REVIEW OF THE CODE OF BANKING PRACTICE

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REVIEW OF THE CODE OF BANKING PRACTICE

• 15 November 2001

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Background of the Code

• Jointly issued by HKAB DTCA endorsed by HKMA
• First published in 1997
• Primary objective is to promote good banking
  practices by setting out the standards expected
  of institutions
• It covers business with personal customers
• Subject to periodic review

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The Review

• Informal Working Group (IWG)
• convened by HKMA
• comprised of representatives of HKAB DTCA
• Objective
• strengthen the Code in the light of its operation
  since 1997 and keep it up to date with banking
  industry developments
• Extensive consultation
• with industry associations Consumer Council

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Major Improvements
Card Services (effective since 15 January 2001)

• Greater protection for consumers
• Maximum liability for card loss should not exceed
  HK500 except for fraud and negligence
• Subsidiary cardholders not liable for debts of
  primary cardholders
• Customers should not be charged extortionate
  interest rates

• Fairer
• APRs further standardised to facilitate price
  comparison by consumers
• Cost of debt recovery should be of reasonable
  amount reasonably incurred

• More transparent
• Terms conditions should be provided at the
  request of customers
• Major terms conditions should be highlighted in
  application forms, in plain language!

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Major Improvements

• Notification of Changes to Fees and Charges
• Effective since 1 June 2001 ahead of full
  deregulation of Interest Rate Rules in July 2001
• Institutions should give 30 days notice to
  affected customers before changes in fees
  charges take effect
• Effective means of notification should be adopted
  e.g. one or a combination of the following
• individual notification by mail
• press advertisement
• prominent display of notice in banking halls
• display on ATM screens
• phone-banking message
• notice posted on institutions website

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Major Improvements

• Debt Collection
• Any collection expenses to be recovered from
  customers should be of reasonable amount and
  should have been reasonably incurred
• Institutions should regularly evaluate whether
  charges of debt collection agencies are
  reasonable
• Institutions should have proper systems
  procedures for selecting debt collection agencies
  and monitoring their performance
• Institutions should have established procedures
  to handle complaints from debtors
• Institutions should require their debt collection
  agencies not to employ harassment or improper
  debt collection tactics

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Major Improvements

• New Chapter on e-banking Services
• New guidelines to boost consumer confidence in
  using e-banking services
• When customers contract an e-banking service,
  institutions should make clear prominent
  disclosure of
• customers liability for unauthorised
  transactions
• fees charges applicable to the e-banking
  service
• customers security obligations, etc.
• Customers should be provided with a facility to
  confirm they have read such disclosures before
  they can sign up for e-banking services
• Unless customers have acted fraudulently or with
  gross negligence, they should not be responsible
  for any direct loss suffered as a result of
  unauthorised transactions

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Major Improvements

• New Chapter on Stored Value Cards
• Major terms conditions of stored value cards
  should be drawn to the attention of customers or
  prospective customers
• General descriptive information on use of stored
  value cards should be provided to customers, such
  as
• all fees charges applicable to the card (e.g.
  annual fees)
• any deposit payable by customers the refund
  policy
• potential loss to be suffered by customers in
  case of card loss, etc.
• Deposit any residual value in the card should
  be refunded to customers if they do not agree to
  significant variations of the terms conditions

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Going Forward

• Role of HKAB DTCA
• HKAB, in conjunction with DTCA, will take greater
  ownership of the Code. They will jointly handle
• Future review of the Code
• Questions regarding general interpretation
  application of the Code
• A Code of Banking Practice Committee comprising
  representatives of HKAB, DTCA HKMA has been
  established

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Going Forward

• Role of HKMA
• The HKMA is responsible for promoting
  encouraging sound prudent business practices
  amongst institutions
• We will continue to be as involved - if not more
  involved - in the Code in terms of
• Monitoring compliance with the Code by
• Requiring institutions to conduct annual self
  assessment
• Carrying out on-site examinations
• Ensuring institutions have effective complaint
  handling procedures (N.B. guideline on this to be
  issued) assisting customers in filing
  complaints with individual institutions
• Actively participating in the future development
  of the Code

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Going Forward

• Role of Consumers
• While institutions will endeavour to provide top
  quality service to consumers, consumers also have
  a role to play. They should
• Understand their rights obligations
• Read terms conditions, compare APRs, etc. a
  lot of helpful information is available,
  increasingly in easily understandable language,
  but this is of little value unless consumers make
  use of it!
• Seek help from institutions in case of need
• Reflect their views on the Code to the industry
  associations

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Conclusion

• We believe that the issuance of the new Code of
  Banking Practice will help to promote the
  interests of bank customers
• Institutions in Hong Kong are increasingly
  focusing on customer service, the exercise
  clearly demonstrates the aspiration of the
  banking industry to bring our standards of
  banking services fully into line with
  international best practices
• The HKMA will continue to play an active role in
  consumer issues

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• Q A