Banks revamp code of practice in face of scandals, royal commission
Updated
Unsolicited credit card limit increases will be banned and customers will be empowered to quickly cancel credit cards online under dramatic changes to the banking industry's code of practice.
As it rushes to rebuild trust in the scandal-plagued sector, the Australian Bankers Association (ABA) will also push its members to make unpopular transaction fees more transparent and for small business contracts to be written in plain English.
The ABA says the restructured code will ensure "a more prominent commitment to ethical behaviour" as the industry confronts a royal commission into evidence of bad and unethical banking behaviour.
ABA chief executive Anna Bligh described the strengthened code as a huge voluntary step by the banking industry after a major initiative announced in April 2016 to bolster standards in the face of rolling scandals.
"Banks are committed to change and the new code is stronger, broader and written in simple to understand language," Ms Bligh said.
"It has been completely rewritten to better meet community expectations and service the needs of customers.
"The new set of rules and behaviours will go a long way in addressing the expectations that Australians have of their banks.
"Banks most certainly do not underestimate the challenge ahead of them and will continue to make necessary changes."
Provisions in the code will be legally binding
The updated code of practice has been lodged with the Australian Securities and Investments Commission (ASIC), although the corporate regulator is likely to tweak the revamped provisions before signing off in the coming months.
The 24 members of the ABA — which includes the Big Four, regional banks, community banks and foreign banks — will be expected to sign and adhere to the code once it is approved by ASIC.
Provisions in the code will be legally binding as part of contracts with customers and the implementation will be monitored by the independent Banking Code of Compliance Committee.
The previous code was voluntary, but enforceable where members of the ABA agreed to sign up.
However, Ms Bligh said the fact that members accepted 96 of the 99 recommendations proves that banks are serious about change and committed to the greatest reform in more than 20 years.
Provisions designed to counter household debt concerns
The move to ban unsolicited credit card increase offers and to allow easier card cancellation is designed to counter concerns about rising household debt fuelled by easy access to bank credit.
Other provisions in the code designed to breathe life into the battered reputation of banks will see:
- Customers notified before their introductory credit card interest free period expires
- Customers only paying interest on what remains on a credit card and not the full amount of purchase if a loan is being paid down
- Customers informed when a bank reports a payment default on a loan to a credit reporting body
- Statement fees for customers who can access electronic statements waived or refunded
- Banks to assess a customer's ability to repay the entire amount of a loan within a certain timeframe
- Customers provided with a list of direct debits that come off cards to better inform customers about their commitments
- Small business banks to provide a minimum of 30 days notice to change conditions of loans and three months before a loan facility ends
- Loan guarantors who have not received legal advice will be required to wait three days before signing to help avoid potential financial abuse
Revised code expected to be implemented in next 12 months
A spokesman for ASIC confirmed it was expecting the updated code of conduct to be lodged but that as regulator it would not have a role in enforcing it.
"We are expecting to receive an application from the ABA to approve their code imminently," the spokesman said.
"We then would need to make a decision about providing our approval.
"The ABA code is already 'enforceable' by consumers. Subscribing banks incorporate the commitments made in the code within their banking contracts with consumers.
"The soon-to-be updated code will also be similarly enforceable by consumers."
Despite resisting calls for a royal commission, the ABA said it would fully cooperate after Prime Minister Malcolm Turnbull caved to mounting pressure and announced an inquiry on November 30.
The revised code of practice is expected to be implemented within the next 12 months as the banking industry manages fallout from the royal commission.
The lodging comes after an independent review by banking veteran Phil Khoury said "community pressure on the banking industry is high" and that ASIC approved was required to ensure any new code is strengthened and properly monitored.
Topics: banking, industry, business-economics-and-finance, royal-commissions, law-crime-and-justice, australia
First posted
