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									Discussion Paper:
    Book Up

                         20 March 2006

         Aus tralian Bankers ‟ Ass ociation I nc . ARBN 117 262 978
 (I nc orporated in New South Wales ). L iability of members is limited.
                                     Table of Contents

1.      Introduction-------------------------------------------------------------------------------1

2.      Background-------------------------------------------------------------------------------1

2.1     What are the potential problems with Book Up? ..................................... 1

2.2     What are the possible alternatives to Book Up? ..................................... 2

2.3     What has the banking industry been doing to address Book up and
        Indigenous banking issues? ...................................................................... 3

2.3.1   Merchant agreements ..................................................................................... 4

2.3.2   Member banks program s ................................................................................ 5

3.      Options for regulating Book Up ----------------------------------------------------6

3.1     Increase public awareness and education ............................................... 6

3.2     Introduce an improved voluntary code ..................................................... 7

3.3     Amend merchant agreements .................................................................... 7

3.4     Amend the law.............................................................................................. 8

3.5     Adopt a mandatory code............................................................................. 8

4.      Conclusion ------------------------------------------------------------------------------ 10
                            Discussion Paper: Book Up

1.           Introduction
Book up practices, when managed well, can offer valuable and needed services to remote
and rural communities, particularly Indigenous communities. A book up facility at a local
store may be the only access to credit or cash for some distance.

Therefore, the ABA believes that strategies to address book up will require a partnership
approach that:

         Understands what is of concern to Indigenous communities, and

         Understands how best to address these concerns.

There has been an evolution in the financial services sector over the last twenty years –
shifting customer needs, advances in technology, increasing competition, innovation in
products and services and changing regulation – resulting in challenges and opportunities
for banking services in remote and rural communities.

The ABA supports the proposal to introduce a mandatory code governing book practices
under the Consumer Affairs and Fair Trading Act.

The ABA considers that any approach to the regulation of book up should acknowledge that
an immediate prohibition may have adverse consequences for Indigenous and other
remote or rural communities. Therefore, the ABA considers that any legislative or
regulatory strategy seeking to restrict book up practices should be coupled with awareness
raising education for merchants and financial literacy training for consumers.

The ABA supports the Northern Territory Government‟s action to address concerns with
poor book up practices. The ABA has also been supporting th e Australian Securities and
Investments Commission (ASIC) initiatives seeking to educate Indigenous communities
about some of the pitfalls of poor book up practices.

2.           Background

2.1          What are the potential problems with Book Up?

The ABA understands that the Northern Territory Government and ASIC have received
complaints regarding some book up arrangements. Based on the feedback provided to the
ABA regarding some book up arrangements, we consider that there can be a number of
problems with book up that can undermine consumer protection and consumer confidence
in the EFTPOS system.

          Lack of transparency: Frequently book up is managed in a non-transparent
           manner. Sometimes there is minimal disclosure about the price of the goods or
           services by the trader or business owner. Sometimes consumers may not be aware
           of the amount being withdrawn from their accounts, making budgeting difficult.
           Merchants and consumers are tending not to keep good records of how much is
           being spent or is owed.

          Lack of accountability: Sometimes merchants do not set withdrawal limits, which
           means that consumers can spend more than the funds available in their account
           and therefore end up with excessive debt.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                        2

         High administration fees (including possibility of banks fees, such as „penalty fees‟
          due to overdrawn accounts): Sometimes merchants charge fees for service or
          charges fines for the return of a debit card. In addition, some merchants and
          consumers access the account regularly to check account balances, increasing the
          number of transactions and thereby any associated transaction fees.

         Lack of flexibility: Consumers are unable to shop around or stop dealing business
          with a particular merchant, resulting in reduced consumer choice and increased
          dependency on a particular merchant. Consumers are o ften unable to access cash
          from their account for other purposes, including emergencies or travel needs.

