A refreshed banking industry code aims to stop banks charging fees to dead people and ensure they only extract fees from customers in exchange for services actually provided.
The Australian Banking Association on Wednesday announced the amendments to its Code of Practice to end ‘fees for no service’ and get banks to refund any fees incorrectly levied.
It also supports changes to the 2013 Future of Financial Advice reforms to remove all legislative provisions allowing grandfathered payments and trail commissions.
The voluntary charter will come into effect from July 1 next year in the wake of the interim findings of the banking royal commission, released almost two weeks ago.
The big four banks have already said they will end grandfathered commissions on wealth products.
The Australian Securities and Investments Commission has been sent the amendments to the ABA code of practice but has yet to approve the changes.
“It has always been wrong for organisations to charge fees without providing a service,” ABA chief executive Anna Bligh told reporters on Wednesday.
“Today the industry is putting beyond doubt that this practice has no place in Australian banking.”
The latest ASIC data indicates customers could receive more than $1 billion in refunds for fees charged for no service.
The ABA’s code of practice is binding and enforceable, Ms Bligh said, giving customers the right to take signatories to the new Financial Complaints Authority which can order banks to repay fees or pursue other actions.
Customers can access the FCA for free from November 2018.
“The industry will also support law changes to end grandfathered payments and trail commissions in financial advice,” Ms Bligh said.
The code changes will make absolutely clear that customers will be refunded any money charged after a customer has died, she said, adding she did not know how much was owed to deceased estates.
In his interim report, the banking royal commissioner Kenneth Haynes accused the sector of greed, saying charging the dead amounted to, “the pursuit of short-term profit at the “expense of basic standards of honesty”.
Ending provisions for grandfathered commissions would help end conflicts of interest between customers’ best interests and incentives for advisers, Ms Bligh said.