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Australian Bankers' Association response on
Reviewer's recommendations to update the Code of Banking Practice
Sydney, 10 September, 2009: The Australian Bankers’ Association (ABA) says the banking sector has accepted the vast majority of recommendations made by the Independent Reviewer to update the Code of Banking Practice.
The Code of Banking Practice is the banking industry's customer charter on best banking practice standards. The Code sets out the banking industry's key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for their banking services for personal and small business bank customers.
It is important to note that not all credit or financial service providers adhere to a Code or an equivalent self-regulatory standard.
David Bell, Chief Executive of the ABA, said the Code of Banking Practice is regularly updated and this second independent review of the banking industry’s self regulatory Code was undertaken by Jan McClelland who delivered her recommendations at the end of last year.
Mr Bell said: “This review was completed against the backdrop of an active Commonwealth legislative program which has overtaken some of the Reviewer’s recommendations. For example, there will be an inclusion of a general commitment on responsible lending in the Code but the final position will need to take into account the Federal Government’s laws on consumer credit.”
“Also, steps taken by the retail member banks have overtaken some of the Reviewer’s recommendations such as banks announcing extensions of their hardship provisions for borrowers who are experiencing financial difficulties. This shows that the banking sector remains responsive to their customers’ needs.”
“Almost of all of the rest of the Reviewer’s recommendations will be fulfilled by self regulation and is a demonstration that this approach continues to work for the benefit of bank customers.”
“The retail banks’ response to the recommendations leaves no doubt that the banking industry can adapt to changes that provide increased protection and fair outcomes.”
The table below shows the main recommendations from the Reviewer and the ABA response (for more detail read Response by ABA to Review Final Recommendations, September 2009 – weblink below).
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Main recommendations from Reviewer |
Banking sector response
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A commitment to responsible lending, including a commitment to carefully assess application for credit that may result in financial hardship. |
Agreed - inclusion of a general commitment on responsible lending and it will be covered by the Federal Government’s Consumer Credit legislation. The final position will need to take into account the final legislative requirements.
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Proactive approach in identifying and helping customers facing financial difficulties at the earliest possible opportunity.
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Agreed - ABA retail banks have already adopted the expanded principles on hardship - some of the options which the bank might consider include adjusting the terms of the mortgage contract by providing a repayment holiday and interest will be capitalised, or making interest-only repayments for a short period of time. |
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Full disclosure of exception fees by the banks, and that they provide information to customers on how to avoid such fees, which normally apply for overdrawn accounts.
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Agreed – Banks have already reduced exception fees and provide accounts which don’t charge these fees demonstrating the market is delivering results for bank customers. Banks have also published information on their websites to help customers understand how exception fees are avoidable.
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New provision on switching accounts for personal customers.
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Not needed because the account switching principles announced in November 2008 are already included in the Electronic Funds Transfer Code of Conduct administered by ASIC.
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Include a new clause in the Code relating to Indigenous customers, including Indigenous cultural and community awareness training for staff operating in Indigenous communities. |
Agreed - This will be included in the new Code as banks have already committed to an Indigenous Statement of Commitment which outlines how banks may make a difference for Indigneous people and their communities. A bank’s decision to extend services to remote locations where banks’ services do not currently exist is a commercial decision which should be reserved for the banks’ discretion, rather than being dealt with under the Code.
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Clarify the roles of the Code Compliance Monitoring Committee (CCMC) and the Financial Ombudsman Service (FOS) in relation to Code compliance monitoring and dispute resolution respectively. |
Agreed - the independent work of the CCMC continues but will operate under a new governance arrangement – the CCMC will be established as an independent unit within the FOS reporting directly to and accountable to the FOS Board.
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Inclusion of unfair contract terms be considered in the context of the proposed national regulation of consumer credit. |
Not needed, because with the States, the Federal Government will legislate in relation to this as part of the Council of Australian Government (COAG) initiatives, so there is no need to include it in the Code. |
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Code is readily accessible by consumers and written in language that is consumer friendly.
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Agreed - the ABA recognises the current Code is written in legalistic terms and might be difficult to understand. The aim is to produce the next version of the Code in plain English.
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The next step in the ABA’s consultative process is to finalise the revised wording of the Code in consultation with key stakeholders.
Background Notes for Editors:
- The ABA’s response to the Reviewer’s Final Recommendations can be found on the ABA website at www.bankers.asn.au/coderesponse
- The current Code of Banking Practice published in May 2004 can be found on the ABA website: www.bankers.asn.au
- Information related to the Review of the Code of Banking Practice can be found on the Reviewer’s website: www.reviewbankcode2.com.au This website contains all of the Reviewer’s documents including the Final Report which contains the Reviewer’s recommendations.
For further information:
Heather Wellard
Director, Public Relations,
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
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