         Lack of financial skills: Most book up arrangements limit the ability for consumers
          to gain an understanding of managing and controlling their own mone y. In
          addition, some book up arrangements allow for family members or other people to
          book up against a consumer‟s account (which may or may not be based on
          relevant Indigenous cultural practices) leaving the consumer vulnerable to

         Fraud: Access to the debit card and/or PIN can be attained by the merchant,
          employees of the merchant or third parties. Unrestricted access to customers‟ bank
          accounts and stolen cards can result in fraudulent transactions.

         Lack of consumer protection: Section 5.6 of the Electronic Funds Transfer Code of
          Conduct (“EFT Code”) sets out that a user is liable for unauthorised transactions if
          the user, amongst other things, voluntarily discloses one or more of the access
          codes to anyone, including a family member or friend, and thereby acts with
          extreme carelessness in failing to protect the security of all access codes. When a
          customer discloses their PIN to a merchant, in the instance of unauthorised
          transactions, it is likely that the customer would be liable for the unauthorised
          transactions. Therefore, consumers using book up lose the consumers protections
          associated with mainstream financial products.

2.2        What are the possible alternatives to Book Up?

As well as restricting book up, the Government might consider promoting other
alternatives which could serve as an alternative to book up. Some possible alternatives

         Direct funds transfers from Centrelink or bank account: Instead of merchants
          obtaining access to customers‟ debit card and/or PIN to cover purchases mad e by
          the customer, a direct funds transfer could be made where a portion of funds or
          welfare/government assistance payments is made available directly to the
          merchant to cover purchases. This approach would ensure that there is money
          available for other purchases in the customer‟s account and assist in limiting
          instances of excessive debt as well as enable the customer to retain their debit
          card and PIN and limit the instances of unnecessary transaction costs, or even
          unauthorised transactions. However, this option may have some of the problems
          associated with the current book up system, such as merchant record keeping,
          consumers being tied to one merchant and the risk of exploitative pricing, etc.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                                                3

         Establishment of alternative banking facilities : To supplement existing banking
          services, local councils, post offices or rural transaction centres can provide a
          number of different services at the same location to minimise costs of services as
          well as provide face-to-face assistance to Indigenous and other customers. For
          example, GiroPOST provides personal banking services and access to credit or
          debit to make deposits or withdrawals. The ABA notes that ASIC has provided
          limited licensing relief to facilitate greater access to banking services for remote
          Indigenous communities in the Northern Territory and Queensland1.

         Establishment of Internet banking facilities in a store, post office, council or rural
          transaction centre: To supplement existing banking services, Internet banking
          located within an alternative loca tion allowing consumers to check their account
          balances, pay bills and transfer funds would empower individuals to take
          responsibility for managing their own money as well as go to limiting fees that may
          be associated with checking balances or making small frequent withdrawals.

The ABA does not believe that book up should be prohibited without considering the impact
on remote and rural communities. The ABA believes that regulation of book up should seek
to improve the financial well-being of Indigenous people.

2.3        What has the banking industry been doing to address Book up and
           Indigenous banking issues?

The ABA and member banks have participated in a number of activities that focus on
addressing book up and broader Indigenous banking issues, including:

         ABA co-hosted, with Reconciliation Australia, the “Industry Roundtable on Banking
          and Financial Services in Remote Communities” on 19 October 2004. Book up was
          one of the main areas discussed.

         ABA and member banks participated in ASIC‟s “Book Up Forum” in Alice Sp rings on
          16-17 November 2005. The ABA has been liaising with ASIC on the distribution of
          its guide Dealing with Book Up launched on 15 December 2005. The ABA and ASIC
          are consulting on how the banking industry can further assist in distribution of
          materials about book up to regional, rural and remote communities, particularly
          Indigenous communities.

         ABA participates in the Northern Territory Government‟s “Indigenous Economic
          Development Taskforce”. Key initiatives of the Taskforce include identifying
          opportunities for developing Indigenous communities‟ business capabilities and
          individual home ownership.

         ABA participates in the “National Indigenous Consumer Strategy” launched on 1
          September 20052.

