Banking Code Compliance Monitoring Committee Bulletin – April 2018

Welcome to Issue 26 of The Bulletin. In this edition:

 

The revised Banking Code of Practice and the Banking Code Compliance Committee

On 19 December 2017, the Australian Banking Association (ABA) submitted the revised Banking Code of Practice (the revised Banking Code) and the Banking Code Compliance Committee (BCCC) Charter to the Australian Securities and Investments Commission (ASIC) for approval under section 1101A of the Corporations Act 2001.

The CCMC has had extensive interactions with both the ABA and ASIC in recent months to share its views on both the revised Banking Code and its associated governance and compliance monitoring arrangements.

The CCMC anticipates that the revised Banking Code will be published in the coming months and that this will initiate the CCMC’s transition to the BCCC.

 

The CCMC’s monitoring program for 2018

The following Code monitoring activities are either in progress or under development:

 

Own Motion Inquiry into breach reporting

The CCMC stated in its 2016–17 Annual report that it has recognised the need to better understand the underlying issues and customer impact of breaches reported to the CCMC. The CCMC has commenced an Own Motion Inquiry to better understand the issues, customer impact and financial impact of the breach data reported for the 2016–17 reporting period.

Through this Inquiry the CCMC will:

  • benchmark and report to industry and the wider community on banks’ monitoring practices, and compliance with the Code
  • establish the areas of highest priority for its future monitoring work, and
  • develop its strategy for future data collection.

The CCMC plans to publish its findings by June 2018.

 

A transitional inquiry into the financial difficulty obligations under the 2013 Code and revised Banking Code

The CCMC anticipates that the revised Banking Code will expand the financial difficulty provisions of the 2013 Code and introduce a strong focus on vulnerable customers.

Under item 1.7 of the CCMC’s 2017-18 Workplan, the CCMC is scheduled to undertake a follow-up review of banks’ compliance with Code clause 28 (financial difficulty). The CCMC is currently scoping an inquiry which will monitor compliance with the 2013 Code and also gather information to provide guidance that assists banks with their transition to the revised Banking Code.

Through this Transitional Inquiry, the CCMC will aim to:

  • Assess, benchmark, and report on banks’ current level of compliance with the Code.
  • Share examples of good practice with the industry and community.
  • Assess the adequacy of banks’ financial difficulty frameworks and provide guidance about alterations required to meet the revised financial difficulty Code obligations.
  • Develop guidance for the industry on best practice principles when working with customers to overcome financial difficulty.

The CCMC plans to publish its findings by September 2018.

 

The 2017–18 Annual Compliance Statement (ACS) program

The CCMC is currently developing its 2017–18 ACS which enables the CCMC to:

  • Benchmark banks’ compliance with the Code during that period.
  • Report on current and emerging issues in Code compliance to the industry and wider community.
  • Establish the areas of highest priority for its future monitoring work.

In line with the CCMC’s approach to data collection in its breach reporting Inquiry, the CCMC will seek detailed breach reporting data from banks, along with information about:

  • the implementation of recommendations from previous CCMC reports
  • complaint and dispute resolution, and
  • requests for financial difficulty assistance.

The outcome of the 2017–18 ACS program will be reported in the CCMC’s 2017–18 Annual Report in November 2018.

 

Improving banks’ compliance with direct debit cancellation obligations

In October 2017, the CCMC reported that:

  • customers continue to be frustrated by bank staff providing incorrect information about cancellation of direct debits, and
  • will continue this monitoring until it is satisfied that compliance has permanently improved to a sufficient level.

The CCMC is conducting periodic, ad-hoc and small-scale mystery shopping exercises to test banks’ compliance and will include several questions in the 2017–18 ACS asking banks to report on their efforts to enhance compliance and the effect of those efforts.

Again, the CCMC will report on the outcomes of these activities in its 2017–18 Annual Report.

 

More broadly, the CCMC is mindful of the many external developments that are likely to have an impact on its operations and those of Code subscribing banks throughout 2018, including the Royal Commission into misconduct in the banking, superannuation and financial services industry.

The CCMC will continue to monitor these developments for any impact on its work.

