Banks have paid more than $1.8 billion in compensation since the Hayne royal commission, but a $15 cheque shows they still have a long way to go with treating customers better.
A year ago, Tim van der Griend's brother got compensation for money wrongly taken in fees but, because he moved to New Zealand and closed his Australian accounts, the cheque could not be cashed.
"Why are we sending cheques in this day and age?" asks Mr van der Griend, a marketing executive who lives in Brisbane.
So far, he has tried to cash the cheque in a branch, flown it to New Zealand to get his brother to sign and "endorse" it being cashed, brought documents including a copy of his passport to support his brother's identity, seen his local branch permanently closed and discovered that even when his brother visits Australian in a few months, he will not be able to cash the cheque – because he does not have a local bank account in his name.
The money can not be given to anyone else or to charity.
"It's been immensely frustrating. It's certainly a lot more time and effort than I wanted to put into this."
It is a tiny problem in an industry that promised to do better.
Three years since the banking giants promised substantial change to how they deal with customer problems, are things any better?
Reborn after Hayne
The banking industry's Code of Practice is a document created by the bank's key lobby group, the Australian Banking Association (ABA).
The self-regulated rules set out standards that should be met for individuals and small businesses.
After the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry exposed scandals that cost customers billions of dollars, the lobby group updated the code to fix some of those problems.
"We've completely rewritten the rule book for Australia's banks," the association's chief executive officer, Anna Bligh, said in mid-2019.
"The Banking Code of Practice has strong protections for customers, serious consequences for breaches and strong independent enforcement."
The industry got to write the rules but they were then essentially made into law because the regulator, the Australian Securities and Investment Commission (ASIC), had to approve them.
"Whether it's through your credit card, home loan, small business loan or just day-to-day banking, Australian customers will see tangible benefits from this new code," Ms Bligh said at the time.
Mute enforcer
The body making sure banks do the right thing? The Banking Code Compliance Committee (BCCC).
The committee has just turned three years old but it is hard to find people to muster a celebration.
Swinburne Law School adjunct professor Paul Latimer is scathing of the body.
"All talk, no action."
A joint submission by consumer bodies said the committee's powers were weak compared with other code-monitoring bodies.
Consumer Action Law Centre chief executive Gerard Brody, who co-signed that submission, says the committee needs more resources — just 13 staff oversee compliance for an industry where the big four banks made $14.4 billion in cash profit last year — and stronger powers.
"The BCCC needs stronger sanction powers to name providers and look at whether there should be penalties for particular breaches, where that might create an incentive for banks to comply with the law."
Secret wrongdoing
The committee has released the findings of just 10 investigations in three years. But most are de-identified, so you will never know which bank:
- Was "inflexible when the customer advised of serious illness, hospitalisation, or a death in the family"
- Did not put appropriate curbs on credit card transactions even after a customer told them they were a problem gambler with drug use and mental health issues
- Made a customer liable for repayments on a loan and credit card, both taken out without their knowledge by an emotionally and financially abusive ex-partner.
Those findings are not the entirety of the committee's work.
Speaking to the ABC, BCCC chief executive Prue Monument says more than 80 matters were considered last year but, "we publish those where we think that there is broader learning to be shared with the sector" and that findings recommend "improvements that we expect the banks to take from".
Five months for info
But the committee's reports also note that banks have failed to take its investigations seriously.
In one finding, an unnamed bank was asked about "systemic and serious" problems that could have affected more than 800,000 customers.
It was asked for information in September 2018 but did not provide it until February 2019, telling the committee it needed "another three months" to get more data.
The committee had to "continuously follow up … to receive responses" and the key bank employee dealing with it all left without telling them.
In that case, the committee dealt out its second-most-powerful sanction — a warning — and followed it with a threat.
"Should similar instances of noncompliance occur in the future, the BCCC may apply another sanction."
That means the committee could roll out its biggest weapon — actually naming the bank involved.
Mute enforcer
Last year, parallel reviews by the banking industry and by an independent body nominated by the committee itself brought out reports with a total of 135 recommendations.
The committee has notable problems, many of them listed in the submission it made to the review it commissioned into its own effectiveness.
The committee's ability to punish banks that breach the code is limited:
- The most severe sanction is to "name" a bank in its findings and that has only been done twice.
- One of those instances was a scandal already made public by the media.
- The committee does not have the power to report "systemic or serious non-compliance" to the regulator unless the problem is ongoing. So if a problem has stopped, regulator ASIC can not be told about it ever happening.
- Currently, the committee cannot fine banks or even make them run corrective advertising if they have done the wrong thing.
In a submission, the committee called for more powers and more options for punishment, saying expanded or more powerful sanctions would "enhance the current enforcement tools available to the BCCC and provide confidence to the community that banks are being held accountable" for sticking to the code.
"At present, the sanctions available to the BCCC do not include the imposition of any financial penalties, requiring corrective advertising, or suspension or expulsion from the ABA."
The committee has called for the ability to force banks to publish what they have done to fix problems, "on its website and apps as acknowledgement of the breach and the resulting actions".
This would lead to "greater compliance with the code due to the level of competition in the industry," the submission reads, "and would provide greater transparency for the community about how well banks comply".
But recommendations to fix the system rely on the Australian Banking Association — whose members are scrutinised by the committee — to make the changes to give it more power.
Self-regulation problems
Experts say it is a toothless watchdog.
The committee partly agrees, saying in the submission it wants stronger penalties so it can be taken seriously by the industry and public.
