Consumer Action Law Centre (Consumer Action), the Financial Rights Legal Centre (Financial Rights) and Financial Counselling Australia (FCA) have provided comment on the Australian Banking Association (ABA) application for Australian Competition and Consumer Commission (ACCC) authorisation of amendments to the 2019 Banking Code of Practice (the Code) in response to the Hayne Royal Commission final report recommendations.
Generally, we are supportive of the ABA application and agree there will be a net public benefit with the introduction of changes to the Code that outweigh any competitive detriments that may arise. We welcome the amendments addressing dishonour and overdrawn fees and informal overdrafts as well as the introduction of minimum features and the general concept of basic bank accounts. Basic bank accounts are crucial to increasing financial inclusion without many of the fees that make other banking products unaffordable for low-income consumers.
However, we are very concerned that the proposed amendments hide the fact that informal overdrafts on basic accounts could still occur frequently, including for payments made through contactless technology. Even more concerning, the amended Code would permit banks to charge interest on these informal overdraft amounts.
We suggest the following further amendments to enhance the consumer benefit of the proposed changes. The suggested amendments in this submission reflect and expand upon our joint feedback to the ABA directly and to the related Australian Securities and Investments Commission (ASIC) application. These include:
- All ABA member banks should provide a basic bank account;
- Clearly state in the Code the most common instances in which informal overdrafts will still occur and ensure banks are required to inform their customers about this clearly and in plain language;
- The Code should explicitly prohibit banks charging interest on an overdrawn amount for basic, low and no-fee accounts;
- The basic banking code protections should apply equally to the Cashless Debit Card;
- Codify proactive provision of basic, low and no-fee accounts for new and existing bank customers, including through data analysis; and
- Strengthen the minimum features of basic bank accounts to clarify free periodic statements, to require scheme debit, to waive all ATM fees (including from third parties) and to reduce the exempted ‘ancillary services’.