Credit card rules and more transparent fees are at the heart of an overhaul of the banking industry’s code of practice that will result in “a more prominent commitment to ethical behaviour”.
With public trust in the sector at a historic low following a series of scandals and the announcement of a royal commission into the finance sector, the Australian Bankers Association (ABA) has lodged the restructured code with the Australian Securities and Investments Commission (ASIC). It is expected to be implemented within 12 months.
The changes – a reaction to concerns about rising household debt through easy access to credit – ban unsolicited offers of card limit increases and give customers the power to cancel their cards online.
Australians owe about $32 billion on credit cards – an average of around $4200 per card-holder.
ABA Chief Executive Anna Bligh said on ABC Radio that the code of conduct overhaul showed banks were serious about change.
She said: “Banks are committed to change and the new code is stronger, broader and written in simple to understand language.
“It has been completely rewritten to better meet community expectations and service the needs of customers.”
The ABA is also pushing its 24 members – the ‘Big Four’ plus regional, community and foreign banks – to make unpopular transaction fees more transparent and small business contracts to be written in plain English.
Ms Bligh said ABA members had accepted 96 of the 99 recommendations presented to them and were committed to what she described as the biggest shake-up of the industry in more than 20 years.
The new code will be a legally binding contract between banks and customers and its implementation will be monitored by the independent Banking Code of Compliance Committee.
The previous code was voluntary but enforceable where ABA members had agreed to sign up; the new code will be mandatory.
“The new set of rules and behaviours will go a long way in addressing the expectations that Australians have of their banks,” Ms Bligh said.
“Banks most certainly do not underestimate the challenge ahead of them and will continue to make necessary changes.”
In other changes to the code, customers will be:
- notified before an introductory interest-free period expires;
- informed when a bank reports a payment default on a loan to a credit reporting body;
- provided with a list of direct debits that come off cards to better inform customers about their commitments.
Has your trust in banks been eroded? What other changes would you like to see?