That is because writing reports about unnamed banks doing the wrong thing probably will not change anything. As the committee puts it:
"[This] may adversely impact its ability to achieve the desired outcome of driving improved code compliance."
The review of the committee said its convention of releasing reports about banks involved in breaking the law but not naming the offender could "be seen as unfairly hiding poor performance" and was inconsistent with other industries and regulators.
"Basically, self-regulation does not work," says Swinburne Law School adjunct professor Paul Latimer.
"Because self-regulation is conflicted. Self-regulation is regulating yourself."
The committee is at least tougher than the body it replaced.
The Code Compliance Monitoring Committee only named and shamed one bank in the previous decade.
Not a regulator
Committee chief executive Prue Monument says it plays an important role in independently monitoring the bank's compliance with the code of practice.
"And it is having a real impact on the behaviour of the banks."
This can be seen in some of the investigations made by the committee because of a tide of complaints.
Recently, the committee looked at issues with cancelling direct debit payments (regular fees for things like gyms and subscription services).
It used 378 mystery shoppers to test how difficult it was to cancel the payments, finding that 71 per cent of the interactions were compliant with the code — a substantial leap from 44 per cent when the survey was last done in 2018.
Both the committee and the banking industry's peak body insist it is not a regulator.
"The Code Compliance Committee does play a really important role in that broader consumer protection context. And obviously, there's a lot of legislation and regulation that the likes of ASIC and APRA [the Australian Prudential Regulation Authority] oversee," Ms Monument says.
"The BCCC's role is to open a window and shine a light on banks' practices. And we know in large organisations like this, things can go wrong."
More power wanted
The independent review of the committee recommended increased transparency and requiring a bank to publish on its website when it had done the wrong thing.
"That is something that the committee supports. We think that that level of transparency is in line with more contemporary practice," Ms Monument says.
The Australian Banking Association's review of the committee has 116 recommendations, but some are essentially technical, such as: "The acronym 'BSB' should be moved from the 'Acronym' section to the 'Definition' section."
Of the 19 recommendations in the review the committee called into itself, only 10 were within its jurisdiction to change.
Nine of the recommendations — including increasing sanctions — require the agreement of the very banks they are checking the compliance of.
Asked repeatedly about the situation where a compliance body is required to beg for powers to do its job from those it is tasked with overseeing, Ms Monument referred questions to the banking association.
"Ultimately, that is a decision for the ABA, and probably a question that you will need to pose to them."
So we did.
Banking body
Australian Banking Association chief executive Anna Bligh will not say if the organisation will support the nine recommendations the committee wants approved.
Despite the parallel reviews being published in November and December 2021, consumers will be waiting to see change.
"We're not going to apologise for taking the time to get it right," Ms Bligh said.
With recommendations from both reviews intersecting and overlapping, a "working group" of the association is talking to consumer groups and others involved in the field.
"Understandably, it's taking a while to work them through," Ms Bligh said.
"I anticipate that we will have a full response to both of those (reviews) by the end of this year."
Ms Bligh emphasises the association sees the committee's role as what it says on the tin: monitoring compliance with the code of practice.
"It was never established or ever meant to duplicate the role of government regulators. That would be entirely inappropriate.
"When it comes to enforcement of poor behaviour, that is the job of government regulators," she added, pointing aggrieved customers towards the bank's internal complaints systems and the Australian Financial Complaints Authority.
"AFCA is there to enforce [code breaches] through a tribunal that has plenty of powers and is free for customers.
"It's important to not confuse monitoring with enforcement. Monitoring is looking at how we're going, if we're getting it right.
"It is not the law. It is over and above the law. And again, we shouldn't mistake the BCCC or indeed the code for the legal framework that protects customers from misconduct in this country."
This marks a shift for the association, which has long noted that the Banking Code of Practice is the only industry code that has been considered and approved by ASIC and has the "weight of law".
The Association later clarified the comment, noting that the code hasn't been passed as legislation, like a law such as the National Consumer Credit Protection Act, so banks are not subject to penalties or fines for any breaches.
However, banks have agreed to be bound by the code and then put that in contracts for products like credit cards and mortgages.
That means customers can enforce the provisions of the code in court as a breach of contract. The more likely scenario is that they will take a dispute to AFCA, which aims to resolve financial disputes without customers having to take banks to court.
Cashing the cheque
Head of banks equity analysis at Jeffries, Brian Johnson, a veteran commentator on the industry, says banks "really don't want to see anything codified".
"Banks generally are scared of regulation coming through."
Banks have changed markedly since the royal commission, largely by selling off financial planning and insurance divisions and killing "exotic" products that caused them problems.
"I think the banks are becoming more crisp and pristine in becoming pure banking businesses as opposed to all these other riskier segments," Mr Johnson says.
"But behaviour speaks louder than words."
Tim van der Griend is about to give up on the $15 cheque. His brother is visiting in a few months but, if they can not cash it then, it is going in the bin.
A Commonwealth Bank spokesperson told the ABC that cheques would only be deposited into a recipients' Australian account subject to account verification checks, to ensure the cheque got to the right person.
"When it comes to remediating customers, it is always our priority to ensure customers receive their remediation payments even if they have since moved overseas or closed their accounts with us," they said in a statement.
Mr van der Griend said the bank managers he dealt with were very friendly, but the system was not.
"It feels almost as if they've made some deliberate choices to make it more difficult, so they don't have to pay all that money. That would be a really sad thing."
