Codes of Practice – Consumers benefit

The following is a guest post by The Code Compliance and Monitoring team, a separately operated and funded business unit of the Financial Ombudsman Service.

Unfair treatment of customers by institutions has been under the spotlight at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Beyond the Commission, however, consumer protection is an ongoing concern for five independent committees striving to improve standards across the financial services industry.

More than 600 institutions subscribe to one of five Codes of Practice covering Banking, Customer Owned Banking, Life Insurance, General Insurance and Insurance Brokers. Supported by the Financial Ombudsman Service and soon to be Australian Financial Complaints Authority, independent committees monitor the Codes’ implementation, offer guidance, examine alleged breaches and share examples of good practice.

As well as investigating self-reported Code breaches and breach allegations, they release multiple reports, conduct inquiries and engage with industry stakeholders. Among the reports, the Banking committee examined good practice when working with customers in remote indigenous communities. It also conducted an inquiry into banks’ breach reporting systems.

A mystery shopping exercise into direct debits in early 2017 found that just 46% of interactions indicated Code compliance. An October report urged banks to lift their game and, in a follow-up study this year, the Banking committee found compliance had leapt to 79%. It continues to be monitored.

Direct debits also occupied the committee overseeing the Customer Owned Banking Code. In 2017, it examined how institutions had responded to advice arising from a 2012 study . Compliance was found to be patchy, with a minority of institutions achieving best practice. An inquiry into privacy obligations also found a concerning level of non-compliance. Institutions provided training but the frequency of breaches due to human error indicated they must work harder to keep privacy front-of-mind among staff.

In the insurance sector, reports by the committee monitoring the General Insurance code included a guidance note on financial hardship obligations, and a report that recommended ways to improve how add-on insurance is sold, including that the Insurance Council of Australia (ICA) strengthen the Code by extending it to external sellers. An inquiry held by the committee monitoring the Insurance Brokers Code found its subscribers had shown a commitment to professionalism by developing competency frameworks for staff. The committee continued to provide monthly tips to Insurance Adviser magazine, with topics ranging from flood non-cover to “Competency vs Professionalism”.

The Life Insurance code compliance committee hit the ground running in its inaugural year of operation. Activities included making a submission to the Australian Prudential Regulation Authority’s discussion paper on transparent reporting regimes, investigating 23 self-reported breaches by 9 of its 24 subscribers, receiving 42 breach allegations, and developing a method to deal with a bulk referral of 711 breach allegations.

The committees have strong relationships with industry bodies. The Banking team worked with ASIC and the ABA on developing a revised Code; presented at Credit Law, Elder Abuse, and Financial Counselling Australia conferences and engaged with community legal centres and advocates.

General Insurance’s stakeholder involvement included participating in three ICA workshops to discuss issues arising from a Code review, and in a multi-stakeholder ASIC workshop about the handling of claims under investigation for suspected fraud. Its industry member participated in an ICA panel about “Unpacking the Royal Commission: Insurance and consumer expectations”.

Any Code breach allegations or requests for further information can be referred to