 

Stakeholder engagement

The CCMC has met regularly with the ABA and ASIC to discuss its work program and ongoing developments regarding the revised Banking Code and the associated governance and compliance framework.

In December 2017, Rural Bank Limited became the 14th bank to adopt the 2013 version of the Code. CCMC staff have met with Rural Bank to discuss the CCMC’s Code monitoring program.

Among other things, CCMC staff and representatives also recently:

  • Attended the ASIC Annual Forum in Sydney.
  • Met with Gerard Brody (Chair, Consumers’ Federation of Australia and CEO, Consumer Action Law Centre)
  • Attended the Financial Counsellors’ Association of Queensland 2018 Annual State Conference in Noosa, Qld.
  • Presented at the South Australian Financial Counsellors Association Professional Development Day in Adelaide, SA.
  • Presented at the ‘Together making change’ 5th National Elder Abuse conference in Sydney.
  • Met with staff from the Consumer Action Law Centre in Melbourne to discuss current issues for customers in financial difficulty.
  • Met with a bank that plans to adopt the revised Banking Code.

In April 2018, the CCMC will meet with all subscribing banks and the ABA to discuss the CCMC’s Code monitoring activities and workshop the 2017–18 ACS.

 

CCMC Investigations – Key statistics

Between 1 December 2017 and 28 February 2018 the CCMC:

  • Received 8 new matters, which raised allegations of non-compliance with the Code related to:
    • financial difficulty (3 allegations)
    • provision of credit (2)
    • key commitments (1)
    • direct debits (1)
    • debt collection (1)
    • terms and conditions (1)
    • internal dispute resolution (1), and
    • information relating to foreign exchange services (1).

 

  • Finalised 19 matters, including:
    • Two where banks agreed to self-report breaches of the Code.
    • One where the CCMC found that there had not been a breach of the Code.
    • Five where the CCMC incorporated allegations into its wider monitoring of the direct debit obligations under the Code.
    • Two that were outside of the CCMC’s jurisdiction because they did not relate to a Code subscriber.
    • Four that were outside of the CCMC’s jurisdiction because they did not relate to products or services to which the Code applies.
    • Two where the Code breach allegations were withdrawn.
    • Three where there was no further contact from the person making the allegation.
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Banking Code Compliance Monitoring Committee Bulletin – December 2017

Welcome to Issue 25 of The Bulletin. In this edition:

 

Banking Practice in Australia 2016–17 – the CCMC’s Annual Report

On 7 December 2017, the CCMC published Banking Practice in Australia 2016–17. This is the CCMC’s Annual Report and outlines how the industry met the obligations of the Code of Banking Practice in 2016–17.

The Report highlights:

  • Breaches of the Code self-reported by banks.
  • Data related to internal dispute resolution and requests for financial difficulty assistance.
  • The CCMC’s work related to the provision of credit, banking services for Indigenous customers and the cancellation of direct debits.
  • The independent reviews of the Code and the CCMC.

A summary of the CCMC’s key activities and findings for the reporting year is provided in the Year at a Glance section.

Further information:

Banking Practice in Australia 2016–17 – the CCMC’s Annual Report

Media Release: Annual report highlights risk areas and improved banking practice

Previous Annual Reports

 

Improving banks’ compliance with direct debit cancellation obligations

In October 2017, the CCMC reported that customers continue to be frustrated by bank staff providing incorrect information about cancellation of direct debits.

The CCMC found that more than half (54%) of bank staff tested gave customers incorrect responses to questions about cancellation of direct debits. It found that contact or call centre staff were more likely to offer compliant information than those in bank branches. The report was based on a small-scale ‘mystery shopper’ study, conducted in 2017, of 15 bank brands representing 12 banking groups.

The study follows previous research in 2008, in which 80% of staff responses regarding cancellation of direct debits were non-compliant, and 2011, when results improved slightly (66% non-compliance).

The CCMC will revise and intensify its compliance monitoring and reporting on banks’ direct debit obligations. The report makes seven recommendations to banks about cancelling direct debits including clear and simple guidance on bank websites, exploring ways to use online banking, and vastly improved communication and training of frontline bank staff.

