06/08/2024
What is the Banking Code of Practice?
The Banking Code of Practice (the Code) outlines the standards of service and practice for banks in dealing with small business, guarantors and individual customers. The primary aim of the Code is to offer customers safeguards and protections beyond what is stipulated by law. It is designed to complement legal requirements and, in some instances, establish higher standards than those mandated by law.
The newest version of the Code comes into effect on 28 February 2025, with ASIC having announced its approval of the revised Code on 27 June 2024.
What are the main changes made?
- The Code contains an updated Introduction which sets out clear guidelines on how eligible individuals, small businesses, and their guarantors can enforce their rights, which includes using internal dispute resolution, Australian Financial Complaints Authority, Court action and by making complaints to the Banking Code Compliance Committee (BCCC);
- The definition of ‘small business’ has been revised, raising the upper limit of aggregate borrowings from $3 million to $5 million, thereby extending protections to a greater number of small businesses under the Code;
- A revised conduct standard now obligates subscribing banks to ensure that banking services provided under the Code are delivered with efficiency, honesty, and fairness. This aligns with the standards set in subsection 912A(1)(a) of the Corporations Act 2001 (the Corporations Act) and subsection 47(1)(a) of the National Consumer Credit Protection Act 2009;
- The commitments to improve inclusivity and accessibility for customers has been clarified, including the provision of interpreter services, National Relay Services, and accessible information;
- The commitments regarding the administration of deceased estates has also been clarified, outlining a banks pledge to provide clear and accessible information about what a representative can do to manage a customer’s account upon their death, and to make this information publicly available;
- The definition of ‘vulnerability’ has been updated to explicitly recognises incarcerated individuals as customers at risk of experiencing vulnerability;
- The definition of ‘financial difficulty’ has been broadened to include customers who are likely or expecting to be unable to meet future repayments, making reference to examples of causes of financial difficulty;
- The commitment of subscribing banks in taking reasonable steps to hold a meeting with a prospective guarantor before accepting a guarantee, and to discuss the customer’s circumstances and reasonable alternatives to repaying a guaranteed liability before selling a guarantor’s primary residence;
- The simplification of provisions on the role and powers of the BCCC. Information about the powers of the BCCC and available sanctions have been relocated to the Introduction and the BCCC Charter, which has also been extensively revised. The BCCC’s role is to monitor compliance and promote best practice Code implementation.
In announcing its approval of the Code, ASIC was clear it will be keeping a constant eye on banks and their expectations as set out in the Code. Small business customers should utilise the dispute enforcement mechanisms set out in the Code. Griffin Legal can assist in making a compliant or commencing a dispute.
The new Code is available at 241514 ABA Working Groups Guide (ausbanking.org.au).
If you have any questions or queries, please contact our team at enquiries@griffinlegal.com.au