Australians will no longer receive unsolicited offers to boost their credit card limits under industry-wide changes to banking practices.
Customers will also be able to cancel their cards online, be told when their introductory credit card interest-free period expires, and only have to pay interest on what remains on their card rather than the full purchase amount.
The new code will also ensure that banks waive or refund statement fees for customers who don’t have access to electronic statements.
The code has been welcomed by consumer advocates, but also criticised for not going further than enshrining changes which were going to be legislated next year anyway.
The changes will be implemented under an update to the banking sector’s code of practice, managed by the Australian Bankers’ Association.
The update comes before a royal commission into the financial sector set up by the federal government and due to begin next year.
The ABA’s chief executive, Anna Bligh, said the new code represented a “complete restructure of important parts of the current code” and followed more than 50 meetings with banks over the past nine months.
“This new set of rules and behaviours will go a long way in addressing the expectations that Australians have of their banks,” she said on Wednesday. “Banks most certainly do not underestimate the challenge ahead of them and will continue to make the necessary changes and improvements that their customers expect.”
The code will be sent to the Australian Securities and Investments Commission for approval.
Here are some of the main changes:
- Customers will be told when a bank reports a payment default on a loan to a credit reporting body
- Customers will now pay interest only on what remains on their credit card (not the full amount of purchase)
- Customers will have the ability to cancel a credit card online
- Customers can ask for a list of direct debits and recurring payments made on accounts as far back as 13 months
- Customers will be told “where practical” about transaction service fees immediately before they incur the fee
- Customers who don’t have access to electronic statements will have their statement fees waived or refunded
- Small businesses will get a longer notice period about changes to loan conditions or a bank’s decision on whether it will continue to provide the loan
- Guarantors will be notified of changes to the borrower’s circumstances, including if they are experiencing financial difficulty
The Consumer Action Law Centre said many of the changes were already set to be legislated in federal parliament next year.
“Ideally an industry code would actually go further,” said Katherine Temple, senior policy officer at the law centre. “But from what we have seen, the new code is a step in the right direction.
“There’s a still a lot of work to be done so Australian consumers can trust our banks again. Scandal after scandal means a lot of people have lost confidence in our big banks.”
Temple said the changes on provisions about financial difficulty, accessible banking and guarantors were big and welcome improvements, but there was still a lot to be done on issues such as credit card insurance.
ABA’s media release referred to “a new deferred sales model” for the insurance, which tends to be automatically added to many consumer’s credit accounts and loans. “The idea behind it is that loan and credit insurance are not bundled together,” Temple said. “They’re trying to unbundle them, essentially, so you can take the loan without insurance.
“The problem with the code is that it only applies to limited products in limited circumstances. The deferred sales model as it stands would only apply to credit cards sold face-to-face or over the phone, when in reality most people are doing it online.”
Temple said it was disappointed some recommendations had not been accepted, including “accepting more responsibility for third-party debt collectors and limiting the cost of default fees”.
