matters, at some point during the conversation they will be asked very clearly if they would be interested in (as an example) comparing their insurance with other local companies.
Take for example a company running cold call surveys, if the remote party says they wouldn’t be interested in changing their insurance the survey data itself has some value, but to express a true interest and consent in further action is sellable.
That data alone is enough to operate as an independent business providing a source of leads to partners and can come as justification for the next call.
If the government truly wants to end these calls entirely then over the phone sales of financial products should be limited to inbound calls only for reputable institutions and take steps to curb whatever loopholes we see emerge over the coming months — though it seems unlikely additional changes will be made for some time.
Ultimately where there’s opportunities to make money business will inevitably follow, and while the new laws may scare many existing players away the new steps necessary to drive a profit are unlikely to keep tomorrow’s entrants absent for long.