 ASIC Class Order [CO 05/844]: Licensing and disclosure relief for certain community representatives in remote

 Objectives of the strategy are to: improve indigenous consumers’ know ledge of their rights and obligations under
consumer protection laws and achieve greater Indigenous access to consumer protection programs; improve the
behaviour of traders, through education and compliance activity, to reduce detriment experienced by indigenous
consumers; and promote effective engagement and partnership between consumer protection agencies, indigenous
organisations, business and other government agencies to improve consumer outcomes for indigenous people.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                                                    4

         ABA and member banks participate in the “Indigenous Banking Reference Group”.
          The ABA is co-chair of the “Financial Literacy Working Group” and a member of the
          “Banking & Financial Services Working Group”. This initiative is part of
          Reconciliation Australia‟s “National Indigenous Money Management Agenda”3.

         ABA is w orking closely with the Federal Government on a number of initiatives,
          including the Treasury‟s “Financial Literacy Foundation” and the Department of
          Families, Community Services and Indigenous Affair‟s “Financial Well-Being

         ABA is chair of the “Indigenous Banking Working Group”, which brings together
          member banks to discuss emerging Indigenous banking issues.

In addition, ABA member banks have undertaken a number of initiatives aimed at
eliminating poor book up practices.

2.3.1       Merchant agreements

ABA member banks with a presence in the Northern Territory have agreed to adopt a
consistent industry approach to addressing the contractual relationship that the bank
maintains with traders and business owners utilising EFTPOS facilities. Specifically, ABA
member banks have agreed to include a clause or clauses within their merchant
agreements dealing with conduct associated with book-up. The wording and precise scope
of these clauses differs among banks, but at a minimu m, all participating ABA member
bank merchant agreements will prohibit merchants requesting a PIN from their customers.

At the time of writing, three member banks have already amended their existing and new
merchant agreements to contain such a clause. Other banks are currently in the process of
amending their existing and new merchant agreements. One major bank is due to
complete amending all merchant agreements by July 2006. Another is due to complete all
merchant agreements by September 2006. Member banks have, or will, communicate with
merchants in advance of the amendment.

The amendment to merchant agreements can encourage improved book up arrangements
by merchants. Depending on the nature of a breach of the terms and conditions of a
merchant agreement, there can be a number of consequences , including chargeback of
transaction(s) to merchants or suspension of EFTPOS facilities. Where steps are not taken
by the merchant to change the offending behaviour, this may ultimately result in
termination of the merchant agreement and removal of the EFTPOS facility.

However, this result may not be in the best interests of the remote and rural community,
as the facility may provide convenient access to cash, and therefore alternative measures
that can be taken against unscrupulous merchants, such as lega l proceedings for violations
of fair trading laws, would be preferable.

The ABA notes that there are limitations with „policing‟ book up practices through merchant
agreements. Where a bank is made aware that a merchant is requesting that customers
make available their PIN, such as via customer complaint, the bank can initiate action to
prevent the practice as a breach of the merchant agreement. However, the ability of a
bank to investigate and prove an alleged breach of the terms and conditions of the
merchant agreement may be limited without the support of government and regulators.

  Objectives of the project are to: improve the financial literacy skills for Indigenous people; improve access to face to
face banking servic es for remote customers; develop means of access to appropriate money management products
for Indigenous people; and build a strong commitment from relevant agencies and organisations to progress these
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                        5

The ABA and member banks have worked closely with ASIC on introducing the amendment
to merchant agreements. ASIC has provided the ABA and member banks with some key
messages to ensure that factual and consistent information regarding why the banks have
been asked to assist the government and regulators with addressing book up practices can
be contained in communications with merchants4. All major banks will have in place
amended merchant agreements before the introduction of any mandatory code.

The amendment to merchant agreements gives effect to one of the recommendations
contained in the National Indigenous Consumer Strategy.

2.3.2        Member banks program s

At the time of writing, ABA me mber banks already have in place a number of programs
that focus on providing financial literacy training and financial inclusion programs to
Indigenous communities, including:

           “Family income management” (FIM) project in Cape York focuses on working with
            Indigenous families to develop a better understanding of how to effectively
            manage income to achieve improved living standards for all the family and the
            benefits of budgeting and saving (Department of Families, Community Services
            and Indigenous Affairs, Centrelink and community representatives, Westpac).

