Review of the Code of Banking Practice
Response by Australian Bankers’ Association to
Review Final Recommendations

September 2009

1. Introduction

The Australian Bankers’ Association (ABA) welcomes the release of the Final Report on the review of the Code of Banking Practice (Code) by independent consultant, Jan McClelland.

The Final Report contains 75 separate paragraphs of recommendations arising from the review which was conducted over a period of approximately 12 months.  Ms McClelland consulted widely and thoughtfully in framing her recommendations for changes to the Code.

Clause 5.4 of the Code requires that the ABA should promptly publish on its website:

(a) the recommendations and report arising from the review of the Code (and to make them available to the public in hard copy on request);

(b) reasons why any recommendation has not been accepted; and

(c) quarterly progress reports on the implementation of the recommendations which have been accepted until the implementation process is complete.

This document has been prepared to record the ABA’s initial response to the many recommendations and, where necessary, to provide some reasons why a particular recommendation has not been accepted by the ABA.  Where relevant, an alternative approach has been suggested for discussion with interested parties.

The ABA believes that many of the recommendations arising from the review can be supported in principle and, subject to further subscriber consultation and appropriate drafting discussions, may be accepted accordingly. 

Further, currently the Commonwealth Government is developing a national consumer credit law and a national consumer protection law, both of which are expected to commence in 2010. The Commonwealth has also developed certain regulation covering margin lending.  Currently, the detailed policy settings and the legislation for these initiatives are not fully finalised.   

Once finalised, these initiatives will have a bearing on the formulation of the revised provisions for the Code and this has been taken into account in preparing this response. The ABA is looking forward to moving ahead with implementation of the accepted recommendations.

Ms McClelland has provided guidance with many of her recommendations as to how these recommendations might be translated into the wording of particular provisions in the Code.  This guidance will be very helpful in the drafting process for implementing these recommendations.  However, the ABA notes that the final wording of any provision of an accepted recommendation may not be identical with the wording proposed by Ms McClelland in the original recommendation, as there may be a need to take account of particular circumstances as well as unforeseen consequences.  As with the review process to date, the ABA will ensure that there continues to be full consultation with interested parties in the course of the Code drafting process.

The ABA wishes to thank Ms McClelland for her review and Final Report and those interested parties who all have made valuable contributions to the review.

2. Responsible Lending

2.1 General Principle of Responsible Lending — Clause 2

Recommendation 1

That a key commitment to responsible lending be included in the current Clause 2 of the Code, Our key commitments to you, along the following lines:

We will be responsible lenders in approving credit, offering credit limit increases, supporting customers facing financial difficulty; and promoting responsible use of credit.

ABA Response Agreed subject to the following comments: The ABA supports the inclusion of a general commitment to responsible lending in the Code but considers that it should be included in the Code in the context of clause 25.  In that regard the ABA proposes that there be included in clause 25 a new provision along the following lines: "To the extent applicable, we will comply with all relevant laws and this Code relating to responsible lending.” The final position to be adopted will, in any event, need to take into account the final form of the legislative and associated requirements for responsible lending that have been proposed by the Government. The ABA considers it imperative that there should be consistency between the Code and the new legislation.

2.2 Provision of Credit — Clause 25.1

Recommendation 2

That a separate clause on provision of credit be included in the Code, building on Clause 25.1 but expanded to include two parts, one relating to approval of an application for a credit facility and another relating to unsolicited or other offers of credit card limit increases, which covers the following: 

A. Approval of an Application for a Credit Facility

1) 1) Before we approve your application for a credit facility or for an increase in your existing credit facility, we will exercise the care and skill of a diligent and prudent banker in selecting and applying appropriate assessment methods to your circumstances and financial position and in forming our opinion about your ability to repay the credit facility.

2) 2) Our credit assessment methods will vary depending on a range of factors including the credit facility product, whether you are a new customer or have an existing banking relationship with us, the information you have provided to us and the information available to us from other sources. Our credit assessment methodologies will include, as appropriate to your circumstances, consideration of at least two of the following factors: 

    (a) Information you have provided on your income and financial commitments; 

    (b) How you have handled your finances in the past; 

    (c) Our internal credit scoring techniques; 

    (d) Information from credit reference agencies.

