The Code team 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.
The four committees we support are the:
- Code Compliance and Monitoring Committee (CCMC)
- Customer Owned Banking Code Compliance Committee (COBCCC)
- General Insurance Code Governance Committee (GICGC)
- Insurance Brokers Code Compliance Committee (IBCCC)
Review of the Code of Banking Practice and the CCMC
Independent reviews of the Code of Banking Practice and the CCMC are currently being conducted by Phil Khoury of Cameronralph Navigator.
In total, there were 25 submissions to the reviews, which raised over 100 issues for consideration. In addition, the reviewer has held a number of meetings with interested stakeholders.
The wide range of matters raised with the reviewer, the complexity of the issues and the level of detail required to adequately deal with them have proved to be greater than originally anticipated. Both Reports are due to be provided to the Australian Bankers Association and the CCMC at the end of January 2017.
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 (the Banking Code) for the period 1 July 2015 to 30 June 2016.
The Report highlights that, in 2015–16, banks:
- Self-reported 7,987 breaches, of which 2,328 self-reported breaches related to the provision of credit obligations
- Identified 21 significant breaches of the Banking Code
- Dealt with 1.19 million complaints, 92% of which were resolved in under five days
- Received 279,000 requests for assistance from customers experiencing financial difficulty, with 70% of requests granted some form of assistance.
The report also comments on how banks comply with specific clauses of the Code of Banking Practice and the CCMC’s work investigating allegations of breaches of that Code.
An overview of the Annual Report is available on the dedicated microsite www.ccmc.org.au/2016-annual-report/, where you can also download a copy of the full report.
Customer owned banking institutions’ engagement with community
The COBCCC is finalising its Own Motion Inquiry into Key Promise 9 of the Customer Owned Banking Code. This key promise reflects the customer owned banking sector's commitment to serving both its communities and its customers.
The inquiry provides an understanding of how institutions manage this obligation, thereby benchmarking current industry practice and making recommendations for good industry practice based on the information provided.
In particular, it addresses the following issues:
- how institutions define community
- how institutions engage with community, in particular the use of social media
- how institutions measure community engagement.
Key findings included:
- The customer owned banking sector is community focused, reflecting its history and the culture and frameworks that underpin its dealing with customers. Many institutions reported that they engage with over 100 different community groups on an annual and ongoing basis.Over 50% of institutions engage with communities on a weekly or monthly basis.
- 73% of all institutions spent more than $20,000 on community engagement activities, with 19 of the largest institutions spending over $500,000.
- Philanthropic or voluntary community engagement, such as engagement which does not provide direct benefit to the institution, is wide-spread irrespective of the size of the institution.
- Community engagement brings benefits to both communities and institutions – increasing community trust and cohesion.
A copy of the Own Motion Inquiry Report will be publicly available shortly.
Customer Owned Banking Code Compliance Committee Annual Report 2015-16
The COBCCC published its Annual Report for 2015-16 in December 2016.
A copy of the report can be downloaded here.
The Year at a Glance section on page 5 of the Report sets out the Committee’s key achievements for the reporting year in monitoring the activities of those mutual banks, credit unions and mutual building societies (Customer Owned Banking Institutions) that voluntarily subscribe to the Customer Owned Banking Code.
The Report also outlines the Committee’s work to influence improvements in the standards of practice and service of the Australian Customer Owned Banking Industry and how the Committee aims to build on that work in the future.
The Committee’s involvement in consulting with a range of stakeholders to provide guidance and influence positive breach and complaints reporting was wide ranging. This included participation in Customer Owned Banking Association (COBA)'s compliance forums. The Committee believes that the increase in the number of self-reported Code breaches reflects that institutions are embracing a positive breach reporting framework.
While the Committee acknowledges that Customer Owned Banking Code subscribers faced many challenges as regulation and compliance obligations evolved, it encourages Code subscribers to continue to review and strengthen their compliance processes, in particular in areas of major non-compliance, such as privacy obligations and delivering high customer service.
