Industry codes of conduct can provide additional and stronger protections for consumers. Industry codes are not laws of parliament, but are agreements entered into by members of an industry about the standards and practices they will uphold. Industry codes range from unenforceable voluntary codes to compulsory codes that bind industry members. However, external dispute resolution schemes may see industry codes as good industry practice relevant to their decision-making.
The Code of Banking Practice (“Banking Code”) is a voluntary code that sets out standards of good banking practice when banks deal with consumers who are, or may become, their individual and small business customers, or guarantors. Virtually all retail banks subscribe to the Banking Code.
There is now legal authority that the Banking Code forms part of the bank’s contract with the customer. Therefore, a breach of the Banking Code amounts to a breach of contract.
The Banking Code provides that subscribing banks will:
• supply the terms and conditions of any banking services it offers to any person on request (cl 12);
• promptly process instructions to cancel a direct debit authority and complaints about an unauthorised direct debit (without directing or suggesting that the matter should be raised first with the debit user) (cl 21);
• where a customer disputes a credit card transaction, claim a chargeback right and not accept a refusal from the relevant merchant’s bank except in certain circumstances (cl 22.1);
• before offering, giving or increasing an existing credit facility, exercise the care and skill of a diligent and prudent banker in selecting and applying its credit assessment methods and in forming its opinion about the customer’s ability to repay (cl 27);
• try to help a customer overcome their financial difficulties with any credit facility held with the bank, including by developing a repayment plan, communicating with the customer’s financial counsellor, informing the customer about the hardship variation provisions in the NCC (if applicable) and confirming the main details of any hardship assistance it provides in writing (cl 28);
• not accept a person as a co-debtor under a credit facility where it is clear, on the facts known to the bank, that the person will not receive a benefit under the facility (cl 29.2);
• before signing a person up as a co-debtor, take all reasonable steps to ensure that they understand they may be liable for the full amount of the debt and their rights to terminate their liability in respect of future advances or accommodation (cl 29.2–29.3);
• give certain information to a prospective guarantor about the financial situation of the debtor whose loan is being guaranteed (cl 31.4);
• not ask a prospective guarantor to sign a guarantee unless it has allowed them until the next day to consider the information referred to above (unless the prospective debtor has received independent legal advice after receiving the information) (cl 31.5);
• not give the guarantee instrument to the debtor or their representative (unless the representative is a lawyer or financial advisor) to arrange the signing (cl 31.6(a));
• ensure the guarantee is signed in the absence of the debtor and in the presence of the bank (cl 31.6(b));
• comply, and take all reasonable steps to ensure their collection agents also comply, with the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission’s Debt Collection Guideline for Collectors and Creditors (cl 32.1(a));
• not assign a debt while considering a customer’s hardship request or while a customer is complying with an agreed hardship arrangement (cl 32.1(b)).
The Banking Code was reviewed in 2016; a number of recommendations to enhance the Banking Code were made. It is anticipated that the Banking Code will be redrafted by the end of 2017.
The Banking Code is available at the Australian Bankers’ Association’s website (www.bankers.asn.au).
Other similar industry codes that may assist consumers include the Mortgage and Finance Association of Australia Code of Practice (whose signatories include mortgage and finance brokers and managers), the Customer Owned Banking Code (formerly the Mutual Banking Code of Practice for credit unions and mutual building societies) and the SEQUAL Code of Conduct (for providers of equity release products, such as reverse mortgages).
The ePayments Code applies to ATM, EFTPOS and credit transactions, online payments, internet and mobile banking, and BPAY transactions. Among other things, the ePayments Code:
• deals with recovering mistaken internet payments (cl 24–34);
• sets out the rules for determining who pays for unauthorised transactions (cl 9–17);
• requires subscribers to give consumers terms and conditions, information about changes to terms and conditions (such as fee increases), receipts and statements (cl 4–6).
The ePayments Code is a voluntary code that almost all banks, credit providers and building societies follow. A list of subscribers is available at www.asic.gov.au. In addition, external dispute resolution schemes consider it to be good industry practice. A copy of the code is available at www.asic.gov.au/for-consumers/codes-of-conduct/epayments-code.