B.   Unsolicited or Other Credit Limit Increase Offers

1) If we decide to make you an offer of an increase in the credit limit of your credit facility, we will take into account the following criteria:

    (a) Your recent credit facility repayments history, including whether you have been able to meet repayments or whether you have a history of missed or late payment; 

    (b) Your income, if in the course of our dealing personally with you, we become aware that you are in receipt of a welfare payment that is your sole source of income;

    (c) Your recent credit facility history, including whether you have a history of consistently reaching or exceeding the credit limit while making only the minimum monthly repayments, and/or whether we are aware of other information that suggests you may be likely to be experiencing financial stress;

    (d) Your banking relationship with us, including whether you are a new customer and/or whether you have acquired any other products from us; and 

    (e) Your request not to receive unsolicited offers of credit limit increases, if you have made such a request.

2) If we decide to make you an offer to increase your credit limit on an existing credit facility, we will provide information on: 

    (a) The new minimum monthly payment and repayment period if you accept the offer and the credit facility is fully drawn on; 

    (b) How to request a lower credit facility limit than the one we have offered;

    (c) How and when to reject the offer, for example, if you are having difficulties meeting your current repayments, or if your financial circumstances have changed or are likely to change such that you cannot afford to meet increased repayments; and

    (d) Easy and efficient ways to reduce your credit facility limit and how long it will take to process your request for a reduction in your credit facility limit.

ABA Response Agree with the inclusion in the Code of a separate provision that sets out in principle support for responsible lending (see Recommendation 1). However, the ABA has the following comments on the specific recommendations concerning clause 25: An overly prescriptive approach in the Code may result in inconsistency with the final form of the legislative requirements for responsible lending that have been proposed by the Government.  As mentioned above (see comments on Recommendation 1), the ABA considers it imperative that there should be consistency between the Code and the new legislation.  The final wording of changes to clause 25.1 for consumer lending will be developed in line with the final consumer credit legislation. Existing clause 25.1 is an appropriate standard in relation to lending to small business.  The new consumer credit legislation is not intended to apply to small business credit (at least in respect of Phase One of the Government’s credit laws policies) and clause 25.1 will be retained for small business credit.  This position will be reviewed following the completion of Phase Two of the credit regulation. Further, a requirement for a standardised approach to credit decision-making which requires specified criteria to be taken into account may impair the necessary flexibility and judgment that banks must have in making assessments about credit. The ABA does not agree that Recommendation 2B (in relation to unsolicited or other offers to increase credit limits) should apply to all types of credit facility. Rather, the requirements in Recommendation 2B should apply to credit cards only (as contemplated in the opening words in the first paragraph of Recommendation 2).  In particular, the ABA does not agree that the requirement to provide information where there is an offer of a credit limit increase should apply to all types of credit facilities and not just to credit cards (see Recommendation 2B(2)). The ABA’s March 2004 Banking Initiatives on Debt in this regard apply only to offers of credit limit increases on credit cards. Recommendation 2B by applying to all types of credit facilities is unnecessary given the provisions in the Consumer Credit Code (to become the National Credit Code under Commonwealth law) which provide for detailed information to be provided to debtors (including as to repayments) who obtain an increase in the amount of credit under a non-continuing credit contract (see section 65(3)).  The ABA is not aware of any issue that would require Recommendation 2B to apply to small business offers. In 2B(2)(a) the ABA believes that this is better expressed as “information on the minimum monthly payment if the offer is accepted”.  This is consistent with the ABA’s March 2004 initiative referred to above about information on how much more a customer may have to pay each month if the offer is accepted. The ABA also does not agree that information as to repayment periods (see Recommendation 2B(2)(a)) should be given to credit cardholders who are offered a credit limit increase given the revolving nature of such facilities, the variable nature of the interest rates which apply, and the potential for minimum repayment rates to change. There is no evidence that a consumer would rely on information on repayment periods in considering an offer of a credit limit increase.  Further, publicly available information indicates that the overwhelming majority of credit cardholders are able to manage their spending on credit cards and repayments in accordance with current economic conditions.  Any response in the Code to assist consumers in managing credit card debt should be proportionate to the need illustrated by the data.

3. Financial Hardship — Clause 25.2

Recommendation 3

That a separate clause on financial hardship be included in the Code, building on Clause 25.2 but expanded to cover the following:

1. With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us.  We will deal with you or, at your request, with your financial counsellor or representative.
   

2. If, in the course of our personal dealings with you, we identify that you might be experiencing difficulties in meeting your repayments we may contact you and invite you to discuss your situation with us and the options available to assist you in meeting your obligations in these circumstances.
   
   
3. If at any time you feel you are experiencing difficulties in meeting your repayments, you should make contact with us as soon as possible to discuss your situation with us and the options available to assist you in meeting your obligations in these circumstances.
   