Further information:

Report: Improving banks’ compliance with direct debit cancellation obligations (PDF, 580 KB, 18 pages)

Media Release: Fix direct debit problem now, compliance body tells banks

 

The CCMC’s focus areas for early 2018

The CCMC was due to conduct an Own Motion Inquiry examining banks’ compliance with their Internal Dispute Resolution (IDR) obligations in accordance with its 2017–20 Workplan.

The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill currently before parliament includes amendments to provide ASIC with powers to collect and publish IDR data. With the potential for policy changes should the Bill pass, the CCMC has cancelled its review of banks’ IDR processes at this time.

The CCMC is therefore scoping an alternative piece of work that examines banks’ compliance frameworks. Part of that work will include the collection of further information relating to the breaches reported during the 2016–17 period.

Through this Inquiry, the CCMC will seek to understand the causes of non-compliance with the Code and its impact on customers. A report with the CCMC’s findings is expected to be released in mid-2018.

In 2018, the CCMC also plans to:

  • review its approach to compliance investigations with a view to adopting a more risk based strategy towards Code breach allegations
  • continue to monitor banks’ compliance with the direct debit obligations, and
  • commence a follow-up inquiry into the financial difficulty obligations under the Code.

In addition, the CCMC is mindful of the major external developments that are likely to have an impact on its operations and those of Code subscribing banks in early 2018:

  • The release of the new Banking Code of Practice.
  • The Royal Commission into misconduct in the banking, superannuation and financial services industry.

The CCMC will continue to monitor these developments for any impact on its work.

 

Stakeholder engagement

During October 2017, CCMC staff met with each Code-subscribing banking group to discuss the outcomes of the 2016–17 Annual Compliance Statement program.

The CCMC also met regularly with the Australian Bankers’ Association (ABA) and the Australian Securities and Investments Commission (ASIC) to discuss its work program and ongoing developments regarding the new Code and the associated governance and compliance framework.

Among other things, CCMC staff and representatives also recently:

  • Attended the Annual Credit Law conference in Queensland.
  • Met with the Complaint Management & Advisory Unit of the Central Bank of Malaysia to discuss the CCMC’s monitoring program and how it contributes to the improvement of practices and service by banks.
  • Met with the CEO and the Director of Policy of the Australian Communications Consumer Action Network to discuss the Code and Code monitoring.
  • Met with a bank that is considering adopting the 2013 Code.
  • Provided training on Codes of Practice as part of the Financial and Consumer Rights Council’s (FCRC) CPD program at the FCRC Annual Conference.

 

CCMC Investigations – Key statistics

Between 1 September 2017 and 30 November 2017 the CCMC:

  • Received 13 new matters, which raised allegations of non-compliance with the Code related to:
    • key commitments (8 allegations)
    • financial difficulty (4)
    • chargebacks (2)
    • debt collection (1)
    • terms and conditions (1)
    • copies of documents (1)
    • internal dispute resolution(1), and
    • compliance with laws (1).

 

  • Finalised five matters, including:
    • three where the consumer withdrew their Code breach allegation.
    • two where there was no further contact from the person making the allegation.
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Media Release: Annual report highlights risk areas and improved banking practice

The Banking Code Compliance Monitoring Committee’s Annual Report, released today, outlines how the industry met the obligations of the Code of Banking Practice in 2016–17.

Banks self-reported 10,402 Code breaches in 2016–17, which was 30% more than last year, although the Committee acknowledged inconsistencies of collecting data and reporting breaches across the banks.

For the third consecutive year, the key risk area was provision of credit. The Committee described the 4,200 self-reported breaches of provision of credit obligations as a distinct concern.

“Of all the obligations in the Code, those reflecting the provision of credit are among the most important,” Committee Chair Christopher Doogan said. “Where banks fail to meet these standards, the impact for consumers can be far-reaching.”

The Committee’s inquiry into provision of credit, released in January 2017, identifies areas where banks can improve lending, particularly in relation to the introduction of ‘serviceability buffers’ and the assessment of credit card top ups.

The Annual Report also shows that banks are still not meeting their obligations to cancel direct debits at a customer’s request. ‘Mystery shopping’ research found that more than half (54%) of bank staff gave customers incorrect responses to questions about cancellation of direct debits.

