The CCMC Bulletin 22 – March 2017

Welcome to Issue 22 of The Bulletin. In this edition:

 

Reviews of the CCMC and the Code of Banking Practice

Mr Phil Khoury, of Cameron Ralph Khoury, published the reports of the reviews of the CCMC and the Code on 20 February 2017.

The Australian Bankers’ Association (ABA) released its response to the Code review on 28 March 2017. The banking industry has accepted 61 of the 99 recommendations in full. There are 29 recommendations that it supports in principle or in part, and nine where it either needs more time to consider, or are not in a position to adopt.

The Code review made 20 recommendations directly related to the CCMC and its operations. The industry supported 16 in full and 4 in principle or in part.

In the ABA’s Media Release, its Executive Director – Retail Policy, Ms Diane Tate said:

“While the Code has legal effect through subscribing banks’ terms and conditions, we have heard we need to do more to give customers confidence in the Code. That’s why the ABA will work with the Australian Securities and Investments Commission on approving the Code, and on giving greater powers to the Code Compliance Monitoring Committee.”

The ABA response states that:

“The industry will work with the [CCMC] on strengthening the governance of the Code. The CCMC mandate will be redrafted to make it clearer, ensuring there is greater awareness of, and understanding of, the CCMC and its role. The CCMC will have greater powers to monitor compliance and investigate breaches. The role of the CCMC will also need to be examined as part of working with the Australian Securities and Investments Commission (ASIC) on approving the new Code.”

The CCMC is currently developing its Work Plan and establishing budget requirements for 2017–18 and beyond. This Work Plan will demonstrate:

  • how the CCMC plans to implement the recommendations made in the CCMC review, and
  • progress towards a monitoring framework envisaged by the Code review, and which is now largely supported by the ABA and banking industry.The CCMC’s Work Plan will be published by 1 July 2017.

The Code review is part of the ABA measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks. The CCMC was required to arrange a review of its activities, coinciding with the review of the Code, to meet its Mandate obligations.

 

The CCMC’s Provision of credit Own Motion Inquiry

The CCMC published its Provision of credit Own Motion Inquiry Report in January 2017.

The Inquiry focused on unsecured credit and the CCMC found that banks generally have robust, and often complex, processes in place to assess applications for unsecured credit in compliance with the Code.

However, the CCMC did identify potential issues, including matters related to the collection and verification of current customer information.

Information provided to the Inquiry suggests that the majority of applications for unsecured credit are processed using automated systems. The CCMC has stated that up-to-date information regarding a customer’s financial position should be incorporated into the credit assessment, whether processed manually or by an automated system. The CCMC considers that having a full and current picture of a customer’s financial circumstances is fundamental to complying with the Code obligations.

The CCMC has made nine recommendations in its Report, which:

  • support Code compliance, and
  • can assist banks to continuously work towards improving standards of practice and service in the banking industry as anticipated by clause 3.1(a) of the Code.

Annual Forum

The CCMC held its Annual Forum for banks on 2 and 3 March 2017 at Suncorp Bank’s offices in Brisbane.

The forum provides an opportunity for discussion between the banks and the CCMC on current and future Code compliance monitoring issues.

At this year’s forum:

  • Phil Khoury presented on the reviews of the CCMC and Code.
  • Diane Tate, ABA Executive Director – Retail Policy, provided attendees with updates on current regulatory inquiries and the ABA’s current program of initiatives (which includes the Code review).
  • The CCMC held:
    • a workshop on banks’ approach to Code breach reporting to try to achieve consistency and common understanding across the industry, and
    • a session discussing issues around accessibility to banking, with the assistance of Paul Holmes from Queensland Legal Aid and Sharona Torrens from the Commonwealth Bank’s Indigenous Affairs team.

Remote Indigenous communities

The CCMC is currently developing a report on banks’ approaches to dealing with remote Indigenous communities. The report will highlight broad banking issues faced by these communities and share good practice in services provided by Code-subscribing banks.

We expect to publish the report by June 2017.

 

CCMC Investigations – key statistics

Between 1 December 2016 and 28 February 2017 the CCMC:

  • Received nine new matters, which raised allegations of non-compliance with the Code related to:
      • financial difficulty
      • key commitments
      • internal dispute resolution, and
      • guarantees.

 

  • Finalised eight matters, including:
      • one by Delegated Decision where the CCMC adopted a decision made by another forum that there had not been a breach of the Code
      • one regarding an organisation that is not a Code-subscriber
      • one where there was no further contact from the person making the allegation, and
      • five where the consumer withdrew their Code breach allegation.

Further information about delegated decisions can be found in Guidance Notes 2, 3, 5 and 6.

 

2016–17 Annual Compliance Statement program

The CCMC is currently developing the 2016–17 Annual Compliance Statement (ACS) program. In light of the findings from the Code and CCMC reviews, this year the CCMC will be asking banks to provide a more detailed breakdown of Code compliance data and exploring the trends and emerging issues behind this data to fully understand:

  • the level of banks’ compliance with their obligations under the Code
  • areas of emerging Code compliance risk, and
  • initiatives banks have taken to improve their compliance with the Code.

