Developments in the financial services industry, such as open banking and buy now pay later services, are not addressed in the Australian Banking Association’s proposed changes to the Banking Code of Practice, consumer groups say.
A joint submission by 10 consumer groups, community legal centres and financial counselling bodies to ASIC’s consultation on proposed changes to the code says the ABA has also ignored developments in scam prevention, privacy law and credit reporting in its code update.
In a number of cases the ABA has said that if an area is likely to be subject to regulation in the near term, such as BNPL, it would consider adding code obligations after the government had passed legislation or formulated regulation.
The joint consumer submission said: “We accept there may be some challenges to developing code provisions where law reform is being considered by government. However, the areas the ABA has concluded fall into this category are extremely broad.
“We are concerned that leaving these issues out of the code altogether until the next review commencing in not three years but another five years, as proposed, is a bad outcome that will leave a gap in industry leadership and a significant gap in consumer protections.”
(A number of submissions objected to the ABA’s proposal to extend the code review period from three to five years)
The group said ASIC should make approval of the code conditional on the ABA committing to conducting targeted reviews of those areas when changes to law are passed or the reform process otherwise concludes.
It said these reviews should be conducted with a view to introducing new code provisions where the banking industry can make commitments that would deliver improved consumer outcomes.
The Australian Financial Complaints Authority also recommended that ASIC consider options for ensuring that there are interim reviews of specific issues that may arise during a review interval, and setting expectations about how and when code review recommendations about deferred reforms should be responded to.
The Law Council of Australia went further, saying it should be a priority for the code to respond to regulatory gaps and address emerging harm, particularly in light of rapidly changing technology and market offerings.
Its submission said the code should have a role in “promoting and building best industry practice” in areas of innovation, especially in areas not yet covered by legislation. It said such areas include BNPL, CDR and cryptocurrency exchanges and transactions.