Banks’ ASIC vow: we’ll clean up our act

The nation’s banks have promised ASIC to show more transparency and use con­tracts written in plain English.

The code will include a ­deferred sales model for customer insurance on credit cards

The nation’s banks have promised more transparency in transaction fees, small-business ­con­tracts written in plain English, big changes to credit cards, and use of customer advocates to ­address complaints, according to a revised code of practice that has been submitted to ASIC.

The document, which is the first industry code to be sent to the corporate watchdog for approval, is the culmination of an independent review of the old code undertaken by the former senior Australian Securities & Investments Commission executive Phil Khoury.

Australian Bankers’ Association chief executive Anna Bligh said reforming the banking sector was an ongoing process but the code was a “powerful step in the right direction, signalling a ­commitment to ethical behaviour and improved transparency.

“Unlike many industry codes, the new banking code of practice will form part of your banking contract, which will mean it is ­legally enforceable,” she said. “It will also be monitored by an independent body to ensure (it) is being implemented properly.”

The final report of the Khoury review, which began in July last year, was presented to the ABA in March. The industry accepted 96 of its 99 recommendations in some form.

The revised code is part of the industry’s efforts to lower the level of hostility from Canberra over poor industry behaviour.

Since the global financial crisis, Australian banks have participated in 51 inquiries, investigations and reviews, 12 of them ongoing.

Among the big reforms in the code are changes to enable ­customers to cancel credit cards online. Banks also will no longer send unsolicited letters offering to increase a customer’s credit limits, and a better assessment of a ­customer’s capacity to repay will mean fewer customers taking on debt that they cannot afford. ­Customers will be notified before the expiry of their introductory interest-free period.

Elsewhere, there will be greater transparency on transaction fees, with the onus on banks to ­improve disclosure.

Contracts for small businesses will be written in plain English, and banks will have to give at least 30 days’ notice to change loan conditions and three months’ notice before a facility is withdrawn.

The code will include a ­deferred sales model for customer insurance on credit cards, ­ensuring customers can make ­informed decisions. before signing up. Banks will have to wait four days before offering customers credit insurance on credit cards sold online or in a branch.