A new higher standard in Australian banking
31 July 2018
Australian bank customers will be the big winners from the approval of the new Banking Code of Practice by the Australian Securities and Investments Commission.
To better meet changing community standards and expectations a complete rewrite of the Code was undertaken between 2016/17. It was submitted to ASIC for final approval in December 2017.
CEO of the Australian Banking Association, Anna Bligh, said, the approval process has been rigorous and comprehensive, with a number of changes made to the draft to satisfy ASIC requirements.
“The new code will introduce a range of new measures to make banking products easier to understand and more customer focussed.
“It represents a stronger commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency.
“Banks value their customers and the new Code is a big step towards providing better banking for all Australians.
“Customers will see real tangible benefits, including more information about changes to their accounts, delay in offering on add-on insurance products and simpler contracts, with fewer conditions for small business loans,” Ms Bligh said.
For the first time there is a new dedicated section on small business lending and another on inclusive and accessible banking. In addition, when required, a small business and or agribusiness expert, will be asked to assist the independent Banking Code Compliance Committee, which is responsible for monitoring Code compliance.
The Code is enforceable and banks with personal or small business customers in Australia will be required to sign up to the new Banking Code of Practice if they wish to be members of the ABA.
“Banks understand that Australians have high expectations and know that they have a big challenge ahead of them. The new Banking Code of Practice marks an important step in the right direction.”
Signatory banks have until July 2019 to implement the Code, but some are expected to be compliant earlier.
The approval means it is now full steam ahead for banks over the coming 12-months as they implement the Code.
Banks will now begin training around 130,000 staff around the country, changing back end systems, and, in some cases, completely redesigning or building new systems to accommodate the changes.
“I thank everyone involved in the development of this new and improved Code, including bank staff, consumer advocates and small business groups. Each has played a critical role in shaping the new Code and taking an important step forward in restoring the reputation of Australia’s banking industry.”
The approval of the Code by ASIC is historic as it is the first finance sector industry Code to receive such approval from the regulator.
The Code, which was formerly reviewed every five years, will now be reviewed every three years.
A copy of the code is available at www.ausbanking.org.au/code
Contact: Kelly Stevens 0475 741 007 Contact: Nathalie Samia 0410 348 531
What’s in the new Code?
New Rights and Protections for Customers:
- Banks will abolished fees and commission on lenders mortgage insurance and will provide a fact sheet on the key policy features if you require the insurance.
- A delay in offering add-on insurance for credit cards and personal loans.
- Customer reminders when an introductory credit card offer is about to end.
- New measures to assess a customer’s ability to repay their entire credit card limit within five years.
- Proactive contact with customers deemed at risk of financial difficulty & have measures to help them.
- A commitment to take extra care with vulnerable customers and to train staff to help.
- Active promotion of affordable banking products.
- Assist people on low incomes to pick the right accounts for them (low or no fee accounts for pensioners and concession).
- Give customers lists of direct debits and recurring payments making it easier to switch.
New Rights and Protections for Small Business:
- Simplified loan contracts that are written in plain English and easier to understand.
- Contracts with fewer conditions for those with loans under $3 million.
- Given more notice when loan conditions change – helps with business planning.
- Improved communication and greater transparency when using valuers and insolvency practitioners.
- If a small business, with loans under $3M, has met their loan repayment terms a bank will not take enforcement action against the business (unless they fall within a limited area including bankruptcy, broken the law or loss of a licence to continue to operate).
New Rights and Protections for Guarantors:
- Better protections for guarantors to ensure they understand their obligations, including a cooling off period and advocating that they seek independent legal advice to ensure they understand what they’re signing.
- If borrowers get into financial difficulty, or their circumstances change, the guarantor will be notified.
- The bank will first attempt to receive assets from the borrower before starting action against the guarantor to repay the loan.
Stronger Enforcement and Compliance:
- The independent Banking Code Compliance Committee will investigate alleged breaches of the Code, make findings and recommendations relating to breaches and apply sanctions.
- The BCCC can formally warn a bank, publicly name a bank for breaches and new powers include, requiring a bank to rectify or take corrective action in cases of serious breaches, ordering them to undertake a compliance review, requiring a bank to train staff, and reporting serious, systemic and ongoing issues to ASIC.