The end of unethical practices?
Practices that deliberately push vulnerable customers into credit card debt will be coming to an end, claim The Australian Bankers’ Association (ABA). The news comes after efforts by banks to revamp code in the face of scandals.
Under a new and improved code, which is in the process of being reviewed by the Australian Securities and Investments Commission (ASIC), it means banks will be unable to send customers unsolicited offers to increase their spending limit.
Furthermore, customers will now be able to cancel credit cards online, as well as paying interest-only on their outstanding balance instead of the full amount of any single purchase.
The ABA says the restructured code will ensure “a more prominent commitment to ethical behaviour” and ABA Chief Exec Anna Bligh has said “It has been completely rewritten to better meet community expectations and service the needs of customers”.
The hope is that the new set of rules and behaviours will help regain the trust of many Australians in the banking sector, as research commissioned by the ABA in August found that only 31 percent of Australians trust the banking industry, whilst 53% of Australians trust their individual lender.
Provisions in the code will be legally binding
The 24 members of the ABA, which includes the Big Four, regional banks, community banks and foreign banks – will be expected to sign and adhere to the code once it is approved by ASIC.
Provisions in the code will be legally binding as part of contracts with customers and the implementation will be monitored by the independent Banking Code of Compliance Committee.
Ms Bligh also said that “the fact members accepted 96 out of the 99 recommendations, goes to show that banks are serious about change and are committed to the greatest reform in more than 20 years.”
A main motivation behind the move to ban unsolicited credit card increase offers and to allow easier credit card cancellation is designed to counter concerns about rising household debt fueled by easy access to bank credit.
In terms of a time frame, the revised code of practice is expected to be implemented within the next twelve months as the banking industry manages fallout from the royal commission.
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