Banks to lift game with new code
Banks will be forced to treat their customers fairly under new rules to be introduced today by the ABA.
Banks will be forced to treat their customers fairly under new rules to be introduced today by the Australian Banking Association.
The updated Banking Code of Practice outlaws unsolicited credit card limit increases, commissions on lenders’ mortgage insurance and selling insurance with credit cards and personal loans.
It also increases protections for low-income earners, guarantors and credit-card holders, and promises “simpler and fairer” contracts for small business borrowers and co-operation for customers wanting to switch banks.
Billed as the most significant increase in protections available to bank customers, the Australian Securities & Investments Commission-approved code will be enforced by the Banking Code Compliance Committee and the Australian Financial Complaints Authority.
The committee will have the power to apply sanctions for “serious and systemic breaches” that include reporting offending banks to ASIC.
ABA chief executive Anna Bligh said the strong protections for customers, serious consequences for breaches and independent enforcement of the code would go a long way towards improving the sullied reputation of Australian banks following the Hayne royal commission.
“Banks understand they need to change their behaviour and this new rule book represents an important step in earning back the trust of the Australian public,” she said.
“The new code will form part of every customer’s relationship with their bank and will be strongly enforced.”
ANZ chief executive Shayne Elliott said while there was more work for the industry to do in rebuilding trust with the community, the code was an important and significant step towards achieving that goal.
“The code sets down in plain language the standards of practice and service our consumer and small business customers can expect,” he said.
“It also improves customer protections and sets higher standards … in relation to things like account services and lending applications.”
Westpac CEO Brian Hartzer, said the new banking code was a “big step towards earning back trust in the community”.
“This is a new, stronger banking code for a new era,” he said. “Westpac fully supports the new banking code, which is one part of how we are strengthening transparency, accountability and relationships with our customers.”
Financial Counselling Australia CEO Fiona Guthrie said the code was a major step up in the protections for customers, particularly the most vulnerable, and was an important milestone in restoring community trust.
“Codes like this really can make a difference because they go beyond black letter law and instead reflect the standards that an industry voluntarily commits to,” Ms Guthrie said.
“The banking industry released its first version of the banking code over 25 years ago and it is really pleasing to see that each version — and this is the fourth major revision — contains advances in consumer protection.
“Financial counsellors in particular welcome provisions around family violence, stronger protections for guarantors, better promotion of free or low-fee accounts and more proactive approaches to people experiencing financial hardship.”
It comes as banks are forced to relinquish control of banking data to the customers themselves, under so-called “open banking”.
Starting with product data on July 1 and extending to customer data by February 1, 2020, open banking will break down the barriers consumers have faced in finding and switching to banks that offer them the best deals, according to Volt Bank CEO Luke Bunbury.
“This means the incumbent banks will have to innovate to compete, as there will be a long line of fintechs and neobanks like Volt wanting to harness this data to offer customers a superior banking experience,” he said.
“Customers will be the masters of their data, and third parties will have to earn it by being innovative and trustworthy.”
ASIC signed off on the first tranche of changes to the banking industry’s code last week but held off giving a green light to the next stage.
But ASIC is still weighing its position on a second tranche of changes scheduled to come into effect in March next year.
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