           “Financial First Steps” training materials and workshop developed for young adults
            in basic money management that has been delivered to CDEP participants and
            other communities across Australia. Specific materials have been piloted in remote
            Indigenous communities of Northern Territory and North Queensland (Westpac).

           “MoneyBusiness” project in Katherine, Tennant Creek, Galiwin‟ku, Niguiu,
            Kununurra and Geraldton is a community based money management skills and
            savings program including financial literacy workshops and training on topics
            relevant to the individual community (Department of Families, Community Services
            and Indigenous Affairs, ANZ).

           “Saver Plus” financial literacy and matched savings program designed to encourage
            and support people on low incomes to save for their children‟s education – to be
            rolled out as part of the “MoneyBusiness” program in 2006 (ANZ in association
            with Brotherhood of St Laurence, Berry Street Victoria, the Benevolent Society,
            The Smith Family).

           “Traditional Credit Union” partnership provides a project manager to work with
            TCU to provide TCU staff in Milingimbi and Ngukurr with training in financial
            literacy skills (Traditional Credit Union, ANZ).

           “Manage your income, Manage your life” is a pilot project initiated by Indigenous
            Australians in Western NSW that aims to train and resource Indigenous
            communities in financial management skills (Caritas, Centacare, Commonwealth
            Bank of Australia).

           “Commonwealth Bank Foundation” has awa rded a number of financial literacy and
            e-learning grants to Indigenous community schools to assist primary and
            secondary students to develop financial literacy and technology skills
            (Commonwealth Bank of Australia).

    See Attachment 1 for “Summary of ASIC Position on Book Up”.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                       6

         “Indigenous Partnership” program with the Queensland Government and the
          Torres Strait Regional Authority (TSRA) provides assistance to local business
          initiatives. The program provides assistance to Indigenous people to improve
          understanding of building business capacities as well as capabilities in accessing
          and managing finance (National Australia Bank).

         “No Interest Loans Scheme” and “Step Up Low Interest Loan” micro -credit
          program offers people on low incomes opportunities to gain access to small loans
          to purchase household assets (e.g. whitegoods). The programs also include
          financial literacy skills training (Good Shepherd Youth and Family Service, National
          Australia Bank).

The major banks also have Indigenous employment, traineeship and scholarship programs
providing opportunities for Indigenous people.

3.         Options for regulating Book Up

3.1        Increase public awareness and education

Option: Abandon the voluntary code while increasing education and public awareness of
the disadvantages of book up, and in particular, the handover of debit cards and PINs and
blank withdrawal forms.

The ABA and our member banks are strongly committed to improving the financial literacy
skills of all Australians. In particular, member banks have a number of programs that seek
to improve the money management skills of Indigenous people and increase access to
banking products and services by Indigenous communities.

Financial literacy plays a significant role in addressing poor book up practices and broader
issues with Indigenous accessibility to banking products and services. Financial literacy will
assist consumers better protect their interests and understand the financial system. The
benefits of improved financial literacy for Indigenous communities are well-informed
consumers, greater personal savings, improved management o f debt and a reduction in
the likelihood of excessive debt or periods of financial hardship, decreased need for welfare
or government assistance and increased personal economic security. Strategies for
improving financial literacy skills should target thos e sectors of the community with the
lowest levels of financial literacy, including Indigenous communities.

In addition, the banking industry strongly advocates the safe use of debit cards and PINs
as not only a requirement of the terms and conditions under which a bank provides a debit
card to a customer, but also as a necessary aspect of being able to participate in the
financial system.

The ABA is currently working with ASIC on the distribution of its guide Dealing with Book
Up. The ABA and ASIC are consulting on how the banking industry can further assist in
distribution of materials about book up to regional, rural and remote communities,
particularly Indigenous communities.

Therefore, the ABA believes that raising awareness of the disadvantages of book up should
form part of a consumer education program specifically delivered to Indigenous
communities. It is our member banks‟ experience that partnership approaches; involving
the Government, Indigenous representatives and the banks; delivers better result s in
improving financial literacy in Indigenous communities.

