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2 January 2018
For customers and small business, banking can be confusing, complex and difficult to understand. This often means that banking is not as accessible as it needs to be for all customers.
The Australian community relies on banks to provide them with a secure place to deposit their money, to obtain credit and loans in order to help manage their financial lives and run their businesses. Trust is a critical part of this relationship.
The new Banking Code of Practice, developed by Australia’s banks, signals a new era in rebuilding that trust with the Australian community. Australian banks have recognised and spent the past two years reworking the industry’s code of practice to make it easier to understand, friendly to small business and fair for all customers.
Since the global financial crisis, Australia’s banks have taken part in 51 inquiries, investigations and reviews. Of these, 12 are ongoing.
It is clear that banks do not fear scrutiny or accountability and are not afraid to make the hard changes when needed.
While banks participate in these inquiries as well as meet the requirements of the recently announced royal commission, the banking sector is already undergoing a major reform agenda.
A centrepiece of this reform process is the new simplified and customer-focused Banking Code of Practice.
The code still has a few hurdles to go through. It has been submitted to ASIC for approval (the first of its kind to go through this process). However, banks will implement the new code within 12 months of that final approval. A major step forward.
This code will be strong, enforceable and customer-friendly to build a robust, transparent banking sector for the future. Most importantly, it signals a prominent commitment to ethical behaviour as well as improved transparency around products and services for our customers.
The purpose of this code is to set out the industry’s key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for their banking services.
In practice, it means improving services for customers in everyday banking.
The code includes significant changes to credit cards. Customers will be able to easily cancel credit cards online. They’ll no longer be sent unsolicited letters offering increases to their credit limits. Importantly, customers will be better assessed on their capacity to repay a credit card in a timely way so people don’t take on more debt than they can afford.
The code includes a new deferred sales model for consumer insurance on credit cards, ensuring customers are able to make informed decisions before signing up. Banks will have to wait four days before offering customers consumer credit insurance on credit cards sold over the phone or in a branch.
Transaction fees will be more transparent than ever, with the onus on banks to let customers know what they will be charged.
As promised, the sector will deliver small business contracts written in plain English, which will save hardworking Australians time and make life easier for more than 2 million small business owners.
The code will also see a renewed commitment to addressing customer complaints by way of customer advocates who will help banks better handle complaints for customers experiencing stress when things go wrong.
Developing a new code is not a simple or easy process. An independent review of the Code of Banking Practice began in July 2016 headed by Phil Khoury, former executive general manager of the Australian Securities & Investments Commission. In March last year he presented his final report.
The Banking Code of Practice is the culmination of hundreds of hours of development and more than 50 meetings with banks, consumer groups, regulators and key stakeholders over the past nine months.
Finally, an industry code is worthless if it doesn’t have teeth and cannot be enforced. Unlike many industry codes, the code will form part of a banking contract, which means it is legally enforceable. It will also be monitored by an independent body to ensure that the code is being implemented properly.
This code is simpler, stronger, broader and designed to better meet the needs of community expectations. Reform must be ongoing across the banking sector, but the Banking Code of Practice is a powerful step in the right direction.
This article appeared in The Australian on 2 January 2018.