Credit Australia

By: Tristan Dunston

Australia's voluntary banking code, designed to protect consumers, is up for review amid concerns bank customers facing financial trouble are not being helped.

The Code of Banking Practice, which has been adopted by most of Australia's banks, provides a framework of best practice for banks when dealing with individuals and small businesses. The code is legally binding on signatory banks.

A leading financial watchdog, The Banking and Financial Services Ombudsman, has said some banks need to improve the way they deal with customers facing financial hardship.

Among its list of concerns were reported cases of bank staff failing to respond to customers facing financial hardship, and failing to provide customers with the necessary information to get help. In some cases the customer had to use the words 'financial difficulty' and 'hardship' before bank staff responded.

The BFSO also felt some banks were being unhelpful by failing to give customers adequate time to return the required paperwork, and threatening them with debt collectors if they failed to return documentation on time.

A number of bank customers have been required to dip into their superannuation pots before an application for help has been accepted according to BFSO.

A number of banks have also failed to help customers with small business or investment loans, which they are required to do so under clause 25.2 of the code.

An example cited by the BFSO in its quarterly bulletin, described an incident where a bank customer renegotiating a loan found his bank had listed a default against his account before negotiations for assistance were over. It also told of how he had been repeatedly contacted by the bank's collection department.

Another customer was asked to provide medical evidence to back up a claim of financial hardship caused by an illness.

The BFOS has advised a number of banks, it considered to be failing to comply with the banking code's provisions for consumers in financial difficulty, to update their procedures to ensure genuine consideration is given to customer's individual circumstances. They also advised banks to provide written reasons to customers for declining requests for help with financial problems, and to train staff to recognise when a customer is experiencing financial difficulties.

Another financial organisation with jurisdiction over the Code of Banking Practice has said it considers failings not to be with the code itself. The Code Compliance Monitoring Committee (CCMC) takes the view the banking code has set a high benchmark for banks, which they are working towards.

"In the CCMC's view, the code has, overall, worked well to encourage subscribing banks to develop and implement policies and procedures to improve their handling of customers in financial difficulty," it said.

The CCMC echoed the experience of the BFOS, stating it was aware some bank customers haven't been informed of hardship provisions.

The review of the Code of Banking Practice should be completed by the 31st of May 2008. Among the issues it will examine are: how the code has operated since its last review; what barriers, if any, exist to stop banks signing up; and how any difficulties banks or customers face in interpretation or comprehension of the code can be tackled.

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