The ABA also believes that educating merchants in advance of any legislative or regulatory
strategy is vital to the success of promoting good book up practices. Merchants need to
understand the implications for their business, make any necessary changes to their
processes and notify their customers of any change to, or withdrawal of, book up
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                         7

The ABA considers that a public awareness and education program is vital to the success of
any legislative or regulatory measure to address book-up, and is important in transforming
the behaviour of merchants and communities which have come to rely on the book-up

3.2        Introduce an improved voluntary code

Option: Introduce an improved voluntary code, with the contents of that code to be agreed
between the Office of Consumer and Business Affairs, ASIC and the ACCC.

In response to a number of customer complaints regarding the book up practices adopted
by the Alawa store in Darwin, a voluntary code has been entered into between the store
owners and the Commissioner of Consumer Affairs. This voluntary code has subsequently
been adopted by the store owners of the Bucking Bull Burger Bar in Katherine.

The voluntary code does not seek to prohibit the sto re owners from holding the customer‟s
debit card and PIN, but instead:

     Requires the store owners to maintain accurate records

     Ensures that customers are provided with full disclosure and access to their accounts

     Restricts access to book up to the customer and only other persons nominated in

     Obliges the store owner to keep cards and PINs secure, and

     Provides indemnity by the store owner in favour of the customer if there are any

     unauthorised transactions while it is in the custody of the store.

The ABA believes that, in the instance of poor book up practices by unscrupulous traders
and business owners, a voluntary code may not achieve the intended results of improving
the management of book up arrangements. Therefore, the ABA considers that a mandatory
code imposing restrictions on the behaviours of merchants is an appropriate mechanism
for regulating book up practices (see below).

3.3        Amend merchant agreements

Option: Seek the support of the major trading banks to take action against traders who
hold cards and PINs in breach of those amended agreements in place between banks and
traders regulating the use of EFTPOS.

As mentioned above, ABA member banks have agreed to include clauses in their merchant
agreements which, at the very least, will prohibit merchants requesting a PIN from their
customers. Some member banks have chosen to include a wider prohibition, prohibiting
not only the request of a PIN, but also the retention of a PIN, regardless of how it came
into the merchant‟s possession. ABA member banks have not prohibited the retention of a
debit card, as to do so would effectively abolish all book up practices, having unintended
consequences for Indigenous communities that maintain good book up arrangements.

The ABA believes that amending merchant agreements will go some way in eliminating
poor book up practices by unscrupulous traders and business owners, as they should not
have access to the PIN and thereby should be unable to access the customer‟s account
without the customer or a person authorised by the customer.

Where a bank is made aware that a merchant is violating the terms and conditions of the
merchant agreement, such as through a customer complaint, the bank can then initiate
action against the merchant. However, the government and regulators should be aware
that „policing‟ book-up through enforcement of merchant terms and conditions can not be
the sole solution. Banks will be unable to take action for breach of the terms and
conditions without some form of proof or complaint against the merchant.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                       8

Therefore, the ABA considers that amending merchant agreements should be made in
conjunction with other measures. It is necessary for the Northern Territory Government to
introduce additional mechanisms for regulating book up and the behaviours of merchants,
such as through a mandatory code and legislative amendment. This also highlights the
importance of consumer education in raising awareness of poor book-up practices and
encouraging consumers to make a complaint if they are the victim of prohibited behaviour.

3.4        Amend the law

Option: Amend the Trade Practices Act 1974, and the Consumer Affairs and Fair Trading
Act to either specifically outlaw the pract ice of retaining debit cards and PINs, or to deem
that it constitutes unconscionable conduct.

The States and Territories have all adopted a uniform Consumer Credit Code (UCCC) which
requires traders and business owners to comply with particular disclosure and record
keeping requirements. However, the UCCC does not apply in certain circumstances:

         No charge for the provision of credit

         Amount of credit is less than $50

         Credit is offered for a period of less than 62 days

Therefore, the UCCC may not apply to some book up practices.

