Banks need to sharpen up their practices for assessing unsecured loans, overdrafts, credit cards and credit card limit increases to individual and small business customers, the Code Compliance Monitoring Committee said yesterday.The CCMC's comments came with the report of its inquiry into banks' compliance with the provision of credit obligations under clause 27 of the Code of Banking Practice. The report echoed the unease of many consumer advocates, and also government commentaries, on the need for industry reform. The CCMC identified "a number of potential issues", including:--  banks not making inquiries about the purpose of customers' credit card applications;--  the collection and verification of current customer information when processing applications for credit card limit increases; and -- the assessment of a customer's ability to repay a credit card balance. Banks reported 7987 breaches of the code to the Code Compliance Monitoring Committee in 2015/16 - a 22 per cent increase compared with the previous year. Since 2008, banks have self-reported more than 6000 breaches of the provision of credit obligations.One area of concern risks drawing banks into repeated breaches of the code, since "banks do not generally make inquiries about a customer's purpose when they apply for a credit card."Nor did banks "always request updated information for credit card limit increase applications."The CCMC said it asked consumer advocates whether they were aware of any issues around credit products not meeting the needs and the purpose of customers. Examples including customers using credit cards to purchase a car, pay off other debts, gamble and to obtain money to assist with getting a home loan.The majority of applications for unsecured credit are processed using automated systems, a proportion the CCMC put at 97 per cent, based on reviews with 13 banks (although a handful of very small banks consider all applications manually)."At this point in time banks have not demonstrated, to the CCMC's satisfaction, that the use of an automated system or statistical credit scoring model alone is sufficient to comply with the Code obligations, unless up-to-date information regarding a customer's financial position is incorporated into the credit assessment," the CCMC said.It said it "considers that having a full and current picture of a customer's financial circumstances is fundamental to complying with the Code obligations."The CCMC report provided a snapshot of unsecured credit applications "in a typical month in 2016":-- in total, banks processed 380,879 applications for unsecured credit during March 2016;-- credit cards accounted for 68 per cent of applications for unsecured credit and of these,  46 per cent were new applications and 22 per cent were for credit limit increases;-- less than three per cent of all applications for unsecured credit were from small business customers; and -- where an automated system was used at some stage of the credit assessment process, 65 per cent of unsecured credit applications were approved. The CCMC reported that around 55 per cent of applications processed using an automated system were approved, 28 per cent were declined and 17 per cent were referred for manual