Banks hint at backdown on fraud

The New Zealand Bankers Association (NZBA) has hinted it may amend its draft code of banking practice to include some assurance regarding the rights of consumers who are victims of internet banking fraud.

The association, which represents banks, was criticised by Consumer NZ after it proposed removing a fraud guarantee from the existing code and said it would not release public submissions it received on the proposed changes until the new code was finalised.

Banking Ombudsman Nicola Sladden said she also supported ‘‘a clear statement of principle’’ in the code about fraud.

The current code, which is being reviewed, states banks will continue their practice of reimbursing genuine victims of internet banking fraud.

The NZBA said in a statement that it was working with its member banks on issues raised during the public consultation process.

‘‘One of the issues is around retaining a statement in the new code about customers being reimbursed in the case of genuine fraud. We expect the final code will constructively address issues raised through the public consultation process,’’ it said.

The NZBA said it hoped to finalise the code within ‘‘the next few months’’.

‘‘From the outset of the review we’ve said that nothing in the new code of banking practice is intended to reduce customers’ existing rights,’’ a spokesman said.

If the NZBA does add a comprehensive fraud guarantee to the code, it will be the second time banks have backed down on moves that could potentially reduce consumers’ fraud protections.

Between 2007 and 2012, banks abandoned controversial conditions on fraud reimbursements, in the wake of pressure from the public and consumer groups.

The NZBA now wants to move from a ‘‘rules-based’’ code to a set of principles that avoids duplicating banks’ individual terms and conditions.

The existing code runs to almost 10,000 words, while the draft code released last year comprises only 1200 words.

But Massey University banking expert Claire Matthews questioned whether some elements of the proposed code were too vague.

The new draft code appeared to remove a promise from banks to ‘‘co-operate in a timely manner’’ with requests to move accounts from one bank to another, she said.

Sladden supported the move to a principles-based code, but said she had suggested the NZBA develop guidelines that would ‘‘provide more clarity about the detail’’ of how the principles in it would be applied.

There were some overarching principles in the draft code that she expected would govern banks’ practices with regards to moving accounts, such as a duty to act fairly and ethically, she said.

If it was not clear how principles in the code should be applied, she had the jurisdiction to determine ‘‘what is the appropriate industry practice and what is fair’’, she said.

The NZBA spokesman indicated it would consult ‘‘key stakeholders’’ – including Sladden, Consumer NZ and Internetnz – about changes to the draft code before finalising it, but did not intend putting it back out to the public.

Payments NZ was responsible for the rules relating to bank switching, he said.

‘‘Our banks agreed to faster bank switching back in 2010. Your new bank can take care of everything in five working days.

‘‘It’s the fastest switching in the world – something our banking industry is proud of. Nothing in the new code would change that.’’