The Banking Code Compliance Monitoring Committee (CCMC) has released its report Assisting customers in financial difficulty (Part 1).

The CCMC undertook its inquiry to assess and benchmark bank compliance with the current financial difficulty obligations of Clause 28 of the Code of Banking Practice (the Code).

The inquiry made 14 recommendations for improvements in the way banks help customers overcome their financial difficulty.

The inquiry was also intended to assist banks in the transition to the new version of the Code. Among other things, the new Code increases banks’ commitments to customers in financial difficulty and creates new commitments to vulnerable customers. The revised Code will commence on 1 July 2019.

Part 1 of the CCMC’s report reviews and assesses the core components of bank financial difficulty programs, with a focus on increasing accessibility to customers, enhancing frameworks to better support genuine dialogue, and improving the ability of banks to help customers effectively overcome financial difficulty.

Part 2 of the report, scheduled for release in the first half of 2019, will explore how banks should consider their financial difficulty responsibilities in view of the expanded obligations of the new Code.

The CCMC found that banks have financial difficulty programs that generally comply with the requirements of the 2013 Code. The CCMC’s review of these policies and processes highlighted both examples of good practice and areas where banks can improve.

Job-related issues, usually reduced income, reduced working hours or unemployment, were the main reason for people seeking financial difficulty assistance (42% of the total). Other reasons included accidents, illness (including mental illness), family separation and family violence. Banks granted about seven in ten requests for assistance a year.

The CCMC expects all subscribing banks to consider and implement its 14 recommendations.
1. Ensure that financial difficulty assistance information is prominently presented and readily accessible on bank websites and other digital platforms, such as smartphone or tablet applications.
2. Adopt an effective training program that ensures customer-facing staff – including, but not limited to, frontline (branch and call centre staff), financial difficulty, debt collection, and lending staff – receives appropriate financial difficulty training relevant to their work. Ensure that such training is provided at induction with regular refreshers.
3. Develop and incorporate criteria for credit assessment processes to identify indicators of financial difficulty having regard to applications for new credit, top-up credit, and refinancing.
4. Ensure that the reasons for a customer’s financial difficulty are captured and recorded in a manner that can be monitored and reported.
5. Adopt or revise written policy on supporting documentation to ensure it is not needlessly inflexible or burdensome, and that supporting documentation is limited to what the bank reasonably needs in order to understand the customer’s circumstances.
6. Ensure that the written policy on supporting documentation expressly contemplates circumstances under which documentation requirements may be limited or waived, especially for customers who are particularly vulnerable.
7. Adopt or revise written policy on third party authorisations to ensure it requires only such information necessary to satisfy privacy obligations and is not needlessly inflexible or burdensome.
8. Ensure that written policies on financial difficulty contain sufficient detail to reflect the end-to-end process followed by staff, including identifying where staff discretion is appropriate.
9. Promote a culture that reflects the values of non-judgment, flexibility and compassion to support tailored, customer-centric decisions and out-of-the-box thinking. Incorporate targets and measures in performance review processes and reward programs that encourage creative, flexible decision-making.
10. Ensure that the financial difficulty assistance decisions achieved by self-represented customers and customers represented by authorised third-parties are recorded and monitored to promote decisions that are consistent, regardless of representation.
11. Ensure that the case-by-case assessment of a customer’s circumstances expressly considers whether the customer would benefit from a longer-term solution. Where a customer’s circumstances indicate that a short-term solution will not help the customer overcome their financial difficulty but the longer-term solution may be effective, the longer-term solution should be favoured.
12. Adopt a written policy on early access to superannuation that expressly requires staff members recommend a customer seek independent financial advice. Effective training for this policy needs to be implemented for all staff who may deal with such a request. Finally, the number of customer requests for the early release of superannuation benefits, together with the outcome of such requests, is recorded in a manner that can be monitored and reported.
13. Review and amend decision letter templates to ensure the content is suitable for the intended purpose, contains all relevant information and is presented in plain language.
14. Develop and implement metrics to assess the effectiveness of customer financial difficulty arrangements. Where possible, monitor the performance of the loan and the customer’s financial position for at least 12 months after the end of financial difficulty assistance to assess sustainability.