ANNUAL REPORT 2015–16 Analysis of self-reported breach and complaints data regarding the Customer Owned Banking Code of Practice and report on the compliance work undertaken by the Customer Owned Banking Code Compliance Committee during the 2015-16 period. December 2016 COBCCC Annual Report 2015–16 Page 1 of 45 Contents Foreword ............................................................................................................................... 4 Year at a glance .................................................................................................................... 5 About the Code ..................................................................................................................... 6 Key promises ..................................................................................................................... 6 Code Compliance Committee ............................................................................................ 7 Vision and principles ...................................................................................................... 7 Functions ....................................................................................................................... 7 Committee members ...................................................................................................... 8 Code Team staff ............................................................................................................ 9 Code monitoring activities ................................................................................................... 10 Annual Compliance Statement program .......................................................................... 10 Developing and improving the 2016 ACS ..................................................................... 10 Self-reported Code breaches ....................................................................................... 10 Self-reported significant Code breaches ...................................................................... 14 Code Subscribers’ compliance initiatives ..................................................................... 15 Internal dispute resolution ............................................................................................ 16 Annual Compliance Statements Verification Program ...................................................... 23 Objectives and conduct ................................................................................................ 23 Participants .................................................................................................................. 23 Findings ....................................................................................................................... 24 Investigations ...................................................................................................................... 25 Casework ........................................................................................................................ 25 Own Motion Inquiries .......................................................................................................... 27 Community engagement ................................................................................................. 27 Engaging with stakeholders ................................................................................................ 28 Stakeholder liaison .......................................................................................................... 28 Industry ........................................................................................................................ 28 Consumer advocates ................................................................................................... 28 Other ............................................................................................................................ 29 Publications ..................................................................................................................... 29 2016–17: Future outlook ..................................................................................................... 30 Appendix A: Code Subscribers as at 30 June 2016 ............................................................ 31 Appendix B: Comparative table of self-reported Code breaches ......................................... 33 Appendix C: Examples of self-reported Code breaches in 2015-16 ..................................... 35 Appendix D: Significant self-reported Code breaches in 2015–16 ....................................... 39 Appendix E: Comparative table of self-reported complaints ................................................ 42 Appendix F: Additional tables – breach & complaints data .................................................. 44 COBCCC Annual Report 2015–16 Page 2 of 45 About this report This report assesses customer owned banking institutions’ compliance with the 2014 Customer Owned Banking Code of Practice by analysing aggregated industry data for the period 1 July 2015 to 30 June 2016. Data has been collated from monitoring the activities of the 73 institutions that subscribed to the Code in 2015–16, and consists of the outcomes of the 2016 Annual Compliance Statement and Verification Program, and investigations into alleged Code breaches. This report also reviews the Customer Owned Banking Code Compliance Committee’s monitoring activities from 1 July 2015 to 30 June 2016, and shares examples of good industry practice – as well as the initiatives of Code Subscribers – to improve standards of practice and service in the Australian customer owned banking industry. COBCCC Annual Report 2015–16 Page 3 of 45 Foreword A focus on customers is built into the structure of customer owned banking institutions, setting them apart from other financial services providers. Customer owned banking institutions are ideally and uniquely placed to lead the sector in customer service standards. In this task, the Customer Owned Banking Code of Practice is a valuable tool. The goal of the independent Committee responsible for monitoring compliance with the Code in 2015–16 was to assist Code Subscribers to establish, maintain and share good practice for the benefit of customers, institutions and the industry as a whole. The year brought challenges for the customer owned banking industry as regulation and compliance obligations evolved. Against this backdrop, the number of breaches and significant breaches reported by Code Subscribers increased. The Committee believes that rather than indicating poorer standards, this is likely to be an indication that institutions are embracing positive breach reporting in both their frameworks and cultures, meaning that problems are resolved at an early stage and systemic issues are found and addressed. Many of the breaches reported in 2015–16 concerned the Code’s privacy provisions. This non-compliance was not reflected in related complaints, perhaps suggesting that customer detriment was contained. Nevertheless, the Committee noted the growth in self-reported privacy breaches and encourages Code Subscribers to review and strengthen their compliance processes in this area. Another development in 2015–16 was the decrease in complaints handled through institutions’ internal dispute resolution (IDR) processes. As this appears to have coincided with a growing focus on analysing and acting on customer concerns and feedback, we are hopeful that the trend may reflect earlier detection and rectification of breaches, which minimises customer impact and the number of resulting complaints. This year the Committee continued to work closely with the Customer Owned Banking Association (COBA), engaging productively with industry through COBA’s successful compliance forums, and sharing information through regular meetings. The Committee would like to thank COBA for its support of our activities. The work of the Code Team, under the leadership of Sally Davis, has also been integral to our success. The Committee thanks the General Manager, Sally Davis, the Compliance Manager, Daniela Kirchlinde, and their staff for their careful and dedicated work. Dr Sue-Anne Wallace Sally Davis Chairperson General Manager Customer Owned Banking Code Compliance & Monitoring Code Compliance Committee Financial Ombudsman Service Australia COBCCC Annual Report 2015–16 Page 4 of 45 Year at a glance 73 11 Investigated three alleged customer owned banking significant Code breaches institutions subscribed to the were self-reported by 7 Code Code breaches Subscribers (page 14) Code See page 27 in comparison to 80 in the in comparison to 5 previous year. significant Code breaches self- Analysed 73 Annual reported by 5 Code Compliance Statements Subscribers in the previous year See page 10 68% 818 Conducted 12 individual compliance verification of institutions self-reported Code breaches were self- audits Code breaches reported by institutions See page 24 7% 27% Gave four presentations on from the previous year from the previous year (page 10) (page 10) Code issues as part of the COBA Compliance Forum 30% See page 30 of self-reported Code breaches related to privacy obligations Attended six industry and (page 12) consumer conferences, in comparison to 20% in the including two presentations previous year See page 30 14,100 93% Engaged with consumer of self-reported complaints advocates, ASIC, FOS and self-reported complaints were resolved within 21 days handled