Just as the Senate Rural and Regional Affairs and Transport References Committee is winding up its inquiry into the impact of regional bank branch closures, another parliamentary committee inquiry with banking at the core is getting underway.
The Parliamentary Joint Committee on Corporations and Financial Services has commenced an inquiry into financial abuse in Australia, focusing on the role of financial institutions in identifying and preventing abuse, the effectiveness of current laws and potential areas for reform.
The terms of reference were published earlier this month, the committee will take submissions up to June and it plans to report in October.
The committee’s chair, Senator Deborah O’Neill said: “With the shift to online services, we need to investigate how family and domestic violence has shifted there too, and whether our regulatory systems are equipped to adequately deal with it.”
Financial abuse has been on the agenda since at least 2017, when the Australian Law Reform Commission produced a report on elder abuse that said banks needed to do more to prevent it.
The ALRC recommended that banks be required to take "reasonable steps" to identify and prevent the financial abuse of vulnerable customers, with a standard included in the Code of Banking Practice.
Following the report, the industry responded by adding provisions to the code. Individual banks added extra protections, with measures including “two to sign” arrangements, card limits and transaction notifications.
Banks have also taken action to stop so-called “abusive payments”, where abusive and threatening messages are included in the message fields of electronic payments.
The Australian Banking Association has also campaigned to get government to take up the ALRC’s call for a more co-ordinated legislative approach to the problem.
In 2022, the ABA called on the country’s attorneys-general to implement the following recommendations of the ALRC report: agree to nationally consistent laws governing enduring powers of attorney; establish a national register of power of attorney instruments; and designate a body to receive and investigate reports on suspected cases of abuse in each state and territory jurisdiction.
More recently, banks have changed their terms and conditions to give staff authority to cut off customers identified as committing financial abuse.
Under the heading of “unacceptable account conduct”, NAB’s terms and conditions say it can suspend, cancel or deny individuals access to their savings and transaction accounts if the bank identifies them as engaging in financial abuse.
Despite these efforts, there have been ongoing calls for the banks to do more. In 2020, the Gendered Violence Research Network at the University of New South Wales produced a report saying survivors of abuse needed the support of financial institutions to pay off debt, repair their credit scores and get into stable housing if they were to achieve economic independence.
In 2022, the Customer Owned Banking Code Compliance Committee called on customer owned banks to review their approach to dealing with vulnerable customers. It said very few code subscribers had policies and processes that cover all the vulnerable circumstances detailed in the Customer Owned Banking Code of Practice.
And last year, the Banking Code Compliance Committee called for tighter controls and monitoring of guarantee processes. It found that all audited banks had control gaps in their guarantee processes, including failing to provide full disclosure of key information to guarantors.
Consumer groups and community legal centres have long argued that there is a link between guarantees and financial abuse. Evidence at the Hayne royal commission revealed unethical behaviour by banks towards guarantors.