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		Review of the Revised Code of Banking Practice New Zealand Association of Citizens Advice Bureaux submission on the revised Code of Banking Practice September 2002

The New Zealand Association of Citizens Advice Bureaux welcomes the opportunity to comment on the second draft of the code of banking practice. We are pleased that the Bankers’ Association saw the value in seeking additional comment from us, but are disappointed that the consultation process did not originally allow for that. We are also disappointed that the additional consultation is limited to a few organisations, because we feel the Code could be strengthened by input from a more diverse range of consumer and community representatives. This second draft is superior to the earlier draft. Contract-like language and customer obligations have been removed, and it now reads as a code of practice. We are generally pleased with this draft, but still have some concerns about aspects of the Code and issues it has not yet addressed. Our submission makes recommendations for rewording specific clauses in the Code. We also discuss some additional issues that the Code does not address; those being the extension of credit (without permission) and bank products and services for people with disabilities. We also discuss our continued concern with the consultation process used for the draft Code. The Association endorses the submissions of the Consumers’ Institute and the Ministry of Consumer Affairs. Amendments to specific clauses Section 1.1 (c). This paragraph could imply that the banks can use terms and conditions of other products and services to opt out of the Code. We recommend that the last sentence be amended to read, “This Code does not alter or replace those additional terms in any way”. Section 1.2 (b) (iv). The second part of this paragraph is confusing, and could be interpreted as meaning a bank could opt out of the code depending on arbitrary circumstances. We recommend that that sentence be removed so that the clause simply reads, “act fairly and reasonably towards you, in a consistent and ethical way”. Section 1.3 (b). In the interests of clarity we recommend that the second bullet point be amended to read, “your bank will inform you that you may refer your complaint to the Banking Ombudsman for further consideration if you are dissatisfied with its decision, and will also provide you with the contact details for the Banking Ombudsman”. Section 2.2 (b) (ii). We do not consider that communicating variations to terms and conditions by displays in branches or public notices is an effective method of communication. We strongly recommend that such variations should only be communicated directly to the customer. This clause should therefore be amended to read, “communicate such changes by direct communication”. Section 3.1 (a) (ii). This clause could imply that the Bank can arbitrarily decide to not open an account for a customer, i.e. without regard, for example, to the New Zealand Bill of Rights Act. We recommend that this clause be rewritten to clarify this. Section 3.1 (b) (ii). As above, this clause could imply that the Bank can arbitrarily decide to not provide products and services to a customer, i.e. without regard, for example, to the New Zealand Bill of Rights Act. We recommend that this clause be rewritten to clarify this. Section 3.12 (c) (iii) and (d) (iii). It appears that these clauses have been inserted incorrectly; they should simply be swapped. Automatic extension of credit Bureaux receive around 20,000 enquiries each year relating to budgeting and financial difficulties. We find that many of these enquiries involve households being overwhelmed by debt from credit facilities offered by banks. The Association has long been concerned about the practice of banks of extending credit without first receiving an application for the extension from the customer. This practice sees the bank informing the customer that their credit has been extended, which then puts the onus on the customer to request that the extension be reversed. In many cases bureaux deal with we would question whether the bank has correctly considered whether the customer is able to meet the terms of the credit facility. While this practice (essentially inertia selling) may be standard banking practice we do not consider it good practice. We strongly believe that this practice should stop, and that provisions be written into the Code to ensure this happen. We would suggest banks adopt an alternative practice; where they invite customers to apply for an extension of credit. This would then allow the banks to fully evaluate the application to see whether the customer would be able to meet the terms of the credit facility. We recommend that section 3.5 of the Code have a clause added to address this. Products and services for people with disabilities We strongly believe that the Code should be amended to include statements about products and services offered by banks that meet the specific needs of people with disabilities. We also believe that the Code should signal the industry’s intentions to constantly review and enhance those products and services. In this regard, we suggest the Bankers’ Association adopt the clause from the Australian Bankers’ Association Code of Banking Practice that states, “We recognise the needs of elderly or disabled customers to have access to transaction services, so we will take reasonable measures to enhance access to those services.” We would also recommend that a statement be included as to how banks will give effect to that, i.e. include examples of services that banks can offer for people with disabilities. We strongly recommend that the Bankers’ Association seek additional input on this issue from representative organisations that have greater expertise in this area, such as DPA, Royal New Zealand Foundation for the Blind, Deaf Association of New Zealand, National Foundation for the Deaf and New Zealand CCS. Consultation process Our earlier submission rejected the first draft Code and recommended that a more appropriate Code be developed, and that a range of interested people, including consumer representatives, be engaged in that process. The Bankers’ Association did rewrite the Code, however consumer representatives were not involved in that. The Bankers’ Association then chose to consult only with the Banking Ombudsman and the Ministry of Consumer Affairs, and later widened the consultation to include the Consumers’ Institute and ourselves only after we made strong representations. We remain extremely concerned with the process used by the Bankers’ Association to conduct the Review. A robust process would have ensured that a good Code would have been developed earlier, and would have had the additional benefit of establishing constructive relationships between consumers, banks, consumer representatives and the Bankers’ Association. The Bankers’ Association risks undermining the integrity of the Code, and the goodwill between it and consumer representatives if it does not establish a more rigorous and effective consultation process. A good process would allow for the diverse range of expertise and experience to be heard, which would further strengthen the Code. We strongly recommend that the Bankers’ Association review how it engages with consumer representatives, and ensure that a good process is used for future consultations. In addition, we would strongly recommend that consumer representatives be included on the group that reviews and rewrites the Code. In this regard we would recommend the process used by the Electricity Complaints Commission that establishes a “scheme amendment committee” comprised of six industry members, six consumer representatives and the Electricity Complaints Council chairperson. [For a copy of the final Code of Banking Practice visit the New Zealand Bankers' Association website - www.nzba.org.nz]           Information | Contact Us | Volunteering | Social Policy | About Us