Consumer advocates are calling for Australian banks to maintain and enhance robust consumer protections, following an independent review of the Banking Code of Practice (the Banking Code).
The Australian Banking Association (ABA) has published its response to the 2021 Independent Review of the Banking Code of Practice today, authored by Mike Callahan. The banks propose to adopt 48 of 116 recommendations in full and 34 in part, including:
· Enhancing banks’ commitments to supporting customers experiencing vulnerability
· Improving access to free interpreter services for people from a non-English speaking background, including interpreters for Aboriginal and Torres Strait Islander people
· Strengthening code commitments around debt collection and the sale of unsecured debt
· Expanding the definition of small business so that more small business customers are covered by relevant protections.
These improvements are welcome and should enhance standards in banking, particularly for customers in vulnerable circumstances.
The consumer advocates said a forthcoming redraft of the Code is an opportunity to further improve bank practices. One of the recommendations not supported for example was to make existing ABA industry guidelines on specific issues mandatory, as the banks consider these to represent best practice, rather than a binding standard. This was a key recommendation that would have enhanced the commitments made by banks in a number of important areas.
“The banks have indicated that they support stronger consumer protections in the Banking Code of Practice. As part of any redrafting, consumer advocates consider that banks must enhance consumer protections and make sure standards remain in the substance of the code”, said Consumer Action Law Centre CEO Gerard Brody.
“One of the strengths of the code is that it is not just an aspirational statement – it is legally enforceable by a consumer who contracts with the bank. For this reason, bank commitments can’t be wishy-washy, they need to be meaningful”, said Brody.
“If industry guidelines are not to be made mandatory as a whole, the ABA should be exploring what substantial parts of these guidelines can be made mandatory as part of the future redraft.
“With increasing interest rates and cost-of-living pressures, banks will also have to resource compliance with the code, including in important areas such as supporting financial hardship”, said Financial Counselling Australia CEO Fiona Guthrie.
“We welcome the updates to the code and look forward to banks implementing improved access to interpreters for customers from multicultural Australian communities. This will have a significant positive impact, enabling customers to make informed decisions about banking products and services”, said South East Community Links CEO Peter McNamara.
The consumer advocates also welcomed the recent ABA response to the Independent Review of the Banking Code Compliance Committee, including a new commitment to begin reporting compliance on a named basis.
“The BCCC is an important body to ensure compliance and promote best practice. When it undertakes a review of compliance with the code, it needs to be able to name banks to achieve its purpose. Without naming banks who are reaching best practice, and those that don’t meet expected standards, the community can’t have confidence that compliance activities are making difference”, said Financial Rights Legal Centre CEO Karen Cox.
The consumer advocates also called on the banks to uplift standards in key areas that aren’t dealt with in the Banking Code:
· De-banking – the Council for Financial Regulators has released advice to the Treasurer around the practice of banks declining to offer, or withdrawing basic banking services from customers. Banks need to improve fairness and transparency, as de-banking can affect vulnerable groups including people exiting prison. Without a bank account, this group of people is unable to access income support, putting them at risk of further financial harm. We need a system, as they have in the UK, where each bank is required to take on their fair share of customers who need a bank account in order to participate in society.
· Scams and payments – the Banking Code does not deal effectively with how banks detect, prevent and reimburse victims of scams. This is a huge gap in consumer protection.