   
4. If, at the time, the hardship variation provisions of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them.
   
   
5. We will provide you with information about our processes for dealing with customers in financial difficulty, including relevant contact numbers, at your request and when we send you a default notice.
   
   
6. We will respond promptly and courteously to any requests for assistance from you.
   
   
7. We will take into account the information available to us, including the information you provide to us, about your financial situation and determine whether or not we are able to provide assistance and the nature and extent of such assistance.
   
   
8. We will inform you in writing of our decision whether or not to provide you with assistance and the reasons for our decision.  If we agree to provide you with assistance we will confirm in writing the agreed arrangements.
   
   
9. While we are considering your application for assistance where you are experiencing financial difficulty in relation to a credit facility with us, we will not commence any enforcement action in relation to the debt or assign the debt. If we reject your application for assistance, we will allow you a reasonable period of time to obtain advice, before we commence enforcement action in relation to the debt or assign the debt.  If we have commenced enforcement action before you made the request, we will not proceed to judgment whilst we are considering your situation.
   
   
10. We will not require you to access your Superannuation Fund to repay your credit facility with us.
    
    
11. We will have information about our processes for dealing with customers in financial difficulty available on our website.
    
    
12. We will ensure that relevant staff are trained in the financial hardship provisions of the Code, and applicable consumer credit legislation.
    

4. Debt Collection — Clause 29

Recommendation 4

That Clause 29 of the Code is amended to include reference to ACCC and ASIC debt collection guidelines as amended or replaced from time to time.

Recommendation 5

That the debt collection clause follows the proposed revised clause on Financial Hardship and include the following:

(a) We will comply with the Australian Competition and Consumer Commission and Australian Securities and Investments Commission guideline “Debt Collection Guideline for Collectors and Creditors, October 2005,” as amended or replaced from time to time, when collecting amounts due to us.  We will ensure that our debt collection agents do likewise.

(b) If we sell a debt to a third party we will choose firms that agree to observe the ACCC and ASIC debt collection guidelines referred to in (1) and that are members of an ASIC approved external dispute resolution scheme.

ABA Response Agreed

5. Guarantees — Clause 28

5.1 Commercial asset financing guarantors

Recommendation 6

5.2 Enforcement

Recommendation 7

That Clause 28.14 of the Code be expanded to provide that enforcement of a judgment against the guarantor or any security provided by the guarantor will only be taken after attempts have been made to enforce the judgment against the debtor and/or enforce any security against the debtor. 

ABA Response Agreed subject to the following comments: The ABA agrees that, as a general rule, banks should attempt to enforce security against the debtor first. Subject to the current Consumer Credit Code and the proposed NCC where a judgment has been obtained from the court, banks should not be bound in every conceivable case to apply the general rule in the absence of a court judgment.  This is ultimately a commercial decision. The ABA accepts that banks should be required to act reasonably in exercising their commercial judgment. Specific examples of where a bank might need to proceed first against a guarantor include circumstances where the debtor has not provided any security, or where only the guarantor has provided security and in circumstances of the same type provided under section 82 of the Consumer Credit Code (section 90 of the NCC)  including : - where a court has relieved the bank from the need to proceed first against the primary debtor; - where there have been reasonable attempts to contact the primary debtor without success; and - where the debtor is insolvent. Further, section 94 of the NCC will provide a guarantor with the right to seek a postponement from the bank of an enforcement proceeding in respect of security provided by the guarantor and to dispute a bank’s refusal to postpone the enforcement proceeding through the bank’s EDR scheme.  Finally, the ABA considers clause 28 of the Code provides the highest standard for pre-contractual disclosures for prospective guarantors in Australia along with protections in relation to the amount to be guaranteed.

6. Joint Debtors — Clause 26

Recommendation 8

That Clause 26.1 of the Code be amended to provide:

We will not accept you as a co-debtor under a credit facility where it is clear, on the facts known to us, that you will not receive a benefit under the facility.

ABA Response Agreed subject to the following comments: The ABA supports the proposed amendment of Clause 26.1 subject to clarification of what “benefit” may mean under a facility. The ABA considers that it may be difficult for banks to assess, in practice, whether a person will receive a “benefit” by entering into a facility as co-debtor, particularly whether the person is entering into a facility for the benefit of a family member. The ABA will consult with key stakeholders on the drafting of this provision as it will with the re-drafting of the Code generally.

