Industry codes – often referred to as codes of conduct – can be useful when they genuinely improve standards in the relevant sector, provide meaningful rights for consumers and are complied with by industry. Unfortunately, this doesn’t always happen.
In our comment on Treasury’s consultation paper, Enforceability of financial services industry codes, Consumer Action Law Centre (Consumer Action) supports an enhanced regulatory framework that would make industry codes enforceable, but asserts that this work will be for naught unless industries are required to comply with all code provisions.
Enforcing industry codes becomes problematic when the way they are written is unclear. Vague or meaningless language can cause confusion on whether an industry code creates additional rights for consumers beyond a vague assurance of a ‘commitment’.
Where the duty is clear within an industry code, it is not uncommon for financial services providers to simply fail to comply with these duties. For example, recent data from the Customer Owned Banking Code Compliance Committee found “unacceptably high” non-compliance with direct debit obligations. The Committee found that over half of bank staff gave incorrect responses to questions about the cancellation of direct debits, despite their rights being clearly stated within the Customer Owned Banking Code of Practice.
We assert that all industries within the finance sector and the providers operating within it – regardless of whether they hold a license – must be bound to a relevant code of practice.
Furthermore, all provisions of an industry codes must be enforceable in order for the code to work effectively. Any less would create further complexity in communicating rights and remedies under the code to customers and staff alike.
Consumer Action’s submission recommends:
- All provisions of industry codes should be enforceable, both through contract and statutory remedies;
- Remedies should be available through internal and external dispute resolution, or through courts—we should not interrupt the existing principle that a complainant can reject an external dispute resolution determination and seek legal remedies through a court;
- All industries should be required to develop a code and, if they do not, the Australian Securities & Investments Commission (ASIC) should be empowered to make a relevant industry code itself;
- All businesses operating in an industry sector should be required to be signatories of a code relevant to that sector—this should include financial entities that are not licensed;
- ASIC should approve all codes in accordance with the standards set out in its existing regulatory guidance, with some enhancements;
- ASIC approval of an industry code should remove risk of legal action under competition law;
- Consumer representatives should be involved in the approval process for ASIC codes; and
- There should be much greater resourcing for code monitoring bodies, and such bodies should not be limited in relation to the investigations or actions they can take, and the sanctions they impose.