Banks received 303,635 requests from customers seeking financial difficulty assistance (9% more than last year). Banks granted assistance in three-quarters (73%) of these cases but approval rates varied substantially between banks.

The Committee welcomes banks’ flexible approach in assessing financial difficulty and their reduced reliance on supporting documentation.

“This flexibility is especially important for vulnerable customers and those facing family or financial abuse, who may not be able to provide documentation,” the Committee said.

The Annual Report praised initiatives especially by the big four banks to improve Indigenous financial inclusion and literacy. The Committee commissioned a special report showcasing these initiatives, many of which exceeded the Code’s requirements.

Customers made 1.2 million complaints to banks (1% more than last year). Of these complaints, 92% were resolved within five days.

The Banking Code of Practice and the Banking Code Compliance Monitoring Committee itself were independently reviewed in 2016–17. These reviews gave the Committee an opportunity to acknowledge that much has been achieved and consider how its work can drive further improvement in banking practice. A revised Code and Committee Mandate are expected to be released later in 2017–18.

 

  • The Banking Code Compliance Monitoring Committee’s role is to assure the community that subscribing banks honour their obligations to their customers under the Code. The Committee monitors banks’ practices, identifies and reports on industry-wide problems and encourages continuous improvement in the sector.

 

www.ccmc.org.au/2016-2017-annual-report/

 

Information about the Banking Code Compliance Monitoring Committee is available on its website, www.ccmc.org.au/

 

Further information:

 

Sally Davis

Chief Executive Officer

Banking Code Compliance Monitoring Committee

sdavis@codecompliance.org.au

(03) 9613 7341

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Media Release: Fix direct debit problem now, compliance body tells banks

Customers continue to be frustrated by bank staff providing incorrect information about cancellation of direct debits, according to a report released today by the Banking Code Compliance Monitoring Committee.

The report found that more than half (54%) of bank staff tested gave customers incorrect responses to questions about cancellation of direct debits.

Under the Code of Banking Practice, banks cannot direct or suggest that their customers first approach the merchant to cancel direct debits.

Christopher Doogan AM, Independent Chairperson of the Banking Code Compliance Monitoring Committee, said the ability for people to cancel a direct debit via their bank is an important right that gives them control of their finances.

“The Code of Banking Practice recognises and safeguards this right by requiring banks to accept and promptly process a customer’s request to cancel a direct debit,” he said.

He said a bank’s failure to accept or process a cancellation request could be particularly difficult for vulnerable customers on lower or fixed incomes.

Such failures could lead to overdrawing an account, resulting in additional fees and charges to be imposed on customers by the bank and merchant; transactions being dishonoured, also resulting in extra fees; or loss of funds, which customers may have needed for other purposes.

The study follows previous research in 2008, in which 80% of staff responses regarding cancellation of direct debits were non-compliant, and 2011, when results improved slightly (66% non-compliance).

The current report was based on a small-scale ‘mystery shopper’ study, conducted in 2017, of 15 bank brands representing 12 banking groups. It found that contact or call centre staff were more likely to offer compliant information than those in bank branches.

“On many occasions the findings fell short of expectations,” Mr Doogan said.

“In our view, 54% non-compliance is still unacceptably high, particularly after years of attention on this industry-wide issue.”

“We now want to see a permanent fix. Having consulted with banks, we have made fresh recommendations. We will also revise and intensify our compliance monitoring and reporting on banks’ direct debit obligations.”

The report makes seven recommendations to banks about cancelling direct debits including clear and simple guidance on bank websites, exploring ways to use online banking, and vastly improved communication and training of frontline bank staff.

  • The Banking Code Compliance Monitoring Committee’s role is to assure the community that subscribing banks honour their obligations to their customers under the code. The Committee monitors banks’ practices, identifies and reports on industry-wide problems and encourages continuous improvement in the sector.

 

Report: Improving banks’ compliance with direct debit cancellation obligations   PDF (580 KB, 18 pages)

 

Information about the Banking Code Compliance Monitoring Committee is available on its website, www.ccmc.org.au.

 

Further information:

Sally Davis

Chief Executive Officer

Banking Code Compliance Monitoring Committee

sdavis@codecompliance.org.au

(03) 9613 7341

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