Melbourne CBD
The central business district (CBD) of Melbourne can be seen from the area located along the Yarra River called Southbank located in Melbourne, Australia, July 27, 2016. Reuters/David Gray

Retail banks in Australia will be required for the first time to sign up to a new code of banking practice as a condition for their membership in the Australian Banking Association (ABA). The new code has been updated to better meet community standards.

Currently awaiting approval from ASIC, the new code will be enforceable and binding. Australian Banking Association CEO Anna Bligh has emphasised the importance of ramping up the industry’s efforts to improve culture and conduct.

“In the past it was up to each individual bank if they wanted to sign up however this new customer focussed Code will become compulsory for all ABA members with a retail presence,” Bligh said in a media release. She added that the code will be binding, enforceable by law, forming part of relevant customer contracts and will be monitored by an independent body.

According to Bligh, Australian customers expect their banks to operate in an appropriate and ethical way when they apply for a credit card, home, small business loan or other financial products. She recognised that much work still needs to be done but pointed out that banks in Australia are serious about real reform that addresses conduct and culture, with the banking code of practice a cornerstone of these efforts.

The industry is committed to true reform that will rebuild trust with the Australian community, Bligh added.

The new code outlines significant changes for individuals and small businesses. These include plain English contracts, ending unsolicited offers of credit card increases, the mandated ability for customers to cancel a credit card online, and improved transparency around fees by telling customers about service fees immediately before they occur.

“Once approved by ASIC, the Code will deliver changes across the board with plain English contracts for small business, no more unsolicited offers to increase credit card limits, greater transparency around fees and customers having an ability to cancel a card online – just to name a few,” Bligh said. There will be a 12-month implementation period for the Code once it gets approval from ASIC.

The Banking Code Compliance Committee (BCCC) will oversee and monitor compliance with the code. The committee is allowed to investigate breaches of the code and apply sanctions if needed. Making the code compulsory is another step in the banks' efforts to rebuild trust with the community.