7. Code Compliance Monitoring Committee and the Financial Ombudsman Service — Clause 34

Recommendation 9

That the CCMC be established as a separate independent unit within the FOS reporting directly to and accountable to the FOS Board for the performance of its prescribed functions under the Code.

Recommendation 10

That separate terms of reference of the CCMC be developed by the CCMC in consultation with the ABA, the FOS, ASIC and consumer interests.  The terms of reference for the CCMC should be consistent with the compliance monitoring, investigation and reporting functions of the CCMC under the Code and be published on the CCMC, FOS and ABA websites.

Recommendation 11

That the terms of reference of the CCMC make it clear that the CCMC and the FOS  have different functions of Code compliance monitoring and dispute resolution respectively and guarantee the independence of one from the other in the performance of those functions respectively as well as independence from banks.

Recommendation 12

That the charter, constitution, terms of reference and operating protocols of the FOS Board and of the CCMC and the Code make it clear that individuals and organisations have the right to make complaints about Code breaches directly to the CCMC.

ABA Response Agreed subject to the following comments: The ABA supports the governance framework set out in Recommendations 9 to 18 in respect of the Code Compliance Monitoring Committee (CCMC) and the Financial Ombudsman Service (FOS).  The ABA considers that an effective governance framework is critical to the integrity and accountability of the CCMC and the long-term viability of the Code. Banks are not accountable under Recommendation 10 for the development of the Terms of Reference for the CCMC as it is currently worded.  The ABA agrees to the following amended Recommendation 10 “That separate terms of reference for the CCMC be developed for the CCMC by the Code subscribing banks in consultation with the CCMC, FOS, ASIC and consumer interests.”     In implementing the Recommendations, the ABA considers Recommendation 15 to be particularly important as customers need to be given sufficiently clear information that outlines the different roles of the CCMC and the FOS so that they may be able to determine the body to which it would be appropriate to address certain issues. There is a need to consider further the implications of both the CCMC and the FOS considering a potential breach at the same time.

8. FEES AND CHARGES — new provision

ABA Response Agreed

9. REVERSE MORTGAGES — new provision

Recommendation 25

That a new clause be introduced in the Code to govern equity release products, also commonly referred to as reverse mortgages.  This clause should commit subscribing banks and their agents to compliance with the SEQUAL Code.

ABA Response Agreed

10. DIRECT DEBITS — Clause 19

Recommendation 26

That Clause 19 of the Code be expanded to include reference to a variation of direct debit arrangement as distinct from cancellation of direct debit payments along the following lines:

(a) We will take, by telephone or in writing, and promptly process your:

        - instruction to cancel a direct debit request relevant to a banking service we provide to you; and

        - complaint that a direct debit was unauthorised or otherwise irregular.

(b) We will not direct or suggest that you should first raise any such request or complaint directly with the debit user (but we may suggest that you also contact the debit user).

(c) Where you wish to change the terms of a direct debit arrangement with a merchant, as distinct from seeking to cancel a direct debit facility, you will need to contact the merchant directly to make the change..

Recommendation 27

That staff are trained in the provisions of Clause 19 including:

(a) the distinction between cancellation of direct debits and changes to the terms of direct debit arrangements; and
 
(b) the need to process cancellation requests and complaints promptly in order to avoid the possibility of the customer’s banking facility becoming overdrawn and incurring exception fees due to the continuing payment of the direct debit facility.

ABA Response Agreed subject to the following comments: The ABA proposes to make it clear that banks may require customers to identify themselves in making a request in relation to direct debit arrangements (for example, a user ID or a password may be required). As with the current Code, provisions relating to direct debit arrangements will not apply in relation to credit cards (instead the chargeback provisions will apply — see Recommendations 51 and 52). Debit cards that are issued under certain debit card scheme rules  in much the same way as credit cards are issued under credit card scheme rules, present a difficulty when a bank is dealing with a request by a customer to cancel a direct debit arrangement.  This is because if the customer nominates the debit card number instead of the relevant transaction account number when setting up the direct debit facility, the direct debits will be processed through a debit card scheme similarly to a credit card transaction under clause 19.2 of the Code.  Otherwise, if the customer nominates their transaction account number held with the bank, direct debits will be processed through the normal payments clearing system rules operated by the Australian Payments Clearing Association.  The bank is able to take a cancellation instruction and process the instruction according to APCA’s rules while the same facility is not available under debit card scheme rules.  Under the Code, debit card scheme direct debit arrangements. will have to be dealt with in the same way as credit card scheme direct debits, that is, under clause 19.2 of the Code.  As there are facilities for customers to claim chargebacks under debit card scheme rules clause 20 will be amended accordingly.

