December 20, 2017 / 3:57 AM / in a year

Australia's banks agree on new code of conduct ahead of wide-ranging inquiry

* Banks to provide fee transparency, clamp down on easy credit

* Consumer advocacy group says new code does not go far enough

By Paulina Duran

SYDNEY, Dec 20 (Reuters) - Australia’s banks have agreed to a new code of conduct that clamps down on easy access to household credit and promises better fee transparency, seeking to improve practices ahead of a broad inquiry into the scandal-hit sector next year.

Under the new code, the banks have committed to writing contracts in easy-to-understand terminology, a ban on unsolicited credit card increase offers and restrictions on how customers’ credit limits can be determined. They will also inform customers about service fees as soon as they are incurred.

The Australian Bankers’ Association (ABA) initially called for the code in July 2016, with the sector hoping to fend off a Royal Commission - a wide-reaching public inquiry with the power to compel witnesses and recommend criminal charges.

With a Royal Commission now decided in the wake of mounting political pressure, the hope is that the new code will help improve the public’s perception of the industry while it is underway. It will also be reviewed by the 12-month long inquiry.

“Banks most certainly do not underestimate the challenge ahead of them and will continue to make the necessary changes and improvements that their customers expect,” said Anna Bligh, chief executive of the ABA, which lodged the code with corporate regulator on Wednesday.

Scandals that have hit Australia’s big banks - some of the most profitable in the world - include using outdated medical definitions to avoid life insurance payouts.

Commonwealth Bank of Australia is also facing a civil lawsuit from the federal anti-money laundering agency, which accuses it of enabling more than 50,000 payments of criminal proceeds among other allegations. The bank has said the payments occurred but has blamed a computer glitch. It has also admitted to lacking proper monitoring and controls but denied other allegations.

Advocacy group Consumer Action Law Centre said the new code did not go far enough.

“At this stage the banks would simply be complying with the law when it comes to credit cards, but concerns remain about their responsible lending practices around cards,” said Katherine Temple, the group’s senior policy officer.

In line with other efforts to improve public sentiment towards the sector, all of the country’s “Big Four” banks have cut ATM fees, while some have also reduced international money transfer fees for foreign currencies.

Reporting by Paulina Duran; Editing by Edwina Gibbs

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