In its March 2019 submission to the Independent Review of the Customer Owned Banking Association (COBA) Code of Practice a coalition of consumer organisations strongly argues that, while customer-owned banks have avoided much of the public criticism directed in the wake of the banking royal commission at the banking, finance and insurance industries (which “continue to be perceived to be the least ethical sectors of Australia’s economy”) ‘customer owned’ status doesn’t always translate into the fair treatment of customers.
In fact, the submission argues, “this sector is at risk of complacency, and failing to recognise the need for adequate regulation including a strong code”. Further, the sector appears to be “… more focussed on the “cost of compliance” than the consumer interest, the substantive issues raised in the Royal Commission or increased community expectations”.
The consumers’ coalition compiling the submission consists of:
NSW’s Financial Rights Legal Centre
Victoria’s Consumer Action Law Centre
Victoria’s Financial and Consumer Rights Council Inc
Financial Counselling Australia.
In their submission consumer representatives expressed their disappointment that the customer-owned banking sector has “advocated loudly that they should be considered separate to the ‘big banks’ and that different, lower standards for regulation should apply [to it]”.
The submission takes the new Banking Code as a reference and in numerous instances recommends that the COBA Code at least match the commitments made by the ABA. It further identifies a number of areas where customer owned banks can work harder to improve their practices. These include:
developing expansive commitments for engaging inclusively and appropriately with customers who may experience financial exclusion, or who may be in financial hardship or other vulnerable circumstances;
committing to stronger and more comprehensive responsible lending obligations;
addressing issues with third party products, particularly add-on insurance, and the use of finance brokers;
significantly improving compliance with obligations to cancel direct debit arrangements;
offering increased protections for guarantors and co-borrowers; and
increasing compliance with the Code, including boosting sanction powers for COBA Code breaches, and increasing obligations which allow compliance to be measured (such as increased obligations to report).
Click here to download a full copy of the submission.