What customers can expect from a new Code of Banking Practice

By Diane Tate, Executive Director - Retail Policy, Australian Bankers' Association

18 April, 2017: If you haven’t heard of the Code of Banking Practice, you’re probably not alone – but that’s about to change as banks work on improving their commitments to customers.

The Code sets out how banks should treat their customers. It’s important in that it covers matters not contained in the law, creates higher standards for banks, and evolves with changing customer expectations about what constitutes best practice banking. Banks that adopt the Code must reflect this in their contracts with customers, and are therefore legally bound by their obligations.

One year ago, the banking industry announced a comprehensive package of reforms to better protect customers and rebuild trust in banks. This package included an independent review of the Code of Banking Practice, which is now complete. The final report of this review contains 99 recommendations, with the vast majority being supported by the banks.

The Australian Bankers’ Association is now in the early stages of the process of redrafting the Code with the aim of improving day-to-day banking for Australians.

What's new?

The new Code will have a clear and prominent commitment to ethical behaviour by banks. It will also be written in plain-English so customers can better understand banks’ commitments to them, as well as their banking responsibilities.

Changes will be made so it’s easier for customers to reduce a credit card limit or cancel a credit card. Banks are also working with the card schemes, like Visa and Mastercard, to make sure customers can more easily cancel recurring payments they’ve set up on their card. At the moment the process is different to cancelling direct debits on your bank account.

Building on the help already provided to customers who are in financial difficulty, banks will improve their financial hardship assistance programs. The Code will contain a new commitment for banks to proactively identify if someone is at risk of getting into difficulty so they can work with their customer to help prevent a situation worsening.

For the first time, the new Code will include a dedicated section for small businesses with commitments to simplify terms and conditions and give more notice when loan contracts change. The ABA is also developing new industry guidelines on how and when banks can appoint investigative accountants and receivers, administrators or liquidators for a small business or farm property, and on valuation practices. These new guidelines are being developed in consultation with small business representatives and will be published ahead of the new Code.

These are just some of the many changes you can expect from a new Code.

Redraft

The final report and the 99 recommendations has been published by the reviewer; but that’s just the beginning of the process for redrafting the Code.

The ABA is now consulting with key stakeholders on the industry response and the next steps. A number of the recommendations are multi-faceted; so we’ve been honest about what the Code can do and what might best be addressed in other ways. We’ve also been honest about some of the complexities, and we’ll continue to work through these issues with an open mind and with our stakeholders.

It’s important we do this in a way that doesn’t trip up our legal obligations, in particular competition laws which prevent banks from collectively making decisions about the way banking products are offered or the price of those products.

The ABA is aiming to have a new Code by the end of 2017, at which point banks will start the employee training and other operational changes needed to transition to their new obligations.

Banks want to make the changes as soon as possible, but also need time to get it right. There’s lots to get done over the remainder of this year and we’ll be working closely with key stakeholders to do this. If you’re interested in the redraft of the Code and want to get involved, contact the ABA.

More information about the Code of Banking Practice, and the independent review, can be found here.

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