Banking code exposed

A CHOICE shadow shop found that adherence to the revised Banking Code is spotty at best.
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01 .Poor compliance

Banking code

You could be forgiven for not knowing that banks have a voluntary code of conduct. And many of those that have signed on have a poor compliance record. A CHOICE shadow shop has found three-quarters of the 16 banks surveyed had trouble following the code’s direction to promptly process a direct debit cancellation at the customer’s request. 

Three banks told our shadow shop callers they couldn’t help, five gave at least one response that wasn’t best practice and another four charged a $10-15 fee. While charging a fee is not strictly breaking the code, it will discourage consumers to make use of the code’s provision. Only four banks fully followed the code when talking to our two callers. 

A revised Code of Banking Practice, which further strengthens consumer protections, comes into effect on 1 February 2014. But our shadow shop shows it’s doubtful that it will be as effective as it could be. And not all banks have signed up to it. For example, Bank of China, Macquarie and Arab Bank are only signatories to the very basic 1993 code. ME Bank has not signed it, nor the Mutual Banking Code. 

Time to act 

In 2008, the Code Compliance Monitoring Committee (CCMC), which shares the office with the Financial Ombudsman Service (FOS), conducted a shadow shop of all the banks that subscribed to the code, enquiring about the cancellation of a direct debit. Only 29% of calls complied with the code. 

Repeated exercises in 2010 and 2011 didn’t yield much better results: only 33% of calls passed. CCMC advised the banks to provide training and information to staff. In the official review of the 2004 Code of Banking Practice that led to the new code, it was also suggested that staff be trained in this area. Unfortunately these recommendations weren’t included in the new code by the Australian Bankers Association (ABA), which cited a general training requirement already included in the code. 

But ABA CEO Stephen Münchenberg concedes more work needs to be done. “Bank staff need more information about the processes involved to cancel a direct debit,” he says, adding that they’re developing information for both consumers and staff. In CHOICE’s view, the bank industry’s inability to address breaches of a code that’s been in place for almost 10 years in a timely manner indicates self-regulation isn’t working.


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