credit card

Consumers Federation Australia (CFA) along with several consumer organisations have recently submitted a joint consumer representative submission to the Australian Banking Association.

The ABA has resourced this 2016 submission, conducted as a collaborative effort between the CFA and the Financial Rights Legal Centre (FRLC). CFA and the FRLC engaged with the following consumer organisations who have endorsed this submission:

  • Care Inc
  • CHOICE
  • Consumer Credit Law Centre South Australia
  • Consumer Credit Legal Service (WA)
  • Community Legal Centres
    Association (WA)
  • Community Legal Centres
    Queensland
  • Consumer Action Law Centre
  • Financial Counselling Australia
  • Fianncial Rights Legal Centre
  • Good Shepherd Microfinance
  • National Association of Community
    Legal Centres
  • National Seniors Australia
  • Salvation Army Moneycare
  • South Australian Council of Social
    Service
  • Uniting Communities
  • WEstjustice: the Western Community
    Legal Centre (WEstjustice)
  • Women’s Legal Service Victoria

But what actually is the review and what is its purpose?

In April 2016, the ABA announced a series of reforms to improve satisfaction, trust and confidence in banks from consumers. In more recent years, banks reputations to be the stronghold of financial security and respect has plummeted, with many consumers reporting that they were frustrated with substandard service, unexplained fees, poor ethical practices, lack of honesty and several errors made due to fewer staff or poor advice.

Therefore, the ABA announced that Australian banks will conduct an independent third party review of product sales commissions and a product payments with the intention of improving, replacing and modifying practices which are feeding into poor consumer reported outcomes.

Whilst the call for reforms encompassed a series of changes to be made, this submission forms a critical component in bettering consumer outcomes, with the intention that the review of the Code can see clear and tangible change within the consumer sector.

What does the submission call for?

The submission outlines improvement including within the following areas:

  • Account suitability: Make proactive inquiries into an individual consumer’s suitability for a banking service or product. Banks can also develop systems to assist consumers who may be using a poor account choice.
  • Financial hardship solutions: Consumer representatives advise that the consumers are offered a flexible hardship repayment package. Furthermore, banks should collaborate actively with consumers who are experiencing financial difficulties and that banks shouldn’t impose default fees once a hardship notice has been delivered.
  • Fees and charges: Reevaluate fees and charges which are regressive and tailor the limit of fee charges dependent on circumstances. Significantly, the submission calls for banks to ensure that fees and charges will not trigger further fees.
  • Credit card practices: The submission recommends that banks provide simple and clear solutions for customers to cancel credit cards across multiple means including email, writing and over the phone. The submission also suggests that all credit card applications are assessed on the basis that the individual can pay the account in full over a three year period if it has been drawn to its full credit limit.
  • Family violence: Consumer representatives call for financial hardship policies to be more inclusive of family violence, economic abuse as a cause of financial hardship. Furthermore, that there are more extensive options for customers who are experiencing family violence. These options include moratoriums of repayments where the customer has limited or no income. The submission also recommends that banks sever joint debts to assist customers who are already repaying debts and suffering from family violence.

 

Code Efficacy:

Representatives also make the following recommendations on the code’s effectiveness. These include the following:

  • The code includes a plain English statement on specific terms and conditions for consumers
  • A structure for fines dependent on breaches of the code should be developed and administered to encourage compliance with the Code of Banking Practice
  • It’s recommended that the Code itself can be more easily understood and followed if the document is clearly articulated in plain English.

The submission is available on the CFA website with further details here