The Commonwealth, States and Territories have legislation that prohibits traders and
business owners from acting in an unconscionable manner. However, without adequate
evidence, such as complaints from customers, records of purchases, etc, it has proven
difficult under the current laws to bring a successful case against an unscrupulous trader or
business owner maintaining a book up arrangement.

The ABA believes that it is essential that effective provisions exist in the law to prohibit
practices that exploit customers, particularly more vulnerable customers such as recipients
of welfare and government assistance and people with low levels of English and literacy
skills. Therefore, the ABA recommends that the Ministerial Council on Consumer Affairs
(MCCA) pursue legislative amendment to give greater clarity to provisions of
unconscionable conduct. The ABA encourages the Northern Territory Government to
influence the (MCCA).

3.5        Adopt a mandatory code

Options: Adopt regulations under the Consumer Affairs and Fair Trading Act to introduce a
mandatory code to regulate the provision of credit by traders.

As mentioned above, the ABA considers that a mandatory code governing book up
practices and the behaviours of merchants would be an effective mechanism for regulating
book up.

The Code, in addition to the terms of the existing voluntary code, should clearly set out
that store owners must:

         Clearly display the prices of goods on the shelf or the goods themselves (and
          ideally on the shelf and the goods)

         Charge goods at the same price available to other debit cardholders not using book
          up arrangements
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                     9

      Provide the customer with an itemised receipt of their purchases for their records,

      Keep records of book up accounts and make records available to customers or
       authorities upon request.

In addition, the mandatory code should contain a prohibition restricting merchants from
requesting and/or retaining a customers‟ PIN or other password or code that may enable
access to a customer‟s account. However, there should not be an explicit prohibition on
retaining a customers‟ debit card where the customer has w illingly provided the debit card
as security for access to the book up arrangement. The Code should not prohibit
merchants from retaining a customers‟ debit card where the customer has voluntarily
provided the card as security for participating in a book up arrangement. If the Code was
to prohibit merchants from retaining a customers‟ debit card and PIN, this would in effect
abolish book up.

A Code should also contain provision for a transition period, say 3 months, to allow
merchants to make any necessary process changes and to manage their customers‟

The ABA believes that this approach has a number of advantages:

      Customers would have some protection from unauthorised transactions, including
       checking of balances, as the merchant would not have access to the customer‟s
       PIN, resulting in less opportunity for unnecessary transaction costs

      Merchants would have clear guidance on how to maintain good book up
       arrangements, resulting in improved book up practices; or alternatively, merchants
       that feel pressured to provide book up would have the support to withdraw book
       up arrangements

      Poor book up practices would be reduced or eliminated

      Customers would have access to short-term credit and the convenience of book up
       when needed; however the worst of the risk posed by poor book up practices
       would be eliminated, and

      Merchants that breach the law would be held accountable against clearly
       established legal requirements, resulting in improved regulatory outcomes against
       unscrupulous merchants.

While enforcement of the Code will be difficult, particularly in remote communities, the
ABA believes that the Northern Territory Government should ensure compliance with the
Code. Compliance with the Code can be enhanced by increasing public awareness by
educating merchants and consumers as to their rights and responsibilities. The ABA is
currently working with ASIC on distribution of information on book up practices to the most
affected areas and communities.

The ABA also considers that concerns with book up practices may not simply be isolated to
the Northern Territory. Therefore, it would be reasonable for other States to consider how
best to reduce instances of poor book up practices.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                      10

4.        Conclusion

The ABA considers that no regulation of book up is undesirable, as it e xposes consumers,
particularly vulnerable consumers, to unscrupulous traders and business owners. While
book up can provide some consumers with convenient shot-term credit, poor book up
practices can expose consumers to risk of fraud, theft, „unsafe‟ debt and liability for
unauthorised transactions.

The ABA and member banks have not directly received complaints regarding book up for
their customers; however, we understand that book up has been identified as a risk to
consumers by the Government and consumer and welfare groups. Furthermore, it is in the
interests of the banking industry that EFTPOS facilities are managed in a responsible
manner and consumers do not forfeit their consumer protections.