11. ACCOUNT SWITCHING — New Provision

Recommendation 28

1 Visa Worldwide Pte. Ltd and MasterCard Worldwide.  

That the Code includes a new provision on switching accounts for personal customers.

Recommendation 29

That the new Code provision on switching accounts reflect the four key principles announced by the ABA on 9 February 2008 and available on the ABA website with a focus on:

(a) Obligations of the old financial institution to provide a list of the customer’s direct debit and credit arrangements over the past 13 months to the customer in order to facilitate the establishment of the arrangements for the new account;

(b) Obligations of the new financial institution to provide the customer with information and support to help the customer make the switch. If requested by the consumer, the new financial institution will assist in notifying the Direct Entry users of the new direct debit and direct credit arrangements and assist with closing the customer’s old bank account;

(c) Obligations in regards to timeliness, the provision of information to customers on how to avoid exception fees, and dealing fairly with customers throughout the account switching process;

(d) Provision of quarterly progress reports to the Government.

Recommendation 30

That the Code include a provision that banks will publish their account switching arrangements on the ABA website and on their individual websites.

ABA Response Not Agreed: The ABA notes that the account switching principles have been included in the Electronic Funds Transfer Code of Conduct (EFT Code) that is administered by the Australian Securities and Investments Commission (ASIC) effective from 1 November 2008.

12. ELECTRONIC BANKING — Clause 33

Recommendation 31

That Clause 33 be simplified, taking into account the proposed revisions to the Electronic Funds Transfer Code by ASIC, with a focus on:

(a) Providing customers with the option of receiving material electronically if it is available;

(b) Notifying customers by electronic communication when and how information can be retrieved electronically;

(c) Incorporating electronic communication as a product feature and including this in any product disclosures;

(d) Providing information electronically in a form that allows the customer to retain it; and

(e) Protecting customers from ’phishing’ by including a commitment that customers will not be sent an email or SMS message requesting them to reply via the same electronic communication channel or to click on a hyperlink and provide information on their account details, financial details, login or other security password details.

Recommendation 32

That the relationship between the Code of Banking Practice, EFT Code and electronic communication provisions in the Corporations Act and UCCC be clarified and reflected in the Code based on the following:

(a) The EFT Code electronic communication provisions will apply to all transactions covered by that code;

(b) The Code of Banking Practice electronic communications provisions will not apply to those transactions covered by the EFT Code electronic communications provisions;

(c) The Code of Banking Practice will apply to all other electronic communications with the customer except where the law specifically provides for these circumstances, such as the UCCC and the Corporations Act.

Recommendation 33

That Clause 39.2 of the Code be relocated to Clause 33 of the Code and amended along [sic] as follows:

To the extent of any inconsistency, this Code is to be read subject to the Electronic Funds Transfer Code of Conduct and the electronic communications provisions in the Corporations Act 2001 and UCCC.

ABA Response Agreed subject to the following comments: There may be a need to further clarify what is meant by “electronic communication” for the purposes of this Clause 33. The final form of Clause 33 will need to take into account the revised Electronic Funds Transfer Code of Conduct (EFT Code) if it is available when the Code is finalised. In implementing this Recommendation 31, the ABA will consider whether the content and scope of certain requirements suggested by Recommendation 31 can be further clarified.  For example, the ABA may wish to clarify the scope of the proposed requirement to provide electronic information in a form that allows a customer to retain it (for example, the issue of email correspondence and web content needs to be considered).

13. COMMUNICATION — New Provision

Recommendation 34

That a key commitment to communicate with customers and their representatives in a timely and courteous manner be included in the current Clause 2 of the Code, “Our key commitments to you”, along the following lines: 

We will communicate with you and/or your representatives in a timely and courteous manner, whether by telephone or in written communications including electronic communications.

ABA Response Agreed

14. ACCOUNT SUITABILITY — Clause 14

14.1 Information about accounts

Recommendation 35

That Clause 14 of the Code be amended along the following lines:

(a) If you tell us that you are a low income earner or a disadvantaged person (regardless of whether you are an existing or prospective customer but not if you are a small business), we will provide you with details of accounts which may be suitable to your needs.  Depending on your needs this information may include details of accounts which attract no or low fees and charges and how you can avoid incurring exception fees.

