On 16 December 2008, independent reviewer Jan McClelland delivered her Final Report on the Review of the Code of Banking Practice.

The Recommendations made in the Final Report reflect a compromise between the views expressed by consumer advocacy groups during the consultation process and those of current subscribers to the Code. The Recommendations made are also intended to prepare Banks for the impending national regulation of consumer credit.

It is also important to view the Recommendations made in the Final Report in the context of the current financial climate, which has changed considerably since the introduction of the current Code.

Key Recommendations

Adoption of a General Principle of Responsible Lending

A commitment for a Bank to be a responsible lender in approving credit, offering credit limit increases, supporting customers facing financial difficulty and promoting responsible use of credit has been recommended.

Extension of obligations relating to the provision of credit

The Final Report has recommended that the current clause relating to the provision of credit be divided into two parts and expanded to include some prescription in relation to credit assessment methods.

The first part should deal with approvals of applications for credit. The Final Report has recommended that a Bank should treat new and existing customers differently and the credit assessment methods should require consideration of two of the following:

  • information as to income and liabilities
  • credit history
  • credit scoring methodologies
  • credit reference agency information.

The second part should deal with credit limit increases. The Final Report has recommended that a Bank take into account the following in dealing with credit limit increases:

  • repayment history
  • income if it is aware that welfare payments are the sole source of income
  • credit facility history
  • existing banking relationship
  • any request made not to receive unsolicited offers of credit limit increases.

It also recommends that information is required to be provided on:

  • the new minimum monthly payment and repayment period
  • how to request a lower credit facility limit than that offered
  • how to reject the offer
  • ways to reduce a customer's credit limit.

Financial hardship

The existing clause on financial hardship will be considerably expanded to impose a positive obligation on banks to do things such as the following:

  • providing information on a bank's processes for dealing with customers in financial difficulty at the time of sending a default notice
  • not commencing enforcement action when considering a hardship application
  • not requiring a customer to access his/her superannuation fund to repay his/her credit facility.

Exception fees

The Final Report recommends that Banks commit to:

  • disclose exception fees
  • publish a fact sheet on exception fees on the ABA's website
  • provide information on how customers can avoid exception fees
  • provide information on accounts or facilities which have no/minimal exception fees.

The Final Report also recommends that the Code:

  • formally recognise the role of financial counselling in managing hardship
  • include a provision facilitating account switching
  • simplification of provisions relating to electronic banking
  • include a provision relating to indigenous customers.

The Final Report can be obtained by clicking here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.