31 May 2018: New Code of Banking Practice published today

The New Zealand Bankers’ Association has today published the sixth edition of the Code of Banking Practice.  The sixth edition adopts a principles-based approach which the Banking Ombudsman Scheme (BOS) supports. 

The code is a high-level statement of what customers can expect from their banks.  It sets out the principles of good banking practice and sits above the detail that is contained in each bank’s terms and conditions.

In our view it makes sense for the code to be expressed as principles of customer commitment.  These are promises to the customer from the banks that should remain ‘evergreen’, regardless of what new technologies and products emerge on the banking landscape.  It gives BOS more flexibility in determining what good banking practice is and how banks should conduct themselves.

A principles-based approach also makes the Code more accessible to customers. If codes of practice are too prescriptive and detailed, the message for customers on what their rights are can also get lost in the detail.  We want customers to be informed and empowered to apply their rights.

There is no change to the existing consumer protections in the sixth edition of the code, rather the intention is to give more flexibility in determining what good banking practice is and how the banks should conduct themselves. 

Fraud liability

In our submissions on the draft code, we strongly supported retaining a clear statement about the reimbursement of genuine victims of fraud.  We submitted that an express commitment to this principle was appropriate to ensure consumer protection.  We are pleased that commitment has been retained. The response from NZBA to our submission is attached.

The clause enables victims of card and electronic banking fraud to be reimbursed for losses (to the extent the customer has not acted fraudulently or negligently or caused or contributed to the loss by breaching the terms and conditions).

Our data indicates an increase in scams occurring in New Zealand. We have seen a 38% increase in fraud related cases so far this financial year (compared to the same period last year).  We regularly share insights with the banks about the cases we are seeing.

We are also concerned about the broader impact this increase in scams is having on New Zealanders, not only in terms of financial losses, but also in terms of stress and emotional impact, and the loss of trust in core services.  We know from the CERT NZ data released this week that 87% of losses impact New Zealanders aged over 55.  We are therefore taking the initiative to ensure key messages get through.  We are working with the industry to lead a fraud prevention campaign to raise awareness about avoiding scams and exploring opportunities for joint initiatives with the telecommunications industry.

Attachment(s): Letter from NZBA May 2018

ENDS

Media contact: Nicola Sladden 021 808 059

Please attribute all comments to the Banking Ombudsman, Nicola Sladden