Being fair to customers is a positive legal obligation of Australian Financial Services Licensees and Credit Licensees (together with being efficient and honest) with significant penalties for a breach.
But fairness is not defined; the Banking Code has standards and examples of fairness.
According to ASIC Chair James Shipton:
“Fairness means doing what’s right; it’s the quality of being reasonable and just…
From a legal perspective, existing case law suggests fairness is the ethical performance of functions in accordance with professional standards. This would include observance of common law, fiduciary and statutory duties…
Fairness also connotes a requirement of competence in providing advice…
The core statutory obligation on licensees to act ‘efficiently, honestly and fairly’ implies an element – not just of even handedness in dealing with consumers – but also the concept of sound ethical values and judgment in matters relevant to a consumer’s affairs.”
Commissioner Hayne noted in his Final Report that acting fairly is also reflected in the provisions of the Australian Securities and Investment Commission Act 2001 (Cth) (the ASIC Act) about misleading or deceptive conduct, false or misleading representations, unconscionable conduct and unfair contract terms.
“There remains unwillingness, in at least some entities, to recognise and give effect to the obligation to ensure that the relevant services are provided efficiently, honestly and fairly, without first having the regulator agree with what the entity judges to be required in order to meet that standard.
That is, there remains a reluctance in some entities to form and then to give practical effect to their understanding of what is ethical, of what is efficient honest and fair, of what is the ‘right’ thing to do. Instead, the entity contents itself with statements of purpose, vision or values, too often expressed in terms that say little or nothing about those basic standards that underpin both the concept of misconduct and the community’s standards and expectations.”
The task for licensees is to ensure staff are trained adequately to understand the fairness obligation.
Watch my Banking Code video.