Own Motion Inquiry ‘Direct Debit Follow Up’

The Customer Owned Banking Code Compliance Committee (the Committee) has recently conducted an inquiry into subscribing institutions’ compliance with section D20.1 of the Customer Owned Banking Code of Practice (the Code). This inquiry follows two previous Committee inquiries dealing with the same Code obligation conducted in 2010 and 2012. Under section D20.1, an institution is required to stop a direct debit arrangement linked to a member’s transaction account upon the member’s request – and to do so promptly.

This inquiry developed a better understanding of how subscribing institutions have adopted the recommendations following the Committee’s 2012 inquiry and whether compliance in this area has improved.

This inquiry confirmed that, while there appears to have been some improvement, compliance with section D20.1 remains patchy and only a minority of subscribing institutions are achieving best practice standards. As a result of the findings of this inquiry, the Committee has made six recommendations for improvements to policy and procedures, customer information and compliance monitoring.

Some of the key findings include:

  • Subscribing institutions appear to have a range of procedural approaches to direct debit cancellation in place. While only a minority of institutions measure processing times for direct debit cancellation requests, all stated that these cancellations are processed promptly and typically on the same day.
  • An audit of 17 large institutions’ website information indicated that there are still problems with the written advice provided to customers online. One third of the institutions included in the audit still used wording that was either unclear or, in one case, incorrect and non-compliant. These results suggest no improvement since 2012.
  • Most institutions are lagging behind best practice with regard to the availability and accessibility of online information about direct debit cancellation. Some institutions do not provide such information and, where they do, it is rarely easily discoverable via keyword searches.
  • 52% of institutions have conducted a compliance review using the Committee’s 2012 Compliance Checklist. For most of these institutions, the review was a valuable process that highlighted compliance problems or best practice improvements to be made.

A copy of the report can be found here.

 

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