New rule book for banks goes live tomorrow

Australia’s banks will comply
with a strong new code of practice that significantly increases and enshrines
customer protections and introduces tough new penalties for breaches from
tomorrow.

The
ASIC-approved Banking Code of Practice represents the most significant increase
to customer protections under a code in the industry’s history.

From 1 July,
under the new Banking Code of Practice, banks will no longer:

  • Offer unsolicited credit card limit increases
  • Charge commissions on Lenders Mortgage Insurance
  • Sell insurance with credit cards and personal
    loans at the point of sale.

Under the
code banks must:

  • Offer low-fee or no-fee accounts to low income
    customers
  • Have a 3 day grace period on all guarantees to
    give guarantors enough time to make sure it’s the right option for them
  • Actively promote low-fee or no-fee accounts to
    low income customers
  • Provide reminders when introductory offers on
    credit cards end
  • Simpler and fairer loan contracts for small
    business using plain English that avoids legal jargon
  • Provide customers a list of direct debits and
    recurring payments to make it easier to switch banks.

Australian Banking Association
Chief Executive Officer Anna Bligh said customers can expect to see a change to
banking products and services immediately.

“We’ve completely rewritten the
rule book for Australia’s banks. The Banking Code of Practice has strong
protections for customers, serious consequences for breaches and strong
independent enforcement,” Ms Bligh said.

“Banks understand they need to
change their behaviour and this new rule book represents an important step in
earning back the trust of the Australian public.

“The new Code will form part of
every customer’s relationship with their bank and will be strongly enforced
both by an independent body, the Banking Code Compliance Committee, and the
Australian Financial Complaints Authority.

“Whether it’s through your
credit card, home loan, small business loan or just day to day banking,
Australian customers will see tangible benefits from this new Code,” she said

Financial Counselling Australia
Chief Executive Officer Fiona Guthrie said the new Code was a major step up in
the protections for customers, particularly the most vulnerable, and was an
important milestone in restoring community trust in Australia’s banks.

“Codes like
this really can make a difference because they go beyond black letter law and
instead reflect the standards that an industry voluntarily commits to,” Ms
Guthrie said.

“The
banking industry released its first version of the banking code over 25 years
ago and it is really pleasing to see that each version – and this is the fourth
major revision – contains advances in consumer protection.

“Financial
counsellors in particular welcome provisions around family violence, stronger
protections for guarantors, better promotion of free or low fee accounts and
more proactive approaches to people experiencing financial hardship,” she
said.

Banks have
trained more than 130,000 staff on the new requirements in the code so it can
begin operating from tomorrow. Information about the Code has been translated
into Mandarin (simplified Chinese), Arabic, Vietnamese, Tagalog/Filipino,
Hindi, Spanish and Punjabi.

The Financial Services Royal
Commission asked for further changes to the Code which will be implemented by
March 2020.

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