In an article in today’s Australian Financial Review, under the heading: "Bank code should limit cross-selling”, James Ayers reports that, "[a] coalition of 16 consumer groups have called for the Code of Banking Practice to be strengthened to ensure banks cannot ride roughshod over their most vulnerable customers.
In a move that would curtail banks' ability to cross-sell products, the consumer groups want new protections around "add-ons", such as an insurance policy on an initial product, including a mandatory delay of at least 14 days between the sale of a primary product and the sale of an add-on. Banks should also be forced to tell customers that add-on products can be bought elsewhere.
In a submission sent on Friday to the review of the code being conducted by corporate governance adviser Phil Khoury, the consumer groups called for banks to be fined for breaching the code to create an incentive for them to comply with it, and for the code to be registered with the corporate regulator, which would also bolster enforcement.
Like the Financial Sector Union, the consumer groups want conflicted remuneration to be prohibited for all bank staff and for bank officers to have to act in the best interests of customers when providing general advice, arranging credit or selling any other product. It also called for bonus clawbacks to be used when there has been an oversight in lending practices.
The earlier-than-planned review of the review of the Code of Banking Practice was one of the initiatives announced by the Australian Bankers' Association on April 21 to fend off Labor's calls for a royal commission. Mr Khoury, the managing director of corporate governance advisers Cameron Ralph, is due to publish his final report on changes to the code by the end of December.
In their 114-page submission, the consumer groups want the code to prevent banks from charging default fees while hardship claims are being determined and mechanisms in place to refund fees and charges when customers have been put into inappropriate accounts. More lower-income people should be put into "basic bank accounts", where fees are limited, and hardship and responsible lending protections for personal lending should extend to all bank customers, the submission said. Stronger protections are also needed around the cancellation of direct debit requests.
The suggestions come ahead of the appearance of the four chief executives of the major banks before a parliamentary committee in Canberra during the first week of October.
The submission commended various initiatives from the banks including the current review of commissions and moves to establish independent customer advocates in each bank, enhance whistleblower protections and establish a register of employees who breach standards.
"Consumer representatives look forward to the banking sector implementing comprehensive and effective reforms with respect to all these issues," it said. However, more is needed given "trust and confidence in the financial services sector, particularly the banking sector remains low".
Kat Lane, principal solicitor of the Financial Rights Legal Centre, said the big test will be "how many of these recommendations from consumer advocates actually get into the code".
The groups endorsing the submission were: Care, Choice, the Consumer Credit Law Centre of South Australia, Consumer Credit Legal Service of WA, the Community Legal Centres Association of WA, the Consumer Action Law Centre, the Consumer Federation Australia, Financial Counselling Australia, the Financial Rights Legal Centre, Good Shepherd Microfinance, the National Association of Community Legal Centres, Salvation Army Moneycare, the South Australian Council of Social Service, Uniting Communities, the Western Community Legal Centre (WEstjustice) and the Women's Legal Service Victoria.
Read more: http://www.afr.com/business/banking-and-finance/bank-code-should-limit-crossselling-consumer-groups-20160917-gris5j#ixzz4KeMTYt4n