Enclosure - Complaints Watch Issue No. 27

This document is a comprehensive summary of Issue No. 27 of "Complaints Watch," a publication by the Banking Complaints Unit of the Hong Kong Monetary Authority (HKMA). Published bi-annually, Complaints Watch serves to inform Authorized Institutions (AIs) about prevalent complaint trends, emerging issues, and areas requiring heightened vigilance. Its overarching objectives are to foster proper conduct and prudent business practices among AIs and to improve public understanding of banking products. The content presented in Complaints Watch is derived from actual complaint cases, though for confidentiality, these cases may be synthesized, and specific details might be altered or omitted.

The core of this issue of Complaints Watch focuses on key complaint categories and emerging issues that have garnered attention from the HKMA in 2025. The document provides statistical insights into complaint volumes and types, and then delves into specific scenarios illustrating areas where AIs need to improve their practices.

• Overall Complaint Volume: In 2025, the HKMA received a record high of 4,005 banking complaints. This represents a significant increase of 16% compared to 2024.
• Complaint Handling Progress: During the same year, the HKMA completed the handling of 3,777 complaints, an increase of 11% year-on-year.
• Complaint Categories:
• General Banking Services: Received 3,737 complaints, showing a 16% increase.
• Conduct-Related Issues: Received 268 complaints, showing a 16% increase.

The document details the distribution of complaints across various banking services, providing both the number of cases and the year-on-year percentage change:

• Selling Practices: 1,421 cases (▲38%)
• Operation of Banking Accounts: 580 cases (▲5%)
• Service Quality: 467 cases (▼25%)
• Lending Business/Decisions: 414 cases (▲38%)
• Fees and Charges: 342 cases (▲56%)
• Remittance Services or Fund Transfer Disputes: 138 cases (▼12%)
• Client Agreement Issues: 136 cases (▼5%)
• Credit Cards: 133 cases (▲39%)
• Others: (Specific breakdown not provided, but implied to be a smaller category)
• Selling practices and Fees and charges emerged as significant contributors to the overall increase in complaints, with substantial year-on-year percentage increases.

• Issue: A recurring theme involves customer dissatisfaction with unilateral upgrades of banking services, often initiated through promotional campaigns. The primary concern arises from banks adopting an "opt-out" rather than an "opt-in" approach, where customers are automatically enrolled for upgraded services unless they actively decline. This has led to confusion and perceived breaches of customer agreements.
• Root Cause: Dissatisfaction stems from the practice of assuming customer consent if no explicit objection is raised. In some cases, customers were misled into believing that fees and charges would apply to the upgraded service, even when waivers were in place.
• Specific Incident: Complaints highlighted instances where bank hotline staff provided inaccurate information, suggesting that service fees would be levied if a minimum balance was not met, despite the bank having waived this requirement for customers who accepted the upgrade. This conflicting information was also present in written materials like welcome packages and monthly statements.
• HKMA's Stance: The HKMA views these complaints as preventable and attributes them to inadequate staff training on the Code of Banking Practice (COBP). Specifically, section 11.10 of the COBP prohibits automatic enrollment for new or enhanced services that involve costs, potential liabilities, or financial loss for customers, unless they explicitly consent.
• Recommendations:
• AIs should provide better training to staff on COBP provisions related to service upgrades.
• Banks should consider adopting an opt-in approach for customer enrollment in upgraded services, especially if fee waivers are temporary. This ensures explicit customer consent.

• Issue: The HKMA has observed instances where banks' digital channels, particularly mobile apps, fail to clearly differentiate between "ledger balance" and "available balance" when displaying customer account information. This lack of clarity can lead to significant customer confusion and, in severe cases, financial loss through fraud.
• Definitions:
• Ledger Balance: The accounting balance, which includes uncleared funds (e.g., uncleared cheque deposits).
• Available Balance: The actual amount immediately usable by the customer.
• Specific Incident: A prominent case involved a fraudster who impersonated a buyer and claimed to have deposited HK$50,000 into a complainant's account via cheque. Before the cheque cleared, the fraudster requested a HK$10,000 refund due to an alleged overpayment. The complainant, upon checking their mobile banking app, saw that the account balance reflected the HK$50,000 deposit. However, the app did not specify if this was the ledger or available balance. Assuming it was the available balance, the complainant proceeded with the refund. The fraud was later discovered when the cheque was rejected.
• HKMA's Stance: This situation underscores the critical importance of clearly displaying the available account balance to prevent customer confusion and vulnerability to fraud.
• Recommendation: Banks must ensure that digital channels clearly distinguish between ledger and available balances to avoid any ambiguity for customers.