The CCMC will consult with banks on the development of the ACS in April 2017. The outcomes, including any emerging risks and identified good industry practice, will be discussed with key stakeholders directly and published in the CCMC’s Annual Report for 2016–17.

 

Stakeholder engagement

Engagement with stakeholders is important for the CCMC to help inform its compliance monitoring program and raise awareness of its activities.

In addition to its Annual Forum, CCMC Committee members and staff have:

  • Met regularly with banks and the ABA to discuss Code compliance issues, remote Indigenous communities and the Code and CCMC reviews.
  • Consulted with Phil Khoury on matters related to the reviews of the CCMC and Code.
  • Attended the Financial Counsellors’ Association of Queensland conference in Port Douglas.
  • Presented at the Responsible Lending and Borrowing Summit in Sydney.
  • Attended the ASIC Annual Forum for 2017 and met with ASIC for its quarterly liaison meeting.

 

The CCMC’s Compliance Manager

The CCMC will be saying farewell to its Compliance Manager, Robert McGregor, on 7 April 2017. Robert has been with the CCMC since 2011 and we are grateful to Robert for his diligence in managing the Committee’s work and liaising with Code-subscribers, while also providing valuable guidance and support to all stakeholders.

We will announce his replacement in due course.

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CCMC welcomes review of its work

The Code Compliance Monitoring Committee (CCMC) has welcomed the findings of a review of its work monitoring compliance with the Code of Banking Practice. Thirteen banking groups – covering 95% of the Australian retail banking market – subscribe to the voluntary Code, which sets standards of good practice in the banking industry. The CCMC is the Code’s independent monitoring body.

The review report, published today, acknowledged the CCMC’s achievements encouraging good practice in the banking sector. The review found that the CCMC’s monitoring, investigations, reporting and stakeholder engagement is being conducted professionally and to a high standard.

The review made six recommendations for the CCMC’s future operations. In a parallel review of the Code itself, reviewer Phil Khoury of Cameron Ralph Navigator recommended that the CCMC funding be increased and that changes be made to its role and powers as set out in its Mandate.

The recommendations would see, amongst other things, the CCMC shift its emphasis away from investigating individual complaints in favour of an expanded role monitoring overall sector practice and reporting effectively and transparently on this monitoring work.

CCMC Independent Chair, Professor Christopher Doogan AM, said that the Committee supports the review’s recommendations, a number of which align with improvements the CCMC had identified in its own internal review.

‘We will be considering Mr Khoury’s recommendations carefully and, as appropriate, incorporating them into our three-year rolling work plan,’ Professor Doogan said. ‘The CCMC will also be working closely with the Australian Bankers’ Association, in relation to its response to the Code and CCMC review recommendations.’

 

The review reports are available via the links below:


Review of the CCMC’s activities

Review of the Code of Banking Practice

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Provision of credit Inquiry

The CCMC is pleased to release the report of its Own Motion Inquiry into Code-subscribing banks’ compliance with the provision of credit obligations under clause 27 of the Code of Banking Practice.

The Inquiry focused on unsecured credit and the CCMC found that banks generally have robust, and often complex, processes in place to assess applications for unsecured credit in compliance with the Code.

However, the CCMC did identify potential issues, including matters related to the collection and verification of current customer information.

Information provided to the Inquiry suggests that the majority of applications for unsecured credit are processed using automated systems. The CCMC has stated that up-to-date information regarding a customer’s financial position should be incorporated into the credit assessment, whether processed manually or by an automated system. The CCMC considers that having a full and current picture of a customer’s financial circumstances is fundamental to complying with the Code obligations.

The CCMC has made nine recommendations in its Report, which:

  • support Code compliance, and
  • can assist banks to continuously work towards improving standards of practice and service in the banking industry as anticipated by clause 3.1(a) of the Code.

To view the CCMC’s findings and recommendations in full, please open the report via the link below:

 

CCMC Provision of credit Own Motion Inquiry Report (PDF, 803 KB)

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The CCMC Bulletin 21 – December 2016

Welcome to Issue 21 of The Bulletin.

Reviews of the CCMC and the Code of Banking Practice

Reviews of the CCMC and the Code commenced on 6 July 2016 and are being conducted by an Independent Reviewer, Mr Phil Khoury. The Code review is part of the Australian Bankers’ Association’s (ABA) measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks.

Mr Khoury, of Cameronralph Navigator, published a summary of issues on the review websites on 14 November 2016.

On 12 December 2016, Mr Khoury, announced that the reports of these reviews will be delayed, stating that:

“The wide range of matters raised with me, the complexity of the issues and the level of detail required to adequately deal with them have proved to be greater than originally estimated – both for the Reviews of the Code itself and of the Code Compliance Monitoring Committee.”

The CCMC is looking forward to receiving the reports by the end of January 2017.

Please consult www.ccmcreview.cameronralph.com.au for any updates relating to the review of the CCMC.

