An interim report was released this month, providing preliminary observations on the independent review of the Banking Code of Practice (BCOP). The interim report can be read here.
The BCOP review has received 34 submissions, including one from this firm, and conducted approximately 60 initial consultation meetings with interested parties. We previously considered the recommendations submitted by the Consumers’ Federation of Australia (CFA) in relation to the BCOP review and how it may impact banks moving forward – please see our article here.
The interim report addresses a number of overarching themes and preliminary issues which have emerged from the BCOP review. Of particular interest are:
- Overlap between the BCOP and the Law
Signatories have varying commitments under the BCOP. There are some areas where the commitment is simply for banks to comply with the law, in other instances the BCOP goes beyond, giving rise to an inconsistency between the BCOP and the law. Many of the provisions in the BCOP relating to individuals are already covered in legislation such as the National Consumer Credit Protection Act 2009 (Cth) and the consumer protection provisions of the Corporations Act 2001 (Cth). A need arises to avoid inconsistency and unnecessary complexity from a regulatory compliance perspective.
While stakeholders, such as CFA, have supported making most of the substantive BCOP commitments enforceable at law, this should not be the case for those commitments that merely restate existing law. The enforceability of the BCOP provisions should be applied where there are new or extended obligations in relation to what is already in the law.
It will be interesting to see how this issue is dealt with in the final report. There should be a balance between references to meeting obligations under the law, providing guidance on how those legal obligations will be met, and providing benefits that go beyond the law. The relationship between the BCOP and industry guidelines is another theme raised by the interim report.
- The BCOP’s Audience
There are divergent views as to who is the BCOP’s intended audience. This question is important because the intended audience affects how the BCOP is drafted. If the customer is the intended audience, then the BCOP needs to be accessible, simple and user-friendly.
The Australian Banking Association (ABA) is of the view that customers only access, and refer to, the BCOP when an issue arises with their bank. The feedback they have received from customers indicates that the BCOP is easy to understand.
The joint submission by consumer organisations, including the Consumer Action Law Centre and the CFA, consider that the primary audience of the BCOP should be the bank signatories. They are of the opinion that the BCOP should seek to improve customer outcomes, even if that means adding complexity and detail to the BCOP.
How to address these divergent views? One possible option, flagged in the interim report, is to create an easily accessible overview of consumers’ rights, while the BCOP itself becomes a more detailed commitment to agreed service levels by the banks.
- The Use of Principle-Based, Prescriptive Clauses and Industry Guidelines
A principle-based approach to drafting is supported by many stakeholders, including the Financial Services Institute of Australasia (FINSIA). FINSIA is of the view that a prescriptive approach can never anticipate every circumstance and, in some cases, may cause customer dissatisfaction because of the application of rigid policies.
Some stakeholders support the inclusion of more detail in the BCOP, particularly around how banks will or should implement BCOP commitments.
The ABA has invited comments on any of the matters raised in the interim report by 4 October 2021. The final report is due by the end of November 2021. Where the final report lands on the above issues will be important to many stakeholders – but the real question is whether the final report will satisfy all those stakeholders.
In the meantime, if you would like to know more about the BCOP review and how it could affect your organisation, please contact us.