Banking Code: The Compliance Committee’s approach to consumer protection

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Many Australians are facing exceptional financial challenges due to the COVID-19 pandemic and are likely to need the support and assistance of their bank to help them deal with its impacts.

The 2019 Banking Code of Practice provides safeguards and protections for banks’ individual and small business customers and includes many obligations which require banks to meet a higher standard of practice than imposed by the law.

In the Code banks have made an overarching commitment to fair, reasonable and ethical behaviour. This commitment is supported by obligations for banks to:

  • provide customers with information about low or no fee accounts that might suit their needs if they tell the bank they’re on a low income
  • try to help customers to overcome financial difficulties
  • have a fair and reasonable process for handling customers’ complaints
  • make their services inclusive and accessible to everybody, including older people, people with disability, Indigenous people and people with limited English, and
  • be sensitive, respectful and compassionate towards people experiencing vulnerable situations.

The Code also includes specific obligations about the steps banks must take when small business and farming customers apply for credit and which limit banks’ use of non-monetary defaults.

Nineteen of Australia’s biggest banks subscribe to the ASIC approved Code which came into effect on 1 July 2019 following an extensive review of the previous version in 2016.

Banks’ compliance with the Code is monitored and overseen by the independent Banking Code Compliance Committee (BCCC) which replaced the previous Compliance Monitoring Committee (the CCMC).

The BCCC’s new Charter provides for a very different approach to monitoring. The BCCC has new powers and an enhanced mandate to ensure banks keep the promises they have made in the Code and to improve standards of service in the Australian banking industry.

The BCCC has developed a new approach to monitoring consistent with its Charter and heightened expectations of industry to meet best practice compliance with the Code.

Specifically the BCCC:

  • considers banks’ promise to engage with customers in a fair, reasonable and ethical manner in every aspect of its monitoring work.
  • concentrates on monitoring potentially systemic and serious matters, and
  • encourages continuous improvements in banking practice.

The BCCC receives a relatively small number of complaints from individuals and businesses. Every complaint is assessed on a case-by-case basis, but most customers are referred to banks’ internal dispute resolution services, or to AFCA, because these services can provide the complainant with an individual outcome.

The BCCC uses the information from individual complaints and other sources – such as AFCA, regulatory reports, and customer advocates – as inputs to a risk based assessment of where the industry is likely to be failing to live up to the Code, with a focus on the issues most likely to disadvantage or cause harm to banks’ customers. This approach enables the BCCC to identify emerging trends or significant concerns which are investigated by conducting targeted or broad-based inquiries.

These inquiries involve a thorough examination of banks’ policies and processes. The BCCC is increasingly requiring performance audits to be conducted by individual banks to test how they comply in practice.

The BCCC expects banks to demonstrate they have a positive culture of internal compliance monitoring and self-reporting. The BCCC has enhanced its approach to data collection to enable it to check whether banks are taking responsibility for identifying and reporting breaches, and making practice improvements to prevent future breaches. Banks are now required to provide data every six months.

Last year member banks self-reported over 15,000 Code breaches, affecting at least 9 million customers and with a financial impact of over $90 million. The breach data indicates banks take action to prevent reoccurrence more often than they remediate customers, but banks appear to be making improvements in this area following feedback from the BCCC and provided details of customer remediation for 76% of breaches, up from 39% in 2017–18.

It is not possible to determine with certainty whether increases in the number of breaches reported each year represent increased non compliance or, as the BCCC believes to be the case, are for the most part a demonstration that banks are better able to identify and fix problems.

Armed with the new Code and Mandate, the BCCC has a more forward-facing role in ensuring banks meet community expectations. The BCCC proactively seeks engagement with key stakeholders and increasingly uses its website to keep stakeholders and the public informed. The BCCC in particular welcomes input from consumer advocates on any of its monitoring activities. Flowing from a recommendation of the 2016 Review, the BCCC has established an Advisory Panel to provide it with advice and guidance on small business and agribusiness banking matters.

If you have any concerns about a bank’s conduct or think that it may have breached the Code, the BCCC would like to hear from you.

This article was prepared by the BCCC’s Consumer Representative, Gordon Renouf.