 

Banking Practice in Australia 2015–16 – the CCMC’s Annual Report

On 12 December 2016, the CCMC published Banking Practice in Australia 2015–16. This is the CCMC’s Annual Report and provides details of its work in monitoring compliance with the Code of Banking Practice for the period 1 July 2015 to 30 June 2016.

An overview of the Annual Report is available on our dedicated microsite, where you can also download a copy of the full Report.

Information about banks’ compliance with the Code prior to 2015–16 can be found in the CCMC’s previous Annual Reports.

 

The CCMC’s Provision of credit Own Motion Inquiry

The CCMC is currently finalising the report of its own motion inquiry into the provision of credit obligations under the Code. The report outlines the CCMC’s findings and recommendations and it is anticipated it will be published in early 2017.

More information about previous CCMC Inquiries is available on the CCMC website.

 

Annual Forum

The CCMC is currently planning its annual forum for banks, which will take place on 2/3 March 2017 at Suncorp Bank’s offices in Brisbane.

 

Investigations

Key statistics

Between 1 September 2016 and 30 November 2016 the CCMC:

  • Received 9 new matters, which raised 14 allegations of non-compliance with the Code, of which:
      • three related to financial difficulty
      • three – debt collection
      • three – key commitments.
      • two – provision of credit, and
      • one for each of the direct debits, closure of accounts in credit and monitoring and sanctions obligations
  • Finalised 16 matters (seven by delegated decision), including:
    • one where we considered that another forum would be more appropriate to consider the matter
    • two where the allegation related to the same events and facts as a previous matter and there was no new information
    • one where the CCMC found there had not been a breach of the Code
    • two which were outside of the CCMC’s jurisdiction due to the ‘12 month rule’
    • one where the CCMC adopted a decision made by another forum that there had not been a breach of the code
    • two regarding organisations that are not Code-subscribers
    • four where there was no further contact from the person making the allegation, and
    • three where the consumer withdrew their Code breach allegation.

Further information about delegated decisions can be found in Guidance Notes 2, 3, 5 and 6.

 

Investigation Case study – Verification of financial circumstances

Henry had his credit card with his bank for 10 years. He usually made his payments on time and never spent beyond his credit limit.

However, around Christmas in 2014, Henry incurred some unforeseen expenses. As a result, his payments between January and June 2015 were irregular and below the minimum monthly requirement. During this six-month period, he also sometimes spent over his credit limit.

In the following months between July and December, Henry was able to get his budget under control again and meet his minimum monthly repayments. Around Christmas 2015, he received a letter from the bank inviting him to increase the limit on his credit card. Henry accepted the invitation by signing a form and sending it back, and the credit was approved shortly after.

Henry noticed that the bank did not ask for any information before approving the additional credit. He was only required to tick a few boxes on the credit invitation to confirm that he could afford the additional credit and that his financial circumstances had not changed. Henry also remembered that the last time he provided any additional information to verify his financial situation was when he obtained the original credit card 10 years ago. The bank confirmed that it assessed Henry’s ability to repay the additional credit by using its automated calculations and behavioural scoring.

Henry alleged that his bank had failed to comply with the Code when it did not conduct appropriate checks before providing him with additional credit on his credit card.

In these circumstances, the CCMC considered that the irregular account activity over the six months between January and June should have prompted a diligent and prudent banker to make further inquiries about a customer’s financial circumstances and take additional steps to verify the customer’s information.

The bank did not provide information to show that it took steps beyond its automated systems and calculations to verify Henry’s financial situation and the declaration he ticked on the credit invitation. As a result, the CCMC found the bank had breached the provision of credit obligations under the Code.

 

Stakeholder engagement

CCMC Committee members and staff have continued to engage with a range of stakeholders to raise awareness of the CCMC’s activities and to help inform its compliance monitoring program.

During October 2016, we met with each Code-subscribing banking group to discuss the outcomes of the Annual Compliance Statement and the CCMC’s compliance monitoring program. The CCMC has also consulted with both the banks and the ABA on matters related to the own motion inquiry and reviews of the CCMC and Code in recent months.

As part of the CCMC’s engagement with consumer advocates, CCMC staff:

  • Attended and presented at the Money Workers Association of the Northern Territory (MWANT) Conference in Darwin. As part of this conference, MWANT arranged a trip to a remote Indigenous community on Tiwi Islands.
  • Met with representatives of Queensland Legal Aid, the Financial and Consumer Rights Council and Financial Counselling Australia.
  • Engaged with the Consumer Action Law Centre and ‘WEstjustice’ (a merger of Footscray Community Legal Centre, Western Suburbs Legal Service and Wyndham Legal Service) in Melbourne.

In October 2016, the CCMC’s representative of individual and small business customers, Gordon Renouf, met with the equivalent members of the 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 also met with:

  • Phil Khoury on several occasions to discuss the reviews of the CCMC and the Code, and
  • the Australian Securities and Investments Commission for quarterly liaison meetings and to discuss the provision of credit own motion inquiry.
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