The banking industry’s fall from grace as the royal commission revealed a plethora of dodgy practices was swift. Trust was eroded, some heads rolled, business practices were reviewed. One of the industry’s responses was an Australian Banking Association (ABA) code of practice, approved by the Australian Securities and Investments Commission (ASIC).
Reporting of the new code was littered with weighty words – “extensive engagement”, “comprehensive independent review”, “extensive stakeholder consultation”, “significant changes”, but it may still be a long way back before trust is restored.
Results from a new Roy Morgan survey show that bank customers are less likely to recommend their bank than they were before the royal commission.
In February, 59 per cent of customers were highly likely to recommend their bank to a friend or colleague. That figure fell to 54.4 per cent by June and is at its lowest monthly level since November 2016.
What’s in the code for you?
The code, which starts from 1 July next year, promises:
- provisions for inclusive and accessible banking, including for vulnerable customers
- protections around the sale of consumer credit insurance
- protections for guarantors of loans
- reminders for credit card customers that promotional periods for balance transfer are about to end
- better processes to assist customers in financial difficulty and to resolve complaints.
And what has been overlooked?
Consumer Action Law Centre (CALC) chief executive Gerard Brody described the code as positive, but said there were shortcomings, included not taking further action to limit penalty fees for such things as late credit card late payments.
“These fees can drain people’s accounts, meaning they don’t have enough to live on,” he told the ABC.
He said banks should ensure that credit card limits are repayable over two years rather than the five years the ABA proposes.
He was also concerned about compliance with the code.
It is to be administered and enforced by an independent monitoring body, the Banking Code Compliance Committee (BCCC), but Mr Brody said sufficient resources had to be provided to allow this to occur.
“Many of the case studies at the royal commission involved breaches of the code,” he said, “but the existing processes haven’t identified and stopped these from occurring.”
Will the code help restore your trust in the banks? Does it go far enough?