Why stronger banking reforms are needed
Last year was one the banks probably would prefer to forget. A relentless series of scandals and fines kept them on front pages and at the forefront of the political agenda.
But the banks are approaching 2018 as a fresh start, using the upcoming royal commission as a way to clear the air. In a bid to get in ahead of the game, they have released a new voluntary code of conduct to try to win back consumer confidence.
The Australian Bankers' Association's new industry code aims to make products fairer for consumers and has made a commitment to more ethical behaviour.
Key changes include:
- Telling customers before they are about to be charged a fee, giving them time to pay off their credit card or top up their account.
- Notifying customers before the interest-free period on their card ends.
- Giving customers the ability to cancel their credit cards online, rather than being forced to do so over the phone or in person at a branch.
- Providing customers with a list of direct debits and recurring repayments, making it easier for them to switch.
- Providing more safeguards to guarantors who help family members with their home loans.
The banks are making a concerted effort to make their products fairer. The revised code is a legitimate step in the right direction but it's by no means pens down just yet for our banks.
When it comes to credit cards, more reform is still needed in relation to interest rates. RateCity data shows that just 4% of cards offer a rate under 10%. Our banks can do better than this.
We would also like to see the credit card companies increase the minimum repayments people are forced to make each month. Currently most cards require customers to only pay between 2% and 3% of their bill - which is a pittance.
By increasing the minimum repayments to 10%, customers would be forced to pay back a reasonable amount of debt and avoid paying some unnecessary interest.