Significant Breaches reported to the Committee The table below aggregates the main areas of significant breach self reported by banks in the Annual Compliance Statements for the two years year ended 31 March 2009. A brief reference is also included on remedial actions advised by banks.
| Guarantees | One bank advised of a significant breach concerning non compliance with its equipment leasing business. There were other instances advised by two other banks relating to deficiencies in guarantor documentation and procedures. The banks have implemented corrective action including advice to guarantors impacted and revision of documentation. [Clause 28] | |
| Interest Rates, Fees and Charges | Banks charging incorrect fees to customers in variance to or without adequate disclosure in the banks’ Product Disclosure Statements (PDS). There were other instances of incorrect fees and interest rate charges that resulted from system and process errors. The banks concerned amended the relevant PDS and corrected process breakdowns. The incorrectly charged amounts were also refunded to the customers impacted. [Clauses 2.2, 10 and 18] | |
| Disclosure of Terms and Conditions | Breaches of the disclosure related provisions of the Code relating to customers accessing accounts over the internet; credit card chargebacks; and account closures. The banks concerned amended the disclosures to conform with the Code. [Clause 10, 18 and 33] | |
| Privacy | Instances of banks failing to adhere to privacy requirements, including incorrectly providing customer information after bank staff failed to properly identify the customer. There were other significant one off incidents involving lost or incorrectly addressed mail containing sensitive customer information. Banks instituted procedural improvements and in some cases issued apologies to the customers concerned. [Clause 22] Customers in Financial Difficulty- A number of banks advised the Committee that the Banking and Finance Ombudsman had identified a systemic issue in respect to its procedures for dealing with customers in financial difficulty. The issues are being addressed by all banks in conjunction with recent industry and government initiatives relating to dealing with customers in financial difficulty. [Clause 25.2] |
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| Debt Collection Guidelines | Bank staff not adhering to various aspects of the Debt Collection Guidelines referred to in Clause 29 of the Code. These matters included non compliance with the Centrelink Code; inaccuracies in customer default data provided to credit reporting agencies; and incorrect content of collections letters. The Banks concerned instituted procedural improvements. [Clause 29] | |
| Advertising | Instances of marketing material not fully informing customers of fees and product features, including interest rates. Corrective actions included the withdrawal and amendment of marketing material and compensation to affected customers. [Clause 30]. | |
Total Breaches 2008-09: the detail
CCMC - Breaches identified through Code Monitoring
The CCMC continues to receive complaints and investigate alleged breaches of the Code.
The number of complaints raised with the CCMC has remained relatively constant. The recent review of the Code and the operations of the CCMC noted that the level of complaints is surprisingly low and has suggested that better integration with FOS and increasing profile will raise this number significantly.
Over the next reporting period we will be seeking to understand what activities have been undertaken by Banks to improve the services and compliance levels with the issues identified in this report.
Banks - Self reported breaches
Taking responsibility for managing and regulating the commitments of the Code is a key aspect of self regulation. Code subscribers are continuing to develop and integrate Code breach reporting into their overall breach management systems.
This compliance reporting to the CCMC provides a better understanding of the issues within the Banks that they have identified through internal risk and compliance management around Code requirements.
That the bulk of issues in relation to the code have been identified in this way is arguably an indication of the success of self regulation.
The challenges to the CCMC in the next reporting period will be to test the Banks' responses to the breaches identified and examine what improvements have occurred as a result of the breach identification.
Overall the total number of breaches has increased, with two Code subscribers reporting a significant number of privacy related breaches and thus increasing the overall total of breaches identified through internal controls.
Ideally, if process improvements have occurred as a result of addressing the breaches, banks should be able to quantify the benefits of those activities and provide a cost benefit analysis in relation to the improved services.
Breaches identified through EDR
External Dispute Resolution provides the Banks with an opportunity to get an external view of complaints that have not been resolved through internal dispute resolution.
The recommendations and/or determinations provide the Banks with some guidance on how Code related matters will be interpreted and should be a prompt for Banks to undertake further analysis to ensure matters are not systemic or in breach of other obligations.
Banks have identified that through EDR, there have been breaches identified across the Code requirements.
Overall there is an increasing trend in the total number of identified breaches, which is not surprising given the declining economic conditions and increased complaints across financial services.
Over the next reporting period part of our focus will be seeking to understand what activities have been undertaken to improve the services and compliance levels with the issues identified.
Significant Breaches reported to the Committee in the 2007/08 and 2008/09 Compliance Statements
Significant breaches were reported in the following areas:
- guarantees
- interest rate fees and charges
- disclosure of Terms and Conditions
- privacy
- customers in financial difficulty
- debt collection guidelines
- advertising