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Issue 24 - January 2016

An update from the Code Compliance and Monitoring Team (FOS Code)

 

FOS Code is a separately operated and funded business unit of the Financial Ombudsman Service (FOS) Australia. We support independent Committees to monitor compliance with codes of practice in the Australian financial services industry to achieve service standards people can trust. Find out more about who we are and what we do.


Customer owned banking – Code commitment remains strong
Customer owned banking institutions remain strongly committed to their industry’s code of practice according to the Customer Owned Banking Code Compliance Committee’s latest annual report, published last month.

The Customer Owned Banking Code of Practice establishes a good practice benchmark for industry and is a clear statement of the commitment mutual banks, credit unions and mutual building societies have made to their customers.

Eighty institutions voluntarily subscribed to the Code in 2014–15, with all taking part in the Committee’s compliance program. Collectively, they reported 646 breaches of the Code, 154 (19%) less than in 2013–14. Most breaches related to privacy and security obligations, with recent revisions to the Privacy Act appearing to prompt more proactive reporting in this area.

With fewer breaches of the Code, the Committee expected a corresponding reduction in customer complaints, yet code subscribers reported 16,709 complaints, up 35% on 2013–14. The Committee’s verification program, which tests and validates code subscribers’ compliance programs, suggests inconsistencies and inaccuracies in complaints and breach reporting may explain the disparity in results.

“Given these findings – and the fact that more than a third of participants reported no Code breaches – we will redouble our efforts to work with the Customer Owned Banking Association (COBA) and code subscribers to achieve consistent reporting that reflects a true position of industry performance,” said Dr Sue-Anne Wallace, the Committee’s Independent Chairperson.

Throughout 2014–15, the Committee consulted with numerous stakeholders to influence positive changes in industry behaviour and share its experience of Code compliance, meeting with the Customer Owned Banking Association (COBA), the Australian Securities and Investments Commission, the Credit and Investments Ombudsman, code subscribers and consumer and small business representatives. On behalf of the Committee, FOS Code also provided training in codes of practice to more than 200 financial counsellors.

“Over the coming year, the Committee will make our Code monitoring and investigation services even more accessible as we enhance our website, develop a user-friendly online feedback form for consumers and their representatives, and strengthen our Code awareness program for consumer advocates and community lawyers,” Dr Sue-Anne Wallace said.

Download the Customer Owned Banking Code Compliance Committee’s Annual Report 2014–15

 

Creating a better banking experience for customers – CCMC Annual Report
The Code Compliance Monitoring Committee (CCMC) has made good progress in supporting banks to comply with their obligations under the Code of Banking Practice, according to its annual report published last month.

The CCMC independently monitors compliance with the Code of Banking Practice to improve standards of practice and service in the Australian banking industry. It aims to be a trusted and valued partner, assisting banks to comply with their Code obligations – ultimately to create a better banking experience for customers.

Thirteen banking groups, representing approximately 95% of the Australian retail banking market, subscribe to the Code.

The CCMC’s Annual Report shows that during 2014–15, code-subscribing banks:

  • self-reported 6,558 breaches of the Code to the CCMC, an increase of 14% compared to 2013–14
  • dealt with 1.2 million complaints, resolving 93% within five days
  • received 296,000 requests for financial difficulty assistance, granting assistance in 70% of cases.

The Code’s provisions regarding privacy and confidentiality, provision of credit, and compliance with laws attracted the most breaches.

Banks also reported a dramatic increase in significant breaches of the Code, up 100% on 2013–14. Mr Christopher Doogan, Independent Chair of the CCMC, said this increase suggests banks are now better able to identify and resolve issues to maintain high standards.

“As a large proportion of significant breaches related to systems issues, the CCMC encourages banks to continue to diligently test, operate and monitor their IT systems so that they can reduce any impact on customers,” Mr Doogan said.

Download the Code Compliance Monitoring Committee’s Annual Report 2014–15

 

­­­­Service standards improve for customers in financial difficulty
Banks have improved service standards for customers in financial difficulty but more can be done, according to the Code Compliance Monitoring Committee’s latest inquiry report, published in November.

The Code Compliance Monitoring Committee (CCMC) instigated the inquiry as it continues to receive allegations from consumers that banks have breached their financial difficulty obligations under the Code of Banking Practice. Banks also continue to self-report breaches of these Code provisions.

The CCMC’s inquiry found that all code-subscribing banks have procedures in place to try to help customers overcome their financial difficulties with credit facilities they have with their bank, as required by the Code. Banks also confirmed it is their policy to engage actively and co-operatively with customers to ensure effective outcomes.

Overall, consumer advocates reported that banks have improved the way they deal with customers experiencing financial difficulty, but issues still occur, particularly where a customer’s situation is unique or requires longer-term solutions.

In light of these findings, the CCMC considers that banks could increase their level of compliance with the Code by:

  • ensuring that their processes and procedures are applied consistently for all customers, including those who are not represented by a consumer advocate
  • ensuring processes are appropriate for customers with particular issues, for example those related to poor mental health or family violence
  • considering whether their procedures are adequate to avoid making unnecessary or inappropriate requests for information that may be difficult or time consuming for customers to fulfil
  • continuing to identify areas where further improvements can be made by analysing data about customers who request assistance more than once and complaints related to financial difficulty assistance.

Download the Code Compliance Monitoring Committee’s Financial Difficulty Own Motion Inquiry Report

 

Upcoming inquiries into Code compliance
On behalf of Code Compliance Committees, FOS Code carries out targeted reviews of financial service providers’ compliance with their industry’s code of practice. These ‘Own Motion Inquiries’ allow us to share our experience of Code compliance and encourage good practice when we have identified areas for improvement.

Four Own Motion Inquiries are planned for 2016, which will examine:

  • insurance brokers’ internal dispute resolution processes to assess their compliance with the relevant standards under the Insurance Brokers Code of Practice
  • customer owned banking institutions’ compliance with their Code obligations to effectively engage with the wider community
  • banks’ compliance with their provision of credit obligations under the Code of Banking Practice
  • Code compliance by service suppliers with the General Insurance Code of Practice.
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