31 October 2017

Fix direct debit problem now, compliance body tells banks

Customers continue to be frustrated by bank staff providing incorrect information about cancellation of direct debits, according to a report released today by the Banking Code Compliance Monitoring Committee.

The report found that more than half (54%) of bank staff tested gave customers incorrect responses to questions about cancellation of direct debits.

Under the Code of Banking Practice, banks cannot direct or suggest that their customers first approach the merchant to cancel direct debits.

Christopher Doogan AM, Independent Chairperson of the Banking Code Compliance Monitoring Committee, said the ability for people to cancel a direct debit via their bank is an important right that gives them control of their finances.

“The Code of Banking Practice recognises and safeguards this right by requiring banks to accept and promptly process a customer’s request to cancel a direct debit,” he said.

He said a bank’s failure to accept or process a cancellation request could be particularly difficult for vulnerable customers on lower or fixed incomes.

Such failures could lead to overdrawing an account, resulting in additional fees and charges to be imposed on customers by the bank and merchant; transactions being dishonoured, also resulting in extra fees; or loss of funds, which customers may have needed for other purposes.
The study follows previous research in 2008, in which 80% of staff responses regarding cancellation of direct debits were non-compliant, and 2011, when results improved slightly (66% non-compliance).
The current report was based on a small-scale ‘mystery shopper’ study, conducted in 2017, of 15 bank brands representing 12 banking groups. It found that contact or call centre staff were more likely to offer compliant information than those in bank branches.
“On many occasions the findings fell short of expectations,” Mr Doogan said.
“In our view, 54% non-compliance is still unacceptably high, particularly after years of attention on this industry-wide issue.”
“We now want to see a permanent fix. Having consulted with banks, we have made fresh recommendations. We will also revise and intensify our compliance monitoring and reporting on banks’ direct debit obligations.”

The report makes seven recommendations to banks about cancelling direct debits including clear and simple guidance on bank websites, exploring ways to use online banking, and vastly improved communication and training of frontline bank staff.

• The Banking Code Compliance Monitoring Committee’s role is to assure the community that subscribing banks honour their obligations to their customers under the code. The Committee monitors banks’ practices, identifies and reports on industry-wide problems and encourages continuous improvement in the sector.
Report: Improving banks’ compliance with direct debit cancellation obligations PDF (580 KB, 18 pages)

Information about the Banking Code Compliance Monitoring Committee is available on its website, www.ccmc.org.au.


Further information:

Sally Davis
Chief Executive Officer
Banking Code Compliance Monitoring Committee
(03) 9613 7341


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