The CCMC recently completed an inquiry into compliance with clause 20 of the Code, dealing with Chargebacks. A “chargeback” is the term given to the process by which a financial institution, at the request of a customer, can reclaim a debit on a credit card from a Merchant’s bank. The financial institution, the card-operating scheme and the Merchant all enter into an agreement with operating rules that govern the credit card scheme. Under those rules, the financial institution can, in certain circumstances, claim a refund, or chargeback transaction within a specific timeframe.
The review involved a shadow shopping exercise, assessing the information provided by banks to customers, and a review of information provided by banks in relation to their chargeback data for the month of March 2011. Overall, the inquiry found that there were few complaints about chargebacks, compared to the total number of chargeback requests made. However, the inquiry found that sometimes customers were given open-ended timescales, without an acknowledgment that a chargeback right may be lost if a referral is not made within a specific timeframe, and/or that advice about timeframes was inconsistent with those given in the credit card terms and conditions. As a result, the CCMC recommended the following:
Training – Banks should ensure that contact centre staff receive effective training and access to information in respect of chargebacks.
Dispute Forms – Where a dispute form is used, this should be easily available online and contact centre staff should be made aware of its use.
Systems – Banks should consider augmenting online Banking systems, where user names and passwords are required, to allow customers to report disputes and unrecognised transactions online.
Processes – Banks should review processes and procedures regarding chargebacks to ensure that they are consistent with both good industry practice and scheme rules online.
Communication – Banks should reflect on the nature of customer communications regarding chargebacks, to ensure information regarding timeframes and refusal reasons are clear.
Statement wording – Banks might consider the inclusion of wording on chargebacks in their monthly statements templates.
The CCMC has also discussed the findings of the inquiry with the individual banks.
A copy of the full report is available here: http://www.ccmc.org.au/cms/wp-content/uploads/2012/04/Chargebacks-Final-Report-Jan-2012.pdf
Or, you can see an abridged copy of the report here: http://www.ccmc.org.au/cms/wp-content/uploads/2012/03/Chargebacks-Report-website.pdf
Follow-up on Direct Debits review
In June 2009, the CCMC released its report of a review of compliance with clause 19 of the Code (direct debits). This review included a small shadow shopping exercise, and the results were somewhat disappointing, with 8 out 10 shadow shoppers receiving incorrect or partially incorrect information about the process for cancelling a direct debit.
To follow up on this review, we conducted another small shadow shopping exercise in 2010 and 2011. This found that the level of compliance with Clause 19 has not increased over the period from the first Inquiry, despite industry efforts to improve performance. The results of the 2010 and 2011 exercises fell short of the CCMC’s expectations.
In conducting the Inquiry, the CCMC also observed the following:
- one bank was fully compliant in the responses to all calls made in 2010 and 2011;
- one bank was fully non compliant in the responses to all calls made in 2010 and 2011;
- three banks charge a fee, ranging from $10 to $15, for cancelling a direct debit; and
- only one bank, at the time the shadow shopping was carried out, provided the option for the direct debit to be cancelled using online banking.
The results of the 2010 and 2011 shadow shopping were discussed with individual banks as part of the CCMC’s yearly on-site visit.
In the Annual Compliance Statement documents, we have asked banks to report on any compliance monitoring activity that the bank has undertaken as a result of these inquiries, and whether the bank has changed any of its processes as a result of the outcomes of the CCMC inquiries.
The CCMC will continue to monitor banks’ activities in this area, and would welcome any feedback from consumer and small business stakeholders about this issue.
A copy of the 2009 report is available here: http://www.ccmc.org.au/cms/wp-content/uploads/2011/10/Direct-Debits-June-2009.pdf
A copy of our follow-up review will be available on the CCMC website shortly.
2012 Annual Compliance Statement process
CCMC recently finalised the 2012 Annual Compliance Statement (ACS) documents, to be completed by all banks subscribing to the Code of Banking Practice over the coming months. The annual ACS process is one of the primary mechanisms for the Code Compliance Monitoring Committee (CCMC) to assess compliance with the Code. In the early years of the Code, the ACS asked each bank to indicate the extent to which it complied with each of the provisions of the Code, and to provide complaint statistics. However, over the past few years, the CCMC has been involved in an ongoing process of evolving the ACS documents, so as to enable the CCMC to gain a more sophisticated understanding of Code compliance. In addition, we have been focusing on improving the useability of the documents by the banks. This year, the continuous improvement of the ACS documents has been helped by a specific engagement with the banks on the content of the documents, as well as by feedback from financial counsellors and consumer advocates about the types of issues that we should focus on in the ACS documents.
Some of the issues raised by financial counsellors and consumer advocates were about cancelling direct debits, addressing financial hardship, and contact with customers after having been advised that the customer is being represented by an advocate. The 2012 ACS documents specifically cover a number of the issues raised, and others we will look to including in future activities. In relation to financial hardship, the questions included in the ACS will also be relevant for our inquiry into financial hardship, planned for later this year.
The results of the 2012 ACS will be reported in our annual report, due for release in October 2012.
New subscribing bank
Beirut Hellenic Bank Ltd is the newest bank to subscribe to the Code of Banking Practice, and has subscribed since 1 January 2012. Remember that the CCMC can only investigate an allegation about non-compliance with the Code if the bank concerned has subscribed to the Code. A full list of subscribing banks, and the date from which they subscribed, is available here: http://www.ccmc.org.au/code-subscribers/.
March 2012 Bulletin and subscriptions to the CCMC website
The latest CCMC Bulletin was released in March, and is available here: http://www.ccmc.org.au/cms/wp-content/uploads/2012/03/Quarterly-Bulletin-2-March-2012.pdf. This Bulletin includes a number of case studies, information on current inquiries, and the ACS.
If you would like to receive notification of future Bulletins, and other updates from the CCMC, you can subscribe to our website.
Queries and comments
As always, please don’t hesitate to contact me if you have any queries or comments about the CCMC’s operations.
Consumer and Small Business Representative
Code Compliance Monitoring Committee