Sydney, 23 March, 2006: The Australian Bankers’ Association (ABA) supports the initiatives by the Northern Territory Government and the Australian Securities and Investments Commission (ASIC) to improve the practice of ‘book up’ in regional communities.

‘Book up’ involves the store owner offering small amounts of short-term credit that is often secured by the consumer leaving their debit card and PIN with the business owner or having their social security cheque posted care of the store. It is common in regional Australia and the consumers are mainly Indigenous Australians.

David Bell, Chief Executive of the ABA, said: “It is important to note that contrary to some media reports, banks are not banning the practice of ‘book up’, but seeking to support Government initiatives to improve its practice.”

“The ABA and its member banks have attended a number of meetings at which we listened to representatives from Indigenous communities who said they did not want an immediate ban of ‘book up’ because this facility at a local store could be the only access to credit or cash for some distance.”

“Therefore the banking industry is suggesting that the Government strategy seeking to restrict ‘book up’ should be coupled with an education campaign for merchants and consumers.”

ASIC has been encouraging reform of ‘book up’ practices. ASIC has noted:

“….the retention of PINs by a merchant can result in significant disadvantages for a consumer and it also undermines the consumer protection provisions of the Electronic Funds Transfer Code of Conduct and consumer confidence in the EFTPOS system.” ¹
 
The ABA has lodged a submission on the Northern Territory’s discussion paper on ‘book up’, noting that the banking sector supports the proposal to introduce a mandatory code governing ‘book up’ practices under the Consumer Affairs and Fair Trading Act.

The submission notes that NT Government and ASIC have received complaints regarding some ‘book up’ arrangements. The ABA has identified a number of problems with the practice including:

• There may be minimal disclosure by merchants regarding the price of goods and services and consumers may not be aware of amounts withdrawn from accounts;
• Sometimes merchants do not set withdrawal limits which means consumers spend more than is available in their account which causes an account overdrawn fee to be charged by the financial institution;
• Some merchants charge fees for service or a fine for the return of a debit card;
• Some ‘book up’ arrangements allow family members or others to ‘book up’ against a consumer’s account, leaving the consumer vulnerable to exploitation;
• Access to a debit card and/or PIN can be attained by the merchant, their employees and third parties which increases the potential for fraud;
• Consumers using ‘book up’ lose the protection of the Electronic Funds Transfer (EFT) Code of Conduct because they have divulged their PIN.

Mr Bell said some member banks have changed their EFTPOS merchant agreement contracts which prohibit merchants requesting a PIN from their customers. Other banks are in the process of amending their agreements.

“These amendments may encourage improved ‘book up’ arrangements when consumers make a purchase and may prevent some of the associated problems.”

“While the debit card may be retained by the store owner, the eventual aim of the changes is to phase out the retention of PINs by merchants, ensuring customers will enter their PIN to complete the transaction. This means that consumers will be less exposed to unscrupulous practices, such as fraud and theft.” 

“By supporting the government and regulators, the banks are hoping to promote ‘book up’ practices that protect consumers. The ABA is encouraging the NT Government to take action against unscrupulous merchants for violations of fair trading laws,” Mr Bell said.

Banks are also supporting the ASIC education initiative ‘Dealing with Book Up: A Guide’ which is a resource for communities and businesses. It includes information and practical tips about financial issues in Indigenous communities, including the importance of keeping your PIN confidential.