Banking standards and disputes
Banking standards are determined by the Code of Banking Practice. The Code outlines the banking industry's obligations to customers. Whilst the Code is not legislation, banks that adopt it are contractually bound to honour the obligations the Code sets out.
The Code ensures customers rights with regards to such things as:
- Privacy and confidentiality
- Statements of account
- Direct debits
- Disclosure of fees and other terms and conditions
- Changes to terms and conditions and fees and charges
- Complaints handling
- Debt collection
Be aware that a new revised Code has been released, but it does not come into effect until 1 February 2014. The revised Code strengthens obligations in relation to a customer's financial hardship, rights in relation to chargebacks where transactions are disputed, on-selling of debts to third parties, and enhanced obligations with respect to Indigenous Australians and elderly customers or those with a disability.
If you think your bank has breached the Code you need to first raise it with your bank. It is a condition of the Code that all banks that adopt it must have an internal complain handling service to deal with customer complaints. If the complaint is not handled to your satisfaction you can then contact the Financial Ombudsman Service for further assistance.
Financial Ombudsman Service
The Financial Ombudsman Service (FOS) is an independent dispute resolution service for individuals and small business holders. Access to the Financial Ombudsman Service is free and it has proved to be an effective forum for people with certain types of complaints.
The FOS can generally hear disputes if:
- the dispute is between an individual or small business and a bank or financial institution (including credit unions);
- the financial services provider is a member of FOS;
- the dispute relates to:
- an act or omission by a financial services provider in relation to a financial service in Australia; or
- any act or omission by a financial services provider relating to confidentiality and in the case of an individual disputant, privacy;
- the amount claimed is less than $280,000;
- the event to which the dispute relates occurred no more than 6 years earlier.
There are some types of disputes which the FOS is unable to consider, including commercial judgments and policies about fees, interest rates and branch closures. The FOS can only consider disputes about financial services provided by banks and non-bank members who are members of the FOS scheme.
Further information about the types of disputes the FOS can consider is available on the Financial Ombudsman Service website. In addition, complaints about insurers are also considered by FOS.
The FOS may investigate a complaint and attempt to resolve it by negotiating between the financial services provider and customer. If this fails, the FOS may recommend a solution for the parties to consider. If this also fails, the FOS may make an award of up to $280,000. If the customer accepts the award, it is binding on the financial services provider, and the customer loses the right to have the dispute heard by a court. However, should customers choose not to accept the award, the financial services provider cannot enforce the award. The customer may then proceed to have his/her case decided by a court.
The Financial Ombudsman Service can also investigate complaints against credit unions.
Other credit providers
Smaller credit providers such as non-bank owned finance companies and mortgage originators are not be covered by the Financial Ombudsman Service. They will generally be covered by another dispute resolution service such as the Credit Ombudsman Service Ltd (COSL). A customer can easily check if their credit provider is a member by asking their credit provider to give details of their external dispute resolution service, by ringing COSL or by going to the website.
COSL operates in a similar manner to the Financial Oumbudsman Service. It is funded by its members, yet is required to act impartially in assisting complainants to resolve disputes. COSL's website has information about how it will handle typical disputes, and provide guidance on what to expect.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.