The federal government has proposed a shake-up of financial services regulation it says will protect consumers from rogue mortgage and finance brokers.

Prime Minister Kevin Rudd says the reforms are aimed at bringing the regulation under a national umbrella to replace the existing “dog’s breakfast” of state and federal rules.

The mortgage industry and business welcomed the government’s green paper on the issue released today.

Treasurer Wayne Swan said the government planned to tighten and streamline the country’s financial services and credit regulations, bringing them into the 21st century.

“That’s all about protecting mums and dads who are consuming financial services and it’s also about better regulation,” Mr Swan told reporters.

Mr Rudd told parliament the reform is important as regulations are uneven across the states.

“Right now current regulations are duplicated, patchy, confusing, in fact it is a complete dog’s breakfast,” he said.

“It is time we had some decent long-term economic reform to ensure this sector is also provided a proper pathway to the future.”

He said some customers are receiving “poor and inadequate” advice under existing arrangements in areas of mortgage broking, which leads them to taking on huge debt while paying extortionate fees.

“You have some consumers unknowingly playing Russian roulette when they buy certain financial products like margin loans, because it depends on how you purchase the product which determines how it is regulated,” he said.

“With such products becoming more mainstream, this is simply not good enough.”

Corporate Law Minister Nick Sherry said the green paper proposes to transfer and modernise the financial regulatory system by bringing some areas under state regulation into a single, national jurisdiction.

This would occur in the areas of mortgage broking, margin lending, non-bank lending and trustee companies.

“So we’ll have single-standard, national financial services regulation for the overwhelming majority of financial products in this country,” he said.

The paper also invites comment on debentures, property spruikers and a range of other credit products.

The Mortgage and Finance Association of Australia (MFAA) welcomed the proposal that would see the federal government assume control of regulating mortgage brokers.

“Since 2002, the MFAA has been pressing for regulation to weed out any mortgage and finance brokers doing the wrong thing,” MFAA chief executive Phil Naylor said.

“The association requires all 13,500 of its members to adhere to rigorous standards of conduct, but it is imperative to protect consumers from the predatory conduct of fringe brokers and lenders who are not our members.”

Australian Chamber of Commerce and Industry (ACCI) said reforms like these are important for the economy as a whole.

Senator Sherry said Australia, like the United States, Canada and most of Western Europe, has “very confused” financial regulation systems.

“Once these reforms are implemented, Australia will lead the world in single financial national regulation of financial services,” he said.

Standard regulations would make it easier and simpler for businesses and for consumers, he said.

The framework is expected to be finalised at the Council of Australian Governments (COAG) in October.

“The powers transfers will occur and then the details of regulation will be concluded in the next calender year,” Senator Sherry said.

AAP