In an Australian first, a new Banking Code of Practice has been considered and approved by the Australian Securities and Investments Commission (ASIC) under their industry code approval powers. In this article Anna Bligh, CEO of the Australian Banking Association outlines some of the new initiatives and why the new code should be adopted by the entire industry.
Recently launched by the Australian Bankers Association the new Banking Code of Practice sets a revised standard of customer service for Australia’s banks. The new Code is part of a significant reform agenda to improve banking services to better meet community standards and expectations.
However, consumers should note that not all Australian banks and lenders are signatories to the new code. Here’s a list of the banks who are ABA Members and therefore required to comply with the new code.
Launching the new code, Australian Banking Association (ABA) Chief Executive Officer, Anna Bligh said banks that weren’t members of the ABA, such as credit unions, building societies and other lenders, should adopt the code to ensure no gaps in consumer protections.
The ABA recommended its adoption by the entire industry to the Banking Royal Commission.
The new code, a requirement of membership of the ABA, lifts the standard in banking, representing a stronger commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency. It will be fully implemented by July 1, 2019.
Ms Bligh said while the new code was tailored specifically for the types of banks the ABA represented, it was important that customers were protected regardless of who they choose to bank with.
“Members of the Australian Banking Association have lifted the standard in banking with this new code, with customers the big winners,” Ms Bligh said.
“Initiatives such as reminders when introductory credit card offers are ending, proactive contact with customers who might be at risk of financial difficulty, and simple, easy-to-understand contracts should be adopted across the entire industry. Particularly for small business, every lender, including building societies, credit unions and others, should give sufficient notice when loan conditions might change to help with future planning.”
Ms Bligh said “While other lenders were offering similar products, the standards were not the same, which created confusion for customers and a loophole in protections.”
“These common standards for customers could be achieved by making membership of an ASIC-approved code, such as the ABA code, a requirement of a licence,” Ms Bligh said.
While it is expected that further changes will be made to banking following the final report of the Royal Commission, it’s important that all lenders adopt the same rigorous standards to ensure there is consistency across the industry.
Initiatives in the new code include:
- Customer reminders when an introductory credit card offer is to end.
- New measures to assess a customer’s ability to repay their entire credit card limit within five years.
- Proactive contact with customers deemed at risk of financial difficulty, with measures to help them.
- Giving customers lists of direct debits and recurring payments, making it easier to switch banks.
- Simplified loan contracts written in plain English and easier to understand.
- Providing more notice to small business when loan conditions changed to help with business planning.
- Better protections for guarantors to ensure they understood their obligations, including a cooling-off period, and advocating that they seek independent legal advice to ensure they understand what they’re signing.
- A new independent body which will investigate breaches and apply sanctions as needed.
Those banks that are ABA Members will need to comply with the code by 1 July 2019.
For a copy of the new code – click here.