(b) If you ask for this information or if, in the course of dealing with you, we become aware that you are in receipt of Centrelink or like benefits, or assess that your needs are suited to an account which attracts no or low fees and charges, we will provide you with factual information about these accounts.

(c) We will publish information about accounts which attract low or no fees or charges on our website or through other means.

ABA Response Agreed subject to the following comments: The ABA considers that any definition which links ‘low income earner’ to the receipt of Centrelink benefits may not be appropriate, as not all Centrelink recipients are low income earners.  The ABA suggests that an inclusive definition be added, with the receipt of Centrelink benefits as one example of persons who may fall within the definition.

14.2 Indigenous customers

Recommendation 37

That account suitability provisions for Indigenous customers be included in a general commitment in the Code in relation to the provision of appropriate banking services to Indigenous communities, particularly those in remote locations.

ABA Response Agreed subject to the following comments: The focus of this recommendation is on the provision of appropriate banking services from a bank’s existing range of products and services where these are being provided to Indigenous communities in remote locations. A bank’s decision to extend services to remote locations where the bank’s services do not currently exist is a commercial decision, which should be reserved for the bank’s discretion rather than under the Code.

15. Disclosures — Terms and Conditions — Clauses 10 and 13

Recommendation 38

That Clause 10 be simplified to clarify and eliminate any overlap or duplication with other Code provisions.

Recommendation 39

That the review of Clause 10 be informed by the work of the Australian Government Financial Services Working Group looking at the length, complexity and readability of disclosure documentation in financial services.

Recommendation 40

That Clause 10.2(e) of the Code be amended to incorporate all of the provisions of Clause 13 of the Code, thus removing overlap and duplication as follows:

(e) (e) inform you that, at your request, we will provide you with general descriptive information about our banking services, including where appropriate: 

    - our account opening procedures; 

    - our obligations regarding the confidentiality of your information; 

    - complaint handling procedures; 

    - bank cheques; 

    - informing us promptly when you are in financial difficulty; 

    - your taking care to read the terms and conditions of your banking service(s); and 

    - cheques, if your account provides cheque access, including 

        • cheque clearance times; 

        • the effect of crossing a cheque; explaining what “not negotiable” and “account payee only” mean and the effect of deleting “or  bearer” on a cheque where these words appear on a cheque

        • stopping payment on cheques; 

        • reducing the risk of unauthorised alteration of a cheque you write; 

        • cheque dishonour; 

        • post dated cheques; and 

        • stale cheques.

Recommendation 41

That Clause 13 of the Code be deleted.

ABA Response Agreed subject to the following comments:  The ABA emphasises the importance of ensuring that any changes to disclosure requirements under the Code be consistent with disclosure requirements under Chapter 7 of the Corporations Act 2001 (Cth) as well as the new disclosure requirements proposed by the Commonwealth Government for consumer credit and margin lending.

16. Compliance with Laws — Clause 3

Recommendation 42

That Clause 3.1 of the Code in relation to compliance with laws be retained.

Recommendation 43

That Clause 34 of the Code be amended to make it clear that the functions of the CCMC do not extend to compliance monitoring, investigation of allegations of a breach and reporting of Clause 3.1 unless they are also breaches of other provisions in the Code.

ABA Response Agreed

17. Key Commitments – Clause 2

Recommendation 44

That the Code make it clear that the provisions of clause 2 of the Code, “Our Key commitments to you” are general guiding principles and should be interpreted by reference to the relevant more detailed code provisions.

Recommendation 45

That Clause 34 of the Code be amended to make it clear that the functions of the CCMC do not extend to compliance monitoring, investigation of allegations of a breach and reporting in relation to clause 2 of the Code unless they are also breaches of other provisions in the Code.

ABA Response Agreed

18. Copies of Documents – Clause 11

Recommendation 46

That Clause 11.2 be amended to include reference to legislative requirements as follows:

At your request, we will give you documents we have in accordance with legislative regimes for the retention of documents, relating to a banking service you have, or had, with us: followed by existing clauses 11.2(a), 11.2(b), 11.2(c) and 11.2(d).

19. Opening of Accounts — Clause 16

Recommendation 47

That Clause 16 of the Code be amended to include reference to Anti-Money Laundering and Counter Terrorism Finance legislation.

Recommendation 48

That customer identification issues faced by remote Indigenous communities be addressed in a general commitment in the Code in relation to the provision of appropriate banking services to Indigenous communities, particularly those in remote locations.

