CANBERRA, Australia–Perhaps fittingly, in what appears to be a scenario upside down when compared to that in the U.S., bankers in the Land Down Under are calling for the closure of a “loophole” in consumer protections that allow credit unions and others to act in ways they say don’t protect borrowers of short-terms loans.
In fact, the Australian Banking Association wants all financial institutions to act in ways that comply with the spirit of its code of practice, according to the Sydney Morning Herald.
The bankers want all Australian credit businesses, including credit unions, building societies, and payday lenders to meet the same criteria as banks have committed to under the industry's revamped code of conduct.
The call for change was made in a recent submission from the ABA to the royal commission, in response to its round of hearings relating to small business lending, the Morning Herald reported.
“The submission, which has not been made public, argued there was a gap in the current arrangements, which created uncertainty for consumers about the protections available to them,” according to the publication.
What Code Includes
The ABA's new code will include a range of changes, including requiring banks to alert customers when their interest-free period on a credit card is about to end, and forcing banks to give small businesses more notice when they decide not to roll over a loan, the Sydney Morning Herald reported.
Australian Banking Association CEO Anna Bligh told the publication customers should be protected regardless of the type of institution they banked with.
“Other lenders are offering similar products however the standards are not the same, which creates both confusion for customers and a loophole in protections," Bligh was quoted as saying.
‘Fundamental’ Differences
Michael Lawrence, the chief executive of Customer Owned Banking Association, to which credit unions in the country belong, said the group would look at the ABA's code when it reviewed its own industry's code of practice. But he said it would not adopt the ABA's code in its entirety because its members were fundamentally different.
"Our customers own their organizations, not shareholders,” he told the Morning Herald. "Our members make profits, but they are not about maximizing profits."