BANK customers with spiralling debts will have stronger bargaining power with their financial institution under a new code of banking practice that will come into force next year.
The legally binding code will force the banks to be more proactive in identifying customers in financial trouble and then working with them to find a solution.
Around 15,000 disputes were lodged with the Financial Ombudsman last year involving the banking sector – as more and more families found it harder to balance their budgets in a slowing economy.
The Australian Securities & Investments Commission already requires lenders to give borrowers 30 days to make payments after being served with a default notice, and to inform them about their rights and options to apply for relief on the grounds of financial hardship.But the new code will improve the powers of the independent chair of the Code Compliance Monitoring Committee to intervene in disputes between customers and banks.
Banks will also be obliged to send customers with a mortgage on their home or investment property an annual reminder about their insurance obligations. A recent survey showed only 25 per cent of bank customers were aware there are programs available to help households in financial hardship.
Australian Bankers Association chief executive Steven Munchenberg said the earlier people contact their bank about financial trouble the better.
“This code is part of a drive we have been on for some time to show that banks will help in bad times and are not just fair weather friends,” he said.
The new code was supported by consumers groups as a positive move but more still needs to be done.
The peak body for financial counsellors Financial Counselling Australia executive director Fiona Guthrie wants to see the banks offer Centrelink customers no fee accounts.
“Many people are still not accessing the right accounts,” she said.
“Access to a bank account is fundamental for participation in Australian society.”
The updated Code of Banking Practice is to come into effect on February 1 next year