Introduction
The Hong Kong Association of Banks (“HKAB”) and the DTC Association (“DTCA”) have published their revised Code of Banking Practice (the “Code”). The amendments took effect on 10 December 2021 and require Hong Kong banks to take steps to revise terms and conditions, customer journeys and other operating practices in order to meet the new requirements.
The revisions focus on updating the Code to better reflect the increasing digitalization of banking in Hong Kong. The amendments expand the Code’s coverage to better address internet banking, contactless mobile payments, the use of self-service terminals and telephone banking services. At the same time, a number of the amendments reflect a move to ensure that traditional banking customers more comfortable with in-branch banking and paper-based services are not left without means of receiving an appropriate level of service.
Background to the Code
The Code is a non-statutory code jointly issued by HKAB and the DTCA, and endorsed by the Hong Kong Monetary Authority (“HKMA”). The Code provides general principles covering the overall relationship between authorised institutions (“AIs”) and their customers in Hong Kong, as well as recommendations on specific aspects of banking practices. The Code was introduced in 1997 and has undergone a number of major amendments to bring it in line with new international standards. This most recent set of revisions of the Code are the first since 2015.
AIs are expected to fully comply with the new Code as soon as practicable and should achieve full compliance within six months of the effective date, with extensions of 12 to 18 months for certain provisions.
Key amendments to the Code are outlined below:
Electronic channels
Use of electronic device in branches to show information
Pursuant to the amended Sections 5.8 and 30.5, where electronic devices are used in branches to present terms and conditions relating to banking accounts or cards to customers, AIs must provide customers with alternative means to review the relevant information. The same applies to presentation of application or transaction-related information under the new Section 17 of the Code.
Publication of information on internet banking platforms
Where internet banking services are provided, important information relating to banking facilities and services should be posted on the AI’s website and internet banking platforms. This includes, for example, details of fees and charges (Section 6.1), notices of closure and relocating or changing of scope of service of a branch (Section 14.2), rates offered on interest-bearing accounts (except where the rate of negotiable) (Section 23.1), changes in interest rates (other than those which change on a daily basis) (Section 23.6), application to initiate error/dispute resolution process (Section 29.6), and chargeback mechanisms for card issuers (Section 29.7).
Provision of information in a non-paper based format
A new Section 18 detailing provision of information in non-paper based format has been introduced. Where information is provided by the AI in non-paper based format, AIs should notify customers in advance and ensure the information is provided in a format that allows customers to directly download and store the information in a non-paper based form at the time of provision and in the version as of that time for future reference. This would cover any non-paper based communications including provision of terms and conditions (and amendments thereof), account statements, credit card statements and all other communications. Where the notice relates to the bank’s terms and conditions (or variations of such terms and conditions) or changes on fees, AIs should inform customers of the specified timeframe within which the information will be available for download. Before closure of bank accounts, AIs should also remind the customers to download and store their non-paper based statements, if applicable, for record-keeping purposes before closure of the accounts, and remind the customers that they will no longer be able to access their statements of account after closure of the accounts.
Note the term “download and store” is used, requiring something more than just the customer being able to save information by means of screen capture or copying and pasting to another file or document.
Provision of statements of account in a non-paper based format
Under new Sections 21.6 and 36.5, retail customers or cardholders who have opted to receive statements of account in a non-paper based format must be allowed to access and store their statements for a minimum period of 7 years. Starting with non-paper based statements made available as of 31 March 2020, AIs and card issuers should incrementally accumulate the statements for a period of at least 7 years.
Online advertising
Amendments to Section 11.2 specify that where digital media or channels are used for the purpose of advertising and promotional materials, AIs should consider the appropriateness of using such channels to promote products and services of a complex nature and whose terms may be difficult for customers to understand. Where appropriate, AIs should consider the incorporation of images, infographics or other means for conveying necessary information to customers, or include reference to the means by which further information may be obtained.
Further, new Sections 11.4 and 11.5 specify AIs’ responsibility when collaborating with or engaging third parties to promote the AI’s products or services (for e.g. celebrities or “key opinion leaders”/“KOLs” who promote the AI’s products on social media), and requires AIs to ensure that the promotional materials published or shared by these third parties are fair and reasonable and do not contain misleading information. The new Sections also recommend AIs to maintain one or more convenient and appropriate channels for the public to verify the authenticity of marketing and promotional activities and materials of the AIs and partnering third parties.
Cybersecurity
A new Section 16 of the Code requires AIs who become aware of customer security risk events (i.e. cyberthreats, frauds, scams, bogus marketing and promotional communications) to issue warning messages to the relevant customers as appropriate if the customer may be affected by the customer security risk events and there is risk that the event will result in financial loss.
What do you need to do?
Hong Kong banks will need to take the Code amendments into account in reviewing their customer terms and conditions, the design of digital banking interfaces and operating practices and procedures.
The rapid growth of digital banking in Hong Kong has meant that consumer expectations for banking services are now in a state of considerable flux. The Code amendments highlight that there are trade-offs between convenience and consumer protection, with an important balance to be struck to ensure the continued orderly development of Hong Kong’s banking sector in a new era of innovation.
Authored by Mark Parsons, Katherine Tsang, Nicola Choi.