The ABA considers that there are a number of strategies tha t can be taken in conjunction
to address concerns with poor book up practices:

        Mandatory code: The ABA supports the implementation of regulations that restrict
         book up practices and behaviours of merchants via a mandatory code restricting
         the retention of a customer‟s PIN and imposing certain disclosure and operational
         practices on merchants that maintain book up arrangements. However, any
         legislative or regulatory strategy that addresses book up must acknowledge that
         for some Indigenous communities, book up provides a convenient source of credit
         when no other alternative is available. Strategies that prohibit book up could result
         in substantial hardship for some Indigenous communities.

        Merchant agreements: The ABA supports a consistent restriction in mercha nt
         agreements of banks and other merchant facility providers restricting merchants
         from requesting a customers‟ PIN.

        Financial literacy training: The ABA supports strategies seeking to improve the
         financial literacy skills of Indigenous people so they can make informed money
         management decisions.

Australian Bankers‟ Association
20 March 2006
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                            11

Attachment 1: Summary of ASIC Position on Book Up

                                                     Australian Securities & Investments Commission


On 11 March 2002 ASIC assumed Commonwealth responsibility for consumer protection
where firms lend money to consumers, investors and small businesses. This includes the
provision of informal credit by a merchant to a consumer to purchase goods or services from
that merchant, commonly known as 'book up' or 'book down'.

In March 2002 ASIC released a report into book up, Book up: some consumer problems
which focussed on the particular practice of stores and merchants taking possession of
Aboriginal consumers' debit cards and/or Personal Identification Numbers (PINs) as a form of
security for book up. The report highlighted a number of disadvantages associated with this
form of book up, including a lack of transparency and consumer choice and a risk of fraud.
Equally though ASIC's report found that book up had some advantages and was relied upon
by a large number of Aboriginal consumers in remote and rural parts of Australia as an easily
accessible form of credit to help them manage money in between payments.

It is ASIC's view that the problems of book up will not be resolved by one solution alone or
by one agency. ASIC has adopted a partnership approach and is working closely with other
Government regulators, the banks and other financial institutions, Aboriginal communit ies
and consumer groups to develop solutions to the problems for Aboriginal consumers
associated with book up.

On 16 and 17 November 2005 ASIC and the NT Government brought together the key
players at a forum on book up in Alice Springs. At the forum the NT Government released a
discussion paper which had the support of ASIC. It proposed a number of regulatory options
for book up in the Northern Territory. The option favoured by the NT Government and ASIC
is a mandatory code under the Consumer Affairs and Fair Trading Act (NT) which sets
minimum standards for book up, including a ban on the retention of PINs by a merchant.

It is ASIC's view that the retention of PINs by a merchant can result in significant
disadvantages for a consumer and it also undermines the consumer protection provisions of
the Electronic Funds Transfer Code of Conduct and consumer confidence in the EFTPOS

ASIC acknowledges that book up has some advantages and is managed well for the benefit of
consumers in certain cases, and has therefore not recommended a complete ban on book up.
A ban on the retention of PINs would not completely prohibit book up. A merchant would
still be able to retain a customers debit card (without the PIN) as security, or where the
consumer preferred to leave the card with the merchant for safekeeping.
AUST RALIAN BANKERS’ ASSOCIATION INC.                                                     12

A mandatory code would need to be supported by an education and compliance program, as
well as a transition period to allow merchants and consumers to find alternatives. As an
initial step, on 15 December 2005 ASIC released Dealing with book up: a guide. The guide is
an information resource for government and community agencies providing assistance to
Indigenous communities dealing with book up. It provides information on how communities
can develop their own responses to book up.

ASIC has also worked with the major banks and other financial institutions to develop
solutions to book up. ASIC welcomes the news by the Australian Bankers' Association and
the Credit Union Industry Association that some of their members have changed, or are in the
process of changing their EFTPOS merchant agreement contracts to prohibit merchants
requesting and/or retaining PINs from consumers. This approach is consistent with and
supports ASIC's views and the contents of the proposed mandatory code.

A ban on the retention of PINs is also recommended as best practice in the National
Indigenous Consumer Strategy, to which ASIC is a signatory.

Further information on ASIC and book up can be found on

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