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ACCC calls for stronger protections in banking code

by Sarah Simpkins10 minute read

The Australian Competition and Consumers Commission has criticised the proposed changes to the Banking Code of Practice, saying the banks have not gone far enough to protect low-income consumers and drought-affected farmers.

Th Australian Banking Association (ABA) on behalf of its 23 members including the major banks, sought authorisation from the consumer watchdog to amend its code in line with recommendations from the royal commission.

The proposed changes aimed to improve basic low or no-fee accounts by prohibiting dishonor fees and informal overdrafts unless requested by the customer.

The ABA also has propositioned that certain types of basic accounts have no minimum deposits, free direct debit facilities, access to a debit card at no extra cost and free unlimited domestic transactions.


After reviewing the amendments, the Australian Competition and Consumers Commission (ACCC) has declared the changes need to be stronger, saying additional conditions are needed.

Under the proposal, the regulator has noted basic accounts could still be overdrawn without the customer’s agreement in some circumstances, and banks could continue to charge interest, in some cases approaching 20 per cent on overdrawn accounts.

The ACCC has asked for conditions stating that interest not be charged in those circumstances, or for banks to require any such interest charges be repaid to the customer.

“This could lead to low income customers getting into debt from overdrafts they did not agree to, which is exactly the kind of problem the Hayne royal commission sought to address,” Delia Rickard, ACCC deputy chair said.

“While the ACCC strongly supports these objectives, we are proposing to place extra conditions on ABA members to ensure the changes effectively address the royal commission’s recommendations, and in turn actually deliver these public benefits.”

The ACCC has also shared consumer groups’ concerns that the changes would not require banks to proactively identify existing customers who would be eligible for the accounts, or even to continue to offer a basic bank account at all.

The regulator has added conditions that would require banks to actively seek out candidates within its customer base, including through data analysis, and inform customers. It also has asked the ABA to report on measures taken to offer eligible customers fee-free bank accounts, as well as how many customers are taking them up.

Further, the ABA’s proposed changes aim to prevent default interest being charged on agricultural loans in drought-affected areas.

The ABA’s proposed changes are expected to come into force on 1 March 2020, pending ASIC approval of a second round of changes to the Code, separate from the ACCC review process.

The ACCC has required ABA members who currently offer a basic banking product to continue to so for the period of authorisation.

The conditions and proposed changes are open for feedback until 14 October. The ACCC’s final determination is due in November.

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