The Australian Bankers’ Association (ABA) released a revised Code of Banking Practice and Code Compliance Monitoring Committee Mandate on 1 February 2013 after an independent review.
This revised Code is set to commence on 1 February 2014. The Code is contractually binding on subscribing banks and sets out the minimum obligations in dealing with individual and small business customers.
We highlight some of the key changes.
Reminders to Mortgagees
Clause 12.6 now requires banks to give customers with a credit facility secured over their primary place of residence or residential investment property an annual reminder of the customer’s insurance obligations (if any).
The reminder must also include a general statement to make inquiries with the insurer about the coverage and reference to ASIC’s MoneySmart website at www.moneysmart.gov.au.
Varying Small Business Facilities – New Notice Requirement
Subscribing banks are now required to give small business customers at least ten clear business days notice when varying the customer’s credit facility terms and conditions.
There are some qualifications. The bank must reasonably consider the variation will materially affect the customer and a shorter notice period may be given if it is necessary to reduce the bank’s credit risk.
Clause 28 expands the existing financial hardship provisions and states that the bank will actively commit to working with the customer to develop a repayment plan. Banks must also deal with the customer’s authorized financial counselor upon request.
A subscribing bank must also provide a written confirmation of their decision whether or not to provide the customer with assistance during financial difficulties and the reasons for that decision.
Subscribing banks must comply with both the ACCC’s and ASIC’s ‘Debt Collection Guideline: for Collectors and Creditors’ when collecting amounts due and payable. The bank must also ensure that their representatives comply with these guidelines as well.
If the debt is sold to a third party, the bank must also ensure the third party agrees to comply with the Debt Collection Guidelines.
Under the revised Code banks must also refrain from assigning the debt (except as part of a funding arrangement) whilst they are actively considering the customer’s financial situation under clause 28, as outlined above. The debt also can not be assigned if the customer is complying with an agreed arrangement.
Low Income Earners
Under the revised Code, clause 16 (which does not apply to Small Business) provides that if an existing or prospective customer informs the bank that they are a low income earner or disadvantaged person and would like factual information about accounts which attract low fees or charges, then this information must be provided.
- if the bank becomes aware that the existing or prospective customer holds a Commonwealth Seniors Health Card, Health Care Card or Pensioner Concession Card then information about accounts with low fees and charges must be provided.
- If a customer is part of a remote, indigenous community then banks must take reasonable steps:
- to provide information regarding low fees and charges;
- assist the customer in meeting any identification requirements;
- train staff in regards to cultural awareness; and
- endeavor to make information about banking services available to customers in an accessible manner.
Under clause 22 banks must annually direct customers to information available in relation to their rights with respect to chargebacks.
This clause also provides that if there is a disputed card transaction the bank will claim a chargeback right and not accept a refusal of a chargeback by a merchant’s financial institution unless it is consistent with the relevant card scheme rules.
The guarantee provisions now have a more limited operation with respect to commercial asset financing guarantors, sole director guarantors and trustee guarantors.
For example clause 31.4 sets out steps that must be taken by the bank before accepting a guarantee, such as informing the customer about any demand made by the bank on the debtor within the previous two years. This notice is not proposed to be given to commercial asset financing guarantors, sole director guarantors and trustee guarantors.
If a customer believes the bank has not met its obligations under the Code they can lodge a complaint with the Code Compliance Monitoring Committee (CCMC) or the Financial Ombudsman Service (FOS) if the customer is claiming a loss
These obligations are in addition to those contained in Australian consumer laws and any Federal, State and Territory laws, including the National Consumer Credit Protection Act 2009 (Cth) incorporating the National Credit Code.