The substantial increase in banking complaints in 2025 is primarily attributed to two areas:

• Operation of Banking Accounts: While this category saw a 5% increase, it's noteworthy that this occurred despite AIs implementing enhanced fraud-prevention measures and more frequent account reviews following HKMA's anti-fraud initiatives and improved intelligence sharing with the Police. The HKMA has reiterated the need for AIs to maintain effective and courteous communication with customers and minimize inconvenience during these intensified reviews.
• Client Agreement Issues: This category experienced a 5% decrease in case numbers but was cited as a major contributor to the overall complaint rise due to issues mainly concerning the disclosure of terms and conditions for promotional campaigns. The HKMA has engaged with relevant AIs, leading to revisions in promotional materials and enhanced staff training to ensure clearer communication of promotion terms and conditions to customers.

This section outlines the significant policy adjustments, updates, and new requirements highlighted in Complaints Watch Issue No. 27:

• Shift in Complaint Handling Focus: While overall complaint numbers increased, the HKMA is drawing attention to specific areas requiring immediate improvement by AIs.
• Mandate for Clearer Communication on Service Upgrades: The HKMA is strongly recommending and implicitly signaling an expectation for AIs to move away from "opt-out" mechanisms for service upgrades towards "opt-in" models, particularly when fees or temporary waivers are involved.
• Enhanced Scrutiny on Account Balance Display: There is a new emphasis on the clarity and accuracy of information presented to customers regarding their account balances on digital platforms.
• Reinforcement of COBP Provisions: The HKMA is reiterating the importance of adhering to existing provisions within the Code of Banking Practice (COBP), particularly section 11.10 concerning customer consent for service enrollment.
• Proactive Measures Against Fraud: The document acknowledges and implicitly encourages ongoing efforts by AIs to strengthen fraud-prevention measures, while also reminding them to balance these with customer service.
• Improved Disclosure of Promotional Terms: AIs are being directed to revise promotional materials and enhance staff training to ensure transparent communication of terms and conditions for promotional campaigns.

• Reporting Period: The complaint statistics and trends presented in this issue pertain to the financial year 2025.
• Publication Date: This issue of Complaints Watch (Issue No. 27) was published in February 2026.
• Effective Dates for New Practices: While specific effective dates for the implementation of new practices are not explicitly stated, the HKMA's recommendations imply that AIs are expected to adopt these changes promptly. Given the publication date, it is reasonable to assume that the HKMA expects AIs to have begun implementing or to be in the process of implementing these enhanced practices in early 2026.
• Transition Periods: No explicit transition periods are mentioned in the document. The HKMA's tone suggests that immediate attention and corrective actions are required.

• Applicable Parties: The primary applicable parties are Authorized Institutions (AIs) licensed by the HKMA, which encompass banks and other financial institutions regulated by the HKMA.
• Affected Institutions: All AIs operating in Hong Kong will be affected, as the publication sets benchmarks and expectations for customer service, conduct, and communication.
• Degree of Impact:
• High Impact: AIs that have engaged in or are currently using "opt-out" mechanisms for service upgrades, or those whose digital platforms lack clear distinction between ledger and available balances. These AIs will need to undertake significant operational and training adjustments.
• Moderate Impact: AIs that have not fully adhered to COBP provisions regarding customer consent or have room for improvement in their communication strategies for promotional campaigns.
• Low Impact: AIs that are already proactive in adopting "opt-in" approaches, ensuring clear balance displays, and maintaining transparent communication. However, even these institutions should review their practices against the trends highlighted.
• Impact on Customers: While not directly addressed in terms of impact on customers, the recommendations are intended to benefit customers by enhancing transparency, reducing confusion, and mitigating the risk of financial loss and fraudulent activities.

AIs are expected to comply with the directives and recommendations outlined in Complaints Watch. While it is not a formal regulatory directive with punitive consequences for non-compliance, adhering to these points is crucial for maintaining the HKMA's confidence and avoiding future regulatory scrutiny.

