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		Review of the Draft Code of Banking Practice New Zealand Association of Citizens Advice Bureaux submission on the Code of Banking Practice March 2002

Background The New Zealand Association of Citizens Advice Bureaus welcomes the opportunity to comment on the Bankers’ Association draft code of banking practice.  The aims of the Association are: To ensure that individuals do not suffer through ignorance of their rights and responsibilities or of the services available: or through an inability to express their needs effectively –– Me noho matära kia kaua te tangata e mate i töna kore möhio ki ngä ähuatanga e ähei atu ana ia, ki ngä mahi ränei e tika ana kia mahia e ia, ki ngä ratonga ränei e ähei atu ana ia; i te kore ränei öna e ähei ki te whakaputu i öna hiahia kia märama mai ai te tangata. To exert a responsible influence on the development of social policies and services, both locally and nationally -- Kia tino whawähi atu ki te auahatanga o ngä kaupapa-ä-iwi me ngä ratonga-ä-rohe, puta noa hoki i te motu. The New Zealand Association of Citizens Advice Bureaux – Ngä Pokapü Whakahoki Pätai mai i te Iwi Whänui provide free, confidential and impartial information, advice, advocacy and support to individuals, and use our experience with clients to advocate for socially just policies and services in Aotearoa New Zealand. The national network of 88 Citizens Advice Bureaux aim to empower individuals to deal with their own problems and to strengthen communities by identifying and raising local and national issues.  The person to person information, advice, advocacy and support service provided by 2,750 bureaux volunteers is unique in New Zealand, as is our ability to provide a national snapshot of community issues and concerns.       Comments on the draft Code In making our comments we draw on the knowledge and experience from bureaus’ client contact and the fact that since 1998 Citizens Advice Bureaus have dealt with over 32,000 enquiries (over 200 every week) about financial matters; the vast majority of which relate to banking and banks.  The number of enquiries and complaints about banking and banks has steadily increased over time, from 7,620 in 1994/95 to 10,484 in 2000/01 – an increase of 38 per cent. The Association has made comment when the first code of banking practice was developed in 1991 and the subsequent revision of the code in 1996.  In those discussions we raised a number of issues and concerns regarding how banks relate to their customers.  These included: 1991 Difficulty opening accounts Poor/no notification of changes to accounts, fees, etc Poor customer complaints procedures and disputes resolution Poor services for many who are not able to engage in modern banking (persons with disabilities, older people, etc) 1996 Difficulty in having bank errors corrected Customers not being able to get information from banks Banks charging fees customers did not agree with Customers not being notified of changes to terms and conditions Banks not adequately explaining the details of financial products People on benefits having difficulty opening accounts – and having benefit plundered to cover fees Bank fees putting people into overdraft (which forces more fees) We were especially disappointed in 1996 when the revision of the Code failed to address these common concerns.  We are even more disappointed with the current revision.  We believe it is a wholly poorer version, which goes even further to diminish the relationship between banks and customers, and to impose greater obligations on the customer. Is this a code of practice? Codes of practice are designed to set minimum industry standards and should not form binding contracts for the customer.  The current revision of the banking code of practice reads more like a contract.  We agree with the Banking Ombudsman when she says “the new prominence given to customer obligations gives the impression that banks are losing sight of the fact that the code’s primary purpose is to set standards of industry practice.”  Further, bank customers are not parties to the code and cannot be bound by it. We also share the view of the Ministry of Consumer Affairs when they reflect in their submission that the revised code is the industry’s vote of no confidence in itself. “The overall impression [conveyed by the code is] of an industry that lacks confidence in its ability to provide quality services, and is more concerned to protect itself than advance reasonable measures aimed at improving standards of service for customers.” The Association has concluded that this version can no longer be defined as a code of practice.  And because of that we believe it undermines any goodwill between consumer representatives, such as Citizens Advice Bureaus, and the banking industry.  It certainly does banking customers a major disservice.  We therefore cannot support the revised code and strongly recommend that it be rewritten. Process for a new code In recommending a complete redrafting of the code, we suggest that the New Zealand Banker’s Association consider a more consultative process involving consumer representatives, banks’ senior customer-relations staff and the Ministry of Consumer Affairs. We recommend that this process involve drafting a new code using the Ministry of Consumer Affairs’ Guideline for developing a code of practice and Guidelines for consulting community organisations. Our Association is able to provide expertise in this process by bringing banking customer experience from our more than 10,000 client contacts relating to banks and banking each year. Establishing a process to engage a range of interested people to develop a more appropriate code of banking practice will, in itself, go some way towards establishing effective relationships between consumers and banks.            Information | Contact Us | Volunteering | Social Policy | About Us