The Code introduces new measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks. All member banks of the Australian Banking Association (“ABA”) with a retail presence in Australia, must sign up to the Code as a condition of their ABA membership. This mandatory requirement is in contrast to the 2013 version where adoption was purely voluntary.
Banks that have adopted the Code are listed on the ABA website. Each bank that has adopted, or will be required to adopt, the Code must comply with its requirements by 1 July 2019.
Who benefits from the Code?
The Code applies customers of member banks, whether current or prospective, that are either an individual, a small business or a guarantor.
What are the new protections?
The Code has built on and enhanced the existing protections in the 2013 version. Importantly, the Code significantly expands the reach and impact of legal protections for consumers and small businesses. The protections provided by the Code must be included in the contracts that member banks make with their customers. Compliance with the Code will be monitored by an independent body – the Banking Code Compliance Committee (“BCCC”). Customers can complain to the BCCC about any non-compliance with the Code.
Some of the key changes are:
|2013 version of the Code
|(A) For consumers
|Special considerations to provide for inclusive and accessible banking for vulnerable (such as aged-related, elder abuse, domestic violence), low income and Indigenous customers.
|New requirement that banks do not receive commissions on lenders mortgage insurance.
|Introduction of a deferred sales period for consumer credit insurance sold for credit cards and personal loans sold in branches or over the phone.
|Banks cannot ask a prospective guarantor to sign a guarantee or accept it until the day after the prospective guarantor was provided information about the guarantee. This is to allow the prospective guarantor time to consider that information.
|Additional protections for guarantors of loans by requiring banks to give prospective guarantors three days to consider information about a guarantee.
|New rules requiring banks to: (1) send reminders to credit card customers that the balance transfer promotional period is ending; and (2) treat how repayments are made more consistently.
|(B) For small business
|A small business is a business that has less than 100 full-time equivalent employees if the business includes the manufacture of goods.
In any other case, a small business is a business that has less than 20 full-time equivalent employees.
|A small business is a business that at the time it obtains the banking service, all of the following apply:
· it had an annual turnover of <$10 million in the previous financial year;
· it has fewer than 100 full-time equivalent employees; and
· it has <$3 million total debt to all credit providers. This includes any undrawn amounts under existing loans, any loan being applied for and the debt of all its related entities that are businesses.