20. Changes to Terms and Conditions — Clause 18

Recommendation 49

That Clause 18.1 of the Code be amended to:

(a) include the use of electronic communication to meet the notification requirements of the information prescribed in this Clause; and

(b) include an additional exception in the clause that the requirement to provide at least 30 days notice does not apply where the change is beneficial to the customer or in other circumstances consistent with the legislative regime relating to the notification of changes of terms and conditions.

Recommendation 50

That the ABA continue to pursue discussions with ASIC relating to consistency of legislative and regulatory provisions in relation to notification of changes to terms and conditions.

ABA Response Agreed subject to the following comments: The ABA proposes that Clause 18.1 be amended so that the 30-day notice requirement does not apply to a variation of the balance ranges within which interest rates apply to a deposit account.  The same notice requirements for variation of interest rates should apply.  A variation of the balance ranges within which interest rates apply should be covered by Clause 18.3, which provides that notice be given no later than the date on which the variation takes effect. The ABA proposes that Clause 18.4(b) be amended to remove the words “so far as the relevant change is a change to fees and charges”.  It is common with financial products for there to be changes to terms and conditions other than fees and charges (for example, interest rates for deeming accounts).  There would be less confusion if a single regulatory regime applied to all changes of terms and conditions in respect of Chapter 7 financial products.

21. Chargebacks — Clause 20 and Clause 10

Recommendation 51 

That Clause 20(d) is amended to include additional means of providing the annual information on chargebacks, such as by Internet, websites or other electronic means as follows:

(d) include general information about chargebacks with credit card statements at least once every 12 months including by access to our website or other electronic communications in accordance with the electronic communication provisions of this Code.

ABA Response Agreed subject to the following comments: The ABA agrees with the recommendation to provide general information on chargebacks on banks’ websites.  In amending Clause 20(d), however, the ABA will consider whether the provisions on electronic communications in Clause 33 are already sufficient. The ABA agrees that the terms and conditions should provide guidance as to the timeframe within which customers should report disputed transactions, but exact timeframes should not be provided.  Timeframes vary significantly between credit card schemes and vary between different types of disputes.  These considerations would make the suggested disclosures very complex.  Further, the relevant time frames are subject to change.  For these reasons information about timeframes for reporting chargebacks should not be set out in the Code.  Instead, customers should be told that they need to report disputed transactions as soon as possible. In implementing Recommendations 51 and 52, the ABA will also consider the impact of the related provisions under the new EFT Code.

22. Privacy and Confidentiality — Clause 22

Recommendation 53

That any changes to Clause 22 be considered in the context of the report by the Australian Law Reform Commission into privacy legislation.

Recommendation 54

That the proposed principles on privacy suggested by consumer advocates be taken into account in reviewing Clause 22 in the context of the report by the Australian Law Reform Commission into privacy legislation.

ABA Response Agreed

23. Statements of Account — Clause 24

Recommendation 55

That Clause 24 of the Code be aligned with the relevant EFT Code provisions when they are finalized.

Recommendation 56

In the interim Clause 24.1 of the Code be amended to include a new paragraph (e)

(e)  where the transaction information has already been provided to you by other means.

ABA Response Agreed subject to the following comments: The ABA supports Recommendation 55 that there should be consistency between the Code and the EFT Code provisions on the provision of statements of accounts, and refers to comments made in relation to ‘Electronic Communications’ (above section 12). In implementing Recommendation 56, the ABA will exclude the provision of transaction information in ATM receipts from the new paragraph (e) of Clause 24.1 as this would be an adverse outcome for customers.

24. Advertising — Clause 30

Recommendation 57

That Clause 30 on Advertising be retained in the Code.

Recommendation 58

That Clause 30.1 be amended to include reference to legislative requirements in relation to advertising by banks as follows:

ABA Response Not Agreed The ABA considers that existing consumer protection laws dealing with deceptive and misleading conduct in financial services that are administered by ASIC are sufficient, and need not be duplicated in the Code.

25. Internal and External Dispute Resolution — Clauses 35, 36 and 37

Recommendation 59

That Clause 35.1 (b) in relation to internal dispute resolution standards be amended to read as follows:

(b) meet the standards set out in any internal complaints handling standard or guideline that ASIC declares is to apply to this Code;

Recommendation 60

That Clause 36 (b) in relation to external dispute resolution policy statements or guidelines be amended to read as follows:

(b) consistent with any external dispute resolution standard or guide that ASIC declares is to apply to this Code.

Recommendation 61

That Clause 35.1 (a) be amended as follows:

(a) be free and accessible.

