Banking Amendment (Banking Code of Conduct) Bill 2012

Banking Amendment (Banking Code of Conduct) Bill 2012

Text of bill

Explanatory memorandum

Mr WILKIE (Denison) (10:16): Banking is obviously a vital part of everyday life for Australian households and businesses. Every day, countless Australians rely on the banks for everything from life-changing events like buying a house or going into business to things as simple as paying their bills online or buying a carton of milk at the corner store. Clearly, we all place an enormous amount of trust in these institutions—big and small, but mainly big—to do the right thing with our money. Regrettably, this is a trust not always reciprocated and hence the need for this private member’s bill, which would, in essence, give more rights to consumers and level the playing field to some degree.

My aim here this morning is not to bash the banks. Heaven knows they have done a lot of good over the years and are staffed by a great many good people. In any case, the banks are all different, with some being much better than others. But the banking industry is not perfect. Obviously no industry is, and this is something we, as legislators, should be careful to monitor and seek to remedy whenever problems lie within our scope of responsibility. In matters of money in particular, we clearly have a responsibility to ensure that Australian households and businesses have confidence that, if something does go wrong, then their complaints will be resolved swiftly and appropriately.

To help have this confidence, we need strong and enforceable regulations, but unfortunately that is not what we have right now, in particular when it comes to the current Code of Banking Practice, which is, quite frankly, a toothless tiger that is badly letting down Australian households and small businesses. What is my evidence for this? Quite simply, the fact that tens of thousands of complaints are made to the banks each year and a disproportionate number of them are resolved in favour of the banks or are never resolved at all. Clearly this should not be the case, and it would not be the case if the current code were effective and evened up the power relationship between the banks and their customers.

The Australian Bankers’ Association maintains the banking industry customer charter—the current Code of Banking Practice. Just about every significant bank in Australia has signed up to it. It is a valuable document and the Australian Bankers’ Association is to be commended for developing and maintaining it. However, as with many other cases of self-regulation, the current code is not always enforced, and the evidence clearly shows that customer complaints against banks are not being resolved quickly or effectively.

The figures do not lie; indeed, they reveal a worrying picture of complaints being swept aside and millions of frustrated customers with nowhere to turn. Since 2004, for example, there have been something like 2.5 million complaints against Australian banks, and how many do you think have been fully investigated to the extent of the current code? Just 200 out of 2.5 million complaints. That is clearly completely and utterly unacceptable and something we must address.

The system is not just broken; rather, it is badly designed. It does not work and it will never work properly because the current code of practice is voluntary and has been set up by the banks. It is run by the banks and is overseen by the banks. No wonder it is so easy to guess in advance who is going to come out on top and who is going to lose when you have individuals and small businesses with disputes up against the giant banks with their seemingly unlimited resources.

The evidence is in. A new mandatory code of conduct is what is needed because the current voluntary code gives too much power to the banks and is simply not in the best interests of the individuals and businesses, especially small businesses, who have no option but to sign up with and rely on the banks. To that end the private member’s bill I have introduced today will establish a new and mandatory code, to be known as ‘the banking code of conduct’, and will give the Australian Prudential Regulation Authority the power to name and shame and even fine any bank or banks failing to comply with it.

The minister would be tasked with the creation of the new banking code of conduct, based on the existing voluntary code of banking practice, drafted in consultation with representatives of the banking industry, small business and consumer advocates. The new code would be a legislative instrument reviewed at least every three years with a report of the review tabled in both houses of parliament. Crucially, this new code would be mandatory, not voluntary. It would have teeth because APRA would be empowered to receive complaints about breaches of the new code and could investigate any complaint. Moreover, APRA would be required to investigate when it is satisfied a breach of the new code may have occurred, that the breach has not been satisfactorily resolved and that the complainant has made every effort to resolve the matter with the bank. The bill provides for APRA to name and shame banks that have breached the new code and, in particularly severe cases, even fine bank and levy civil penalties as defined in the Banking Act 1959 for particularly grievous or ongoing breaches of the new code.

In closing, this bill will provide individuals and small businesses with protection against misconduct by banks. Banking customers will have the confidence that, when they have a legitimate complaint against a bank, it will be investigated and treated seriously. Frankly, that is nothing less than they deserve, because the banks have had the upper hand for too long and it is way beyond time to level the playing field and give some power back to the millions of customers who are ultimately the very reason for the banks’ existence and for their prosperity. I commend the bill to the House.


Posted on

September 10, 2012

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