On 16 December 2008, independent reviewer Jan McClelland
delivered her Final Report on the Review of the Code of Banking
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
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
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
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 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:
income if it is aware that welfare payments are the sole source
credit facility history
existing banking relationship
any request made not to receive unsolicited offers of credit
It also recommends that information is required to be provided
the new minimum monthly payment and repayment period
how to request a lower credit facility limit than that
how to reject the offer
ways to reduce a customer's credit limit.
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
not commencing enforcement action when considering a hardship
not requiring a customer to access his/her superannuation fund
to repay his/her credit facility.
The Final Report recommends that Banks commit to:
disclose exception fees
publish a fact sheet on exception fees on the ABA's
provide information on how customers can avoid exception
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
include a provision facilitating account switching
simplification of provisions relating to electronic
include a provision relating to indigenous customers.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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