Recommendation 62

That any additional legal or other costs which may be incurred and/or imposed on customers by banks should be reasonable having particular regard to the impact on customers experiencing financial difficulties.

ABA Response Agreed on the understanding that Recommendation 62 is directed at third party charges incurred by a bank that the bank may decide to pass on to the customer.

25.1 Application and Transitional Provisions — Clause 39

Recommendation 63

That Clause 39 be amended to reflect the changes in the Code following this review, making it clear that subscription to the Code means subscription to the entire Code.

Recommendation 64

That the application and transitional provisions clarify that the requirement for third party debt collectors and finance and mortgage brokers to be members of an ASIC approved EDR scheme, as recommended by the review:

(a) apply to any new contracts entered into after the commencement date of the new Code; but

(b) (b) do not apply retrospectively to contracts which have been signed prior to the commencement of the new Code and the terms of which extend beyond the commencement date of the new Code.

ABA Response Agreed

26. Customers in Remote Indigenous Communities — New Provision

Recommendation 65

That the Code include a new clause on Customers in Remote Indigenous Communities.

Recommendation 66

That the new clause on Customers in Indigenous Communities records the support of subscribing banks to the Indigenous Commitment Statement and incorporates principles in relation to the provision of appropriate banking services to customers in remote Indigenous communities where such services are currently provided, taking into account the following issues:

(a) Provision of information and communication with customers in indigenous communities;

(b) Account suitability for customers in remote indigenous communities;

(c) Identification issues relating to the opening of accounts for customers in remote Indigenous communities;

(d) Indigenous cultural and community awareness training for staff operating in indigenous communities;

(e) The implications of government programs such as income management programs on the provision of banking services and products in remote indigenous communities.

ABA Response Agreed subject to the following comments: The ABA agrees in principle with Recommendations 65 and 66 that a new clause should be inserted into the Code to express a commitment to providing appropriate services to customers in remote Indigenous communities. As with the ABA’s response to recommendation 37, these commitments are on the basis of a bank’s judgment about commercial viability in providing these services. In drafting the new provision, the ABA will consider the extent to which such a commitment is provided for in existing provisions of the Code.  The ABA will also consider any effects that this commitment may have on other customer groups.

27. Language and Structure of the Code

Recommendation 67

ABA Response Agreed

28. Staff Training and Competency — Clause 7

Recommendation 70

That Clause 7(a) of the Code be amended to make explicit reference to compliance with the Code as follows:

can competently and efficiently discharge their functions and provide the banking services they are authorised to provide in compliance with the Code; and

ABA Response Agreed

29. Unfair Contract Terms

Recommendation 72

That the issue of the inclusion of unfair contract terms in the Code be considered in the context of the proposed national regulation of consumer credit.

ABA Response Not agreed: The Commonwealth Government has announced it will legislate in relation to unfair contract terms. There is no need to include provisions on unfair contract terms in the Code.

30. Account Combination — Clause 17

Recommendation 73

That Clause 17 of the Code be amended to make it clear that banks will not exercise their right to combine accounts:

(a) while the bank is considering an application for financial hardship assistance in accordance with the financial hardship provisions of the Code, subject to the customer’s agreement that funds in another account(s) can be held by the bank until a decision is made to approve or decline the application for assistance; or

(b) while the customer is complying with an agreed repayment arrangement under the financial hardship provisions of the Code.

ABA Response Not agreed The ABA agrees with the principle that a bank’s right to combine accounts should be exercised carefully in all cases. In the circumstances contemplated by Recommendation 73, the ABA proposes to amend clause 17 to make it clear that where a bank does exercise its right to combine accounts it will take into account the implications for the customer (for example their need to pay for living expenses) of a decision to combine the accounts of the customer having regard to a bank’s agreement in this Code to try and help a customer experiencing financial difficulties overcome those difficulties and any further hardship a combination may impose on the customer.

31. Use of Finance and Mortgage Brokers

Recommendation 74

ABA Response Agreed The Commonwealth’s new regime for the regulation of consumer credit will also cover licensing of finance brokers and include a requirement that they are members of an ASIC approved EDR scheme so no further provision is required in the Code.

32. Promotion of the Code — Clause 9

Recommendation 75

That Clauses 9(a) and (c) of the Code be amended to include a commitment by subscribing banks to prominently display a copy of the Code at their branches and on their websites.

ABA Response Agreed that a copy of the Code should be readily visible in a branch and on a bank’s website.