Trending Financial News 1 July
New banking code in force today
A new Banking Code of Practice comes into force today, the 1 July 2019. The new code “represents the most significant increase to customer protections under a code in the industry’s history,” said Australian Banking Association chief Anna Bligh.
“Banks understand they need to change their behaviour,” said Ms Bligh, “this new rule book represents an important step in earning back the trust of the Australian public.”
Under the new code, banks must:
- Offer low-fee or no-fee accounts to low income customers and promote them.
- Give loan guarantors a three-day grace period on all guarantees
- Remind customers when their when introductory credit card period ends
- Create simpler, fairer loan contracts for small business loans
- Help customers transfer their direct debits and recurring payments to a new bank to make switching easier.
From the 1 July, the new Banking Code of Practice requires banks to no longer:
- Offer unsolicited credit card limit increases
- Charge commissions on Lenders Mortgage Insurance
- Sell insurance with credit cards and personal loans at the point of sale.
Customers with a complaint against their bank can contact the Australian Financial Complaints Authority which has the authority to order compensation. The Banking Code Compliance Committee monitors the bank's compliance with the code.
What rights do bank customers have under the new banking code of conduct?
A new Australian Banking Code of Practice comes into force today, the 1 July 2019. The new code requires banks to:
- Delay offering add-on insurance for credit cards and personal loans (from 1 July 2018).
- Make no unsolicited offer to increase credit card limits (from 1 Jan 2019).
- Give reminders about introductory offers ending on credit cards.
- Give customers ability to reduce their credit limit or close their card accounts online (from 1 Jan 2019).
- Assess a customer’s ability to repay their entire credit card limit within three years (from 1 Jan 2019).
- Reach out and provide help to customers at risk of financial difficulty.
- Tell a customer if they are reported for a payment default.
- Take extra care with vulnerable customers.
- Provide and promote low fee and no fee accounts for low income customers.
- Provide a list of direct debits and recurring payments to customers trying to switch banks.
- Stop charging fees to dead customers.
- Take extra care with co-borrowers to ensure they are receiving a benefit from a loan.
Which big banks are winning more home loan customers?
Commonwealth Bank and Westpac are growing their mortgage books strongly with new home loan sales while ANZ and NAB’s loan sales contracting.
ANZ’s total loan portfolio declined $800 million in May according to official data from the Australian Prudential Regulatory Authority, including a $200 million drop in owner-occupied home loans.
NAB has lost $400 million in investment home loans and $100 million in owner-occupied loans in May 2019.
Commonwealth Bank (with Bankwest) added $1.9 billion in loans during May 2019 including $1.6 Billion in owner-occupied loans.
Westpac (and Bank of Melbourne, BankSA and St George Bank) grew its loan book by $1.6 billion in May.
Credit card fees rise, points go down
Fees on credit cards have risen more than 20 per cent in the last five years and purchase interest rates have not fallen along with the falling official interest rates. However the average value of credit card rewards points has also dropped over the last three years according to a report in The Age.
A spokesperson for the Australian Banking Association said there is more than 200 credit cards in the Australian market.
Consumers need to shop around and find the card that’s right for them said the ABA spokesperson, whether they want frequent flyer rewards, bonus schemes, or simply the lowest interest rate.
New credit cards give consumers more low-rate options
Credit card interest rates have not fallen significantly as the official cash interest rate has fallen over the last five years. Many credit cards are still charging 20 per cent pa or more on outstanding balances.
However, there are now more low fee credit cards in the market for consumers to consider. Commonwealth Bank recently introduced a low-fee credit card, the Essentials card, with a purchase rate of 9.90 per cent.
Community First CU has a Low rate Visa card currently charging 8.99 per cent pa.
Compare low rate credit cards from Australian banks, credit unions and other credit card issuers at InfoChoice.