01 Aug The corporate regulator and the Australian Banking Association have agreed on a revised Code of Banking Practice.
The corporate regulator and the Australian Banking Association have agreed on a revised Code of Banking Practice, following months of disagreement.
The Australian Securities and Investments Commission (ASIC) has approved the Australian Banking Association’s (ABA new Code of Banking Practice (COBP), set to commence operation on 1 July 2019.
The new code has been approved following a prolonged dispute over certain terms of the new code, which came to light during the third round of hearings of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
The new COBP includes:
- New Rights and Protections for Customers:
- Banks will abolish fees and commission on lenders mortgage insurance and will provide a fact sheet on the key policy features if you require the insurance.
- 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).
- 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 $3 million, 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 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 understand that Australians have high expectations and know that they have a big challenge ahead of them. The new Code of Banking Practice marks an important step in the right direction.