The Australian Banking Association (ABA) has announced a proposed new Banking Code that would improve customer rights and safeguards in the banking sector. The new code, which has been submitted to ASIC for industry consultation, is expected to be implemented by July 2024.
What are the main changes in the new code?
The new code introduces several changes that are designed to enhance customer trust and protection in the banking sector. Some of the key changes are:
- Strengthening the definition of small business to include any business with less than $10 million in total debt, annual turnover, or aggregated turnover, or fewer than 100 full-time equivalent employees. This would expand the coverage of the code to more than 99% of Australian businesses.
- Improving transparency and fairness in lending practices by requiring banks to provide clear and timely information about loan terms, fees, charges, and interest rates, as well as the reasons for any decline or variation of credit. Banks would also have to notify customers of any changes to their credit limit or repayment arrangements, and offer hardship assistance if needed.
- Enhancing support for vulnerable customers by requiring banks to have policies and procedures to identify and assist customers who may be experiencing vulnerability, such as financial abuse, mental health issues, disability, or language barriers. Banks would also have to provide access to independent advocacy and support services, and ensure that their staff are trained and empowered to deal with vulnerable customers.
- Increasing accountability and compliance by requiring banks to report on their performance against the code standards, and to cooperate with the independent code compliance committee. Banks would also have to implement effective internal dispute resolution processes, and participate in the Australian Financial Complaints Authority (AFCA) scheme.
Why is the new code important?
The new code is a major step to strengthen customer protections and maintain trust in the banking sector, which has been damaged by several scandals and misconducts in recent years. The ABA said that the new code reflects the feedback from customers, regulators, government, and other stakeholders, and incorporates the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
How will the new code be implemented?
The new code is subject to approval by ASIC, which is expected to conduct a public consultation process before making a decision. The ABA said that it will work closely with ASIC and other stakeholders to ensure a smooth transition to the new code.
The ABA also said that it will provide guidance and support to its members, which include 22 banks that account for more than 90% of banking activity in Australia. The ABA said that it will monitor and review the implementation of the new code, and make any necessary adjustments or improvements.
The new code is expected to come into effect by July 2024, replacing the current Banking Code of Practice that was introduced in 2019.
