Banks still charging dead people months after royal commission, Banking Code Compliance Committee finds
A watchdog created by the banking industry in the wake of a scathing royal commission into the sector has dropped a report critical of institutions’ poor efforts to hold themselves accountable.
More than 4.4 million customers were affected by bad behaviour or poor standards in a six-month period, and banks are still charging customers they know have died.
Ian Govey, the chair of the Banking Code Compliance Committee, urged banks to improve their reporting of breaches of the industry’s code of practice and to stop “cut and pasting” their responses.
“The committee has long held a view that some banks continuously under-report on their compliance with the code,” he wrote in the body’s first report.
Most of the breaches were by two banks
The committee’s report covers the six months following the industry’s adoption of the revised code on July 1, 2019, following the banking royal commission’s final report, and found:
- 20,863 breaches
- A financial impact of more than $100 million
- Just two banks account for 72 per cent of breaches
None of the institutions are named and the committee did not apply any of the limited powers it holds to sanction banks, including forcing staff training, insisting on customers being repaid or referring issues to the Australian Securities and Investments Commission (ASIC).
“We are still unable to conclude definitively whether the increase in breaches reported each year represents a deterioration in bank conduct, or is a demonstration that banks are better able to identify and fix problems,” Mr Govey wrote, suggesting the latter was more likely.
The committee was created to report on breaches of a code beefed-up after the obvious failures of self-regulation were exposed in the year-long Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, leading to criminal and civil charges against some of the largest financial institutions in Australia.
Nineteen banks have signed up to the code, and the committee is an independent body that monitors compliance.
Mr Govey pleaded with banks to take reporting seriously, writing there was “substantial room for improvement” with how banks reported breaches, many of them just “cut and pasted” with no regard for the seriousness of the process.
“Some banks appear to be copying data directly from internal systems without proper curation or regard for reporting requirements,” he wrote.
“We recognise the BCCC’s reporting requirements are extensive, but the data provided must sufficiently explain what has occurred, and the steps taken to remediate customers and prevent recurrence.”
The most common breaches of the code related to privacy and confidentiality requirements, as well as training staff to understand the code and engaging with customers in a “fair, reasonable and ethical manner”.
Breach? Less than one-in-five get remediation
The code of practice was devised by the industry’s peak body, the Australian Banking Association, and is not law.
It has been viewed by the Australian Securities and Investments Commission (ASIC) under its powers over similar industries, but as the association itself notes: “The code provides safeguards and protections not set out in the law.”
Of the 20,863 reported breaches of the code, fewer than one-in-five of them resulted in a refund, compensation or goodwill payment. Some of the breaches may not have caused customers a financial loss.
The most common action — in 30 per cent of cases — was correcting the issue such as “updating details, and requests for information to be destroyed, deleted or returned”.
In 7 per cent of cases, the bank “apologised to the customer”.
In fewer than 1 per of cases where the bank breached its own industry code were customers referred for hardship assistance or was there any reduction in “liability, repayment arrangement” or were “collection activities [debt collection] put on hold or ceased”.
Still charging the dead
Knowingly charging dead customers — including for life insurance — was one of the biggest shocks to arise out of the royal commission.
It turns out that banks are still doing it.
The code obliges banks to identify fees and stop charging them when the institution is notified of a customer’s death.
Banks are also required to “treat the deceased person’s representative with respect and compassion and provide clear and concise information” on the processes for dealing with a deceased estate.
Banks reported 219 breaches of these obligations.
The most common issue was a failure to “meet timelines” — that is, stop charging fees — after receiving a death certificate, but others were for providing incorrect information to representatives and failing to refund fees charged after knowing a customer had died.
In almost a third of the cases, it took a customer complaint to raise the issue.