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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Banking Code Compliance Monitoring Committee Bulletin – October 2017

Welcome to Issue 24 of The Bulletin. In this edition:

 

CCMC Special Report – Access to banking services by Indigenous customers

In July 2017, the CCMC published its Special Report into Access to Banking Services by Indigenous Customers.

The CCMC brought together compliance and other data to share some of the work major Australian banks are doing, both individually and in partnership with the industry and other stakeholders, to increase Indigenous financial inclusion, financial literacy and cultural awareness.

The CCMC’s aim is to share these examples of good practice with all Code-subscribing banks so that the industry as a whole can continue to improve their service to Indigenous customers.

Follow-up Research – Direct Debits

The CCMC is currently finalising the report of its follow-up research into the direct debit obligations under clause 21 of the Code.

The CCMC conducted an Own Motion Inquiry into the obligations in 2009 and a follow-up in 2012 – on both occasions the CCMC stated that the findings fell short of expectations. The CCMC is aware that customers continue to experience issues when requesting a cancellation of a direct debit, including from submissions made to the Code Review in 2016.

The CCMC has found that despite some improvement non-compliance is still unacceptably high and will work with banks to ensure that compliance improves through a revised, ongoing compliance monitoring program.

The CCMC expects to publish its final report by the end of October 2017.

 

2016–17 Annual Compliance Statement program

In its Annual Compliance Statement (ACS) for 2016–17, the CCMC asked banks to provide a more detailed breakdown of Code compliance data to ensure it is able to fully explain compliance trends and emerging issues to stakeholders.

The CCMC is currently analysing banks’ responses and will be providing feedback to banks individually during October 2017.

The outcomes of the ACS program, including any emerging risks and identified good industry practice, will be published in the CCMC’s Annual Report for 2016–17 in November.

 

Investigations

Between 1 June 2017 and 31 August 2017 the CCMC:

  • Received six new matters, which raised allegations of non-compliance with the Code related to:
    • direct debits
    • financial difficulty
    • provision of credit
    • key commitments
    • statements of account, and
    • copies of documents.

  • Finalised six matters, including:
    • Two by Delegated Decision where banks agreed to self-report breaches of the direct debits and key commitments obligations under the Code.
    • Three where there was no further contact from the person making the allegation.
    • One where the consumer withdrew their Code breach allegation.

The CCMC is currently reviewing its approach to compliance investigations with a view to adopting a more risk based approach to Code breach allegations. Further information is available in the CCMC’s 2017–20 Workplan.

 

Stakeholder engagement

At each of its last three meetings, the CCMC has met with the Australian Bankers’ Association (ABA) to discuss developments regarding the Code review, in particular regarding the governance and compliance framework for the new Code.

CCMC staff have had additional meetings with the ABA and bank representatives to discuss matters relayed to the Code review and the CCMC’s ongoing monitoring work.

CCMC staff also recently met with:

  • the staff of a Customer Advocate of a major bank
  • the Consumer Action Law Centre in Melbourne, and
  • the Australian Securities and Investments Commission (ASIC) for a quarterly liaison meeting.

In September 2017 CCMC Chair, Chris Doogan, met with the Chairs of the equivalent compliance committees under the General Insurance Code of Practice, the Customer Owned Banking Code of Practice and the Insurance Brokers Code of Practice.

 

The CCMC’s Investigations Manager

The CCMC has welcomed a new Investigations Manager to the team, Rene van de Rijdt, who joined on 24 September 2017.

The CCMC said farewell to its previous Investigations Manager, Ralph Haller-Trost, on 8 August 2017. The Committee is grateful to Ralph for his service and wishes him well for the future.

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