Earlier this year, the Supreme Court determined that a guarantor was not responsible to pay the bank over $6 million, because the bank had not complied with the Code of Banking Practice (National Australia Bank v Rice [2015] VSC 10). Although this decision is under appeal, it illustrates the importance of some industry codes to consumers.
Industry codes were once regarded as a poor substitute for effective laws, but these days industry codes can be legally enforceable – in this case because terms of the Code are considered to be part of the contractual terms between the bank and its customers. Codes generally enhance consumer rights with provisions that address common problems – some of which have been initially identified by consumer organisations and community legal centres.
The vast majority of banks, credit unions, mutual banks, mutual building societies, insurance companies and insurance brokers have signed up to a relevant industry code. All these industries are subject to an industry ombudsman scheme (either Financial Ombudsman Service or Credit and Investments Ombudsman). Those schemes can make determinations that are binding on the industry member if necessary, and in making a determination the schemes have regard to the law, fairness, any applicable code and good industry practice. In some cases the code may be used as guidance for what is ‘good industry practice’, meaning that the conduct of some institutions may be measured against the relevant code even if they haven’t agreed to be bound by the code.
The four codes of practice relating to financial services are:
Some of your clients may be assisted, in particular, by some of the following code commitments:
In almost all cases the customer will be able to access the relevant industry ombudsman scheme, which is the best way to have the dispute resolved. However, a third party in an insurance matter may not have access to the ombudsman scheme, and a complaint to the Insurance Code Monitoring Committee may help resolve the issue.
Each code is overseen by an independent committee, which can receive and investigate alleged code breaches. This information can help to ensure an industry member’s compliance with the code and can help to stop systemic problems impacting on other consumers. However, it is the ombudsman schemes – not these committees – that resolve individual disputes.
For more information:
about the codes:
https://www.fos.org.au/custom/files/docs/code-of-practice-pocketsized-toolkit-flyer.pdf
https://www.fos.org.au/about-us/codes-of-practice/
or email: [email protected]
about the ombudsman schemes:
Carolyn Bond
Carolyn was spokesperson for Community Law Australia campaign and was co-CEO of the Consumer Action Law Centre. She is a member of the Customer Owned Banking Code Compliance Committee.