New legislation means mortgage brokers will be forced to act in consumers' best interests or face stronger penalties.

A bill containing four banking royal commission recommendations has cleared parliament.

The new measures extend consumer protection to funeral expenses-only insurance policies, in a move designed to stop insurers using unfair terms to deny or underpay claims.

Consumer advocacy group Choice has welcomed the changes.

“People will now be able to expect that mortgage brokers are acting in their best interests, and if brokers don't comply, they will face penalties,” Choice chief executive Alan Kirkland said.

Mr Kirkland said brokers have depended on recommending mortgages that provided the best commissions rather than best deal for customers.

“This has led to brokers selling people into loans that are riskier, take longer to repay, and are more likely to fall into arrears,” he said.

Consumer Action chief Gerard Brody said the changes would help stop rip-offs.

“Funeral expenses policies have been sold for too long without proper safeguards, which has resulted in serious harm in Victorian Aboriginal communities,” he said.

Financial Rights chief executive Karen Cox wants the protections extended to people already holding funeral expense policies with unlicensed providers.

Meanwhile, Australia's big four banks will soon face federal politicians to explain how they are progressing with their response to the royal commission.

Economics committee chair and Liberal MP Tim Wilson says recent revelations about Westpac's massive compliance failings have again shaken the community's trust in financial institutions.

“[Holding banks accountable] will help to ensure Australia's financial sector implements the critical reforms needed to regain the community's trust,” Mr Wilson said in a statement on Thursday.

Westpac and the National Australia Bank will face the committee in separate sessions on June 12, while the Commonwealth Bank and ANZ face questions on June 26.