ASIC has issued Consultation Paper 373 on the Australian Banking Association’s (ABA) proposed changes to its Banking Code of Practice (the Code).

The consultation will help inform ASIC’s decision on whether to approve the proposed Code, and is focussed on obtaining feedback and insights on the following key issues:

• whether the proposed Code imposes obligations on subscribers that are beyond those required by the law and, in doing so, addresses key potential consumer harms;
• whether the proposed Code provides for effective administrative systems for monitoring compliance and whether the obligations are capable of being enforced;
• whether any Code review recommendations that the ABA has not supported should be included in the proposed Code;
• whether the recommendations accepted by the ABA are appropriately reflected in the proposed Code and proposed Charter;
• whether the proposed Code strikes an appropriate balance between simplifying the Code and minimising regulatory duplication on the one hand, and promoting consumer awareness of protections applicable to their banking relationship on the other; and
• the role of industry guidelines.

The proposed changes include:

• extending the obligation to exercise the care and skill of a diligent and prudent banker to loans that are not regulated by the National Credit Code;
• new provisions requiring that reasonable steps be made to ensure a meeting is held with a guarantor before they sign their guarantee;
• The definition of ‘financial difficulty’ under the proposed Code has been updated to
  include customers who are likely, or expecting, to be unable to meet future repayments;
• an updated definition of ‘vulnerability’, which recognises that a customer may be vulnerable at any point in time;
• new language and a new commitment to refer customers to support services (where appropriate and practical), free of charge. These include interpreter and translation services, Auslan, National Relay Services and accessible documentation;
• an updated definition of small business, which increases the upper limit of aggregate borrowings from $3 million to $5 million, resulting in a greater number of small businesses having protections under the Code.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.