Key findings included:
- 73 customer owned banking institutions subscribed to the Code (down from 80 due to mergers and acquisitions)
- 68% of institutions self-reported customer owned banking Code breaches (up by 7%)
- 818 customer owned banking Code breaches were self-reported by institutions (up by 27%)
- 11 significant customer owned banking Code breaches were self-reported by 7 Code subscribers (in comparison to 5 significant customer owned banking Code breaches self-reported by 5 Code subscribers in the previous year)
- 30% of self-reported customer owned banking Code breaches related to privacy obligations (in comparison to 20% in the previous year)
- 14,100 self-reported complaints handled by their internal dispute resolution process (down by 16%)
- 93% of complaints were resolved within 21 days or less
- 31% of complaints related to service (up from 18%), and
- 20% of complaints related to charges (down from 29%).
Assessment of Insurance Brokers’ internal dispute resolution processes
The IBCCC is finalising its Own Motion Inquiry into insurance brokers’ compliance with their obligations under Service Standard 10 of the Insurance Brokers Code of Practice. This service standard demonstrates the insurance brokers sector’s commitment to have internal complaints and disputes handling processes in place that meet the Code Complaints and Dispute process standards.
The Inquiry consisted of a 51-question online questionnaire which was released to all 323 Code subscribers. Insurance brokers were asked to rate their organisation’s internal dispute resolution procedures and how these procedures are embedded in their organisation’s overall compliance framework.
The outcome of the Inquiry is expected to be published on the FOS website in February 2017.
General Insurance Industry Data Report 2015–16 and Own Motion Inquiry into claims investigations and outsourced services
We are currently working on two reports for the General Insurance Code Governance Committee (GICGC). The first of these reports covers GI Code subscribers’ general insurance and workforce data, and compliance initiatives and outcomes for 2015–16. The second report will deal with the outcomes of the GICGC’s first own motion inquiry, which has examined the way in which participating GI Code subscribers investigate claims and their arrangements for outsourced services. The GICGC expects to publish both reports in March 2017.
Increasing Code awareness among stakeholders
In November 2016 the Code Team delivered Code awareness training to the Consumer Action Law Centre in Melbourne and to The Western Community Legal Centre in Werribee. These training sessions also served to launch the Code Team’s new e-learning module for external stakeholders. This module supplements our existing ‘in person’ engagement program and increases accessibility to Code training to a state and national level.
As part of our ongoing commitment to community engagement we will continue to identify opportunities in 2017 where we can add value by providing in person and remote Code awareness training.
Outcomes from Code breach investigations
General Insurance Code of Practice – Determination by the General Insurance Code Governance Committee (GICGC)
This matter considered the ‘financial difficulty’ obligations in the General Insurance Code of Practice (GI Code). These obligations protect consumers where a Code Subscriber is seeking to recover a debt in connection with a general insurance product, for example when an insurer pursues an uninsured driver for damage to a motor vehicle insured by the Code Subscriber.
In this case, the Consumer was an uninsured driver. She was involved in a car accident that damaged a vehicle insured by the Code Subscriber. The Code Subscriber wrote to the Consumer to recover its costs of repairing the insured car.
The Consumer did not dispute liability for the debt but asked the Code Subscriber to delay any further recovery action as she was experiencing financial hardship.
The GICGC approved of the Code Subscriber’s decision to place its recovery action on hold for 12 months. However, the Committee was concerned that the Code Subscriber then referred the matter to its debt recovery agent for collection without first considering the financial hardship options set out in the Code. These options include extending the due date for payment, paying in instalments or a reduced lump sum, postponing payments or a combination of these approaches. The GICGC found that the Code Subscriber’s actions had breached the GI Code.
The GICGC also reviewed the Code Subscriber’s processes to identify if the issue was likely to arise again. The Committee was satisfied that changes made by the Code Subscriber since the events had occurred, ensured that its processes now aligned with the GI Code and reduced the likelihood of a similar breach in future.