• Review and Update Service Upgrade Policies:
• Action: AIs must review their current procedures for enrolling customers into new or enhanced banking services.
• Requirement: Prioritize the adoption of an "opt-in" approach over "opt-out," especially for services with associated costs or temporary waivers.
• Evidence of Compliance: Internal policy documents, training records, and evidence of updated customer agreements or consent mechanisms.
• Enhance Staff Training:
• Action: Implement comprehensive training programs for customer-facing staff, particularly those involved in sales, customer service, and call centers.
• Requirement: Training must cover relevant provisions of the COBP (specifically section 11.10) and the importance of accurate information dissemination regarding service upgrades, fees, and waivers.
• Evidence of Compliance: Training attendance records, training material content, and post-training assessments.
• Improve Digital Channel Clarity:
• Action: Audit all digital platforms (mobile apps, online banking portals) that display account balances.
• Requirement: Ensure that the distinction between "ledger balance" and "available balance" is explicit and easily understandable by customers. This might involve clear labels, tooltips, or separate display fields.
• Evidence of Compliance: System audit reports, screenshots of updated user interfaces, and user testing feedback.
• Revise Promotional Materials:
• Action: Conduct a thorough review of all current and future promotional campaign materials.
• Requirement: Ensure that terms and conditions, including any eligibility criteria, fee structures, and waiver details, are communicated clearly, accurately, and conspicuously.
• Evidence of Compliance: Updated promotional collateral (brochures, online banners, scripts).
• Strengthen Internal Controls and Communication:
• Action: Establish or reinforce internal oversight mechanisms to ensure adherence to COBP and HKMA guidelines.
• Requirement: Foster a culture of accurate communication and transparency within the institution.
• Reporting Requirements: While Complaints Watch itself does not mandate specific reporting, AIs are generally expected to maintain internal records of their compliance efforts. The HKMA may request information on these matters during routine supervision or thematic reviews. AIs should be prepared to demonstrate their actions taken in response to the issues raised.

• Phased Implementation: AIs may consider a phased approach to implementing "opt-in" mechanisms for service upgrades, starting with those that carry higher risks or involve temporary fee waivers.
• Customer Journey Mapping: Map out customer interactions related to service upgrades and balance inquiries to identify pain points and areas for improvement.
• Regular Audits: Conduct regular internal audits to ensure ongoing compliance with the updated policies and procedures.
• Feedback Mechanisms: Establish robust internal feedback mechanisms to capture customer concerns related to these areas and to drive continuous improvement.

• Authorized Institutions (AIs): Financial institutions licensed and regulated by the Hong Kong Monetary Authority.
• Code of Banking Practice (COBP): A set of guidelines and principles issued by the Hong Kong Association of Banks and the Deposit-taking Companies Association, setting out standards for banks and deposit-taking companies in their conduct of business.
• COBP Section 11.10: Specifically prohibits automatic enrollment of customers into new or enhanced services that involve a cost, potential liability, or potential risk of financial loss, unless the customer explicitly opts in.
• Ledger Balance: The total amount of funds recorded in a customer's account, including funds that have been deposited but have not yet been cleared by the banking system.
• Available Balance: The actual amount of funds that a customer can immediately withdraw or use from their account. This excludes uncleared deposits.
• Complaint Categories: The document categorizes complaints into "General banking services" and "Conduct-related issues." Within general banking services, specific sub-categories are detailed, including Selling Practices, Operation of Banking Accounts, Service Quality, Lending Business/Decisions, Fees and Charges, Remittance Services or Fund Transfer Disputes, Client Agreement Issues, and Credit Cards.
• Statistical Metrics:
• Number of new complaints received: A raw count of incoming complaints.
• Number of complaints handled: A raw count of complaints whose resolution process has been completed.
• Percentage change (year-on-year): The increase or decrease in complaint numbers compared to the previous year.
• Monetary Figures: HK$50,000 (cheque deposit amount), HK$10,000 (refund amount).

This summary provides a comprehensive overview of the HKMA's Complaints Watch Issue No. 27, highlighting key trends, policy expectations, and actionable insights for Authorized Institutions.