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Sydney, August 1, 2003: The Australian Bankers’ Association has today released the revised Code of Banking Practice for personal and small business customers of banks.
David Bell, Chief Executive of the Australian Bankers’ Association (ABA), said: “The ABA is delighted to provide this revised Code of Banking Practice which followed extensive consultation with consumer, business groups and regulators, and the contents of the revised Code reflects their input.”
“The Code of Banking Practice brings a series of major benefits for bank customers, both personal and small business, which enhances the banking services available from their bank.”
The revised Code builds significantly on the earlier edition (1993) and among the new provisions:
· small business is included for the first time;
· provision of information for prospective guarantors before they commit to guaranteeing someone else’s debt;
· provision of important information on credit card chargebacks;
· helping customers cancel direct debit authorities;
· to try and help customers suffering financial difficulties with their bank loan, overcome those difficulties, with the customers’ agreement.
Mr Bell said: “This Code meets and beats similar codes in other countries such as the United Kingdom, Canada, New Zealand and Hong Kong. The ABA’s Code of Banking Practice stands out both in scope and the specific customer benefits it provides.”
“The revised Code is a major step forward by Australian banks in listening to community concerns and delivering change. This Code reinforces and complements Australia’s world class banking system and bank customers have a Code that will bring a new dimension to their freedom of choice in banking services.”
“The regular three-year review of the Code ensures that we can continue to develop and improve the Code in response to industry conditions and customer demands. Banks will submit to independent monitoring of their compliance and if a bank has systemically or seriously breached the Code it is liable to be publicly named.”
“A bank must be sure it is ready to comply with its obligations under the revised Code before it adopts, because the Code is an enforceable contract between the bank and the customer.”
“The banking industry is currently working on implementation arrangements for the financial services reform legislation and has only recently completed compliance arrangements for the mandatory comparison rate legislation.”
“Each bank will make its own decision about the timing of adoption of this Code and the ABA supports those banks which need a bit more flexibility in the timing of adoption.”
Background notes for editors:
The original Code of Banking Practice commenced in November 1996, to set standards of good practice which guide banks in their relationships with their personal customers.
The Code is a voluntary code in the sense that a bank has a choice whether to adopt it. Any bank, whether it is a member of the ABA, or not, is free to adopt the revised Code.
Once a bank has adopted the Code, it binds the bank contractually to the customer. So if a bank breaches the Code, it has breached its contract to the customer.
Download a copy of the revised Code of Banking Practice and Frequently Asked Questions, and other related information from the ABA website: www.bankers.asn.au. Copies will be available from banks once they choose to adopt the Code.
The Code was launched by the ABA in August last year in the expectation that 12 months would be required for banks to work on their implementation arrangements. There were likely to be some changes to the Code to deal with any unintended consequences. Some changes have been made and they are explained below.
Since August 2002, the main changes to the Code are:
1. Improving the workability of some of the guarantee pre-contractual information provisions and introducing transitional arrangements that make it clear from the Code when they will apply. For example, from June 1, 2004, a bank must tell a prospective guarantor whether there have been excesses on the debtor’s credit facilities or overdrawings on the debtor’s accounts within the previous six months. After February 1, 2005, the bank will provide a list of excesses and overdrawings for the prospective guarantor. Progression to a list delivers more useful information from what would have been made available under the August 2002 launch publication.
2. To maintain competitive neutrality, company directors who guarantee commercial asset financing facilities such as commercial leasing and hire purchase will not receive the pre-contractual disclosure that would normally apply to a prospective guarantor. This exemption is strictly limited and recognises the dynamic features of this type of financing. Banks would be placed in an uncompetitive position with finance companies and other non-bank financiers which do not have to comply with
the Code of Banking Practice.
3. When a borrowing company has only one director, the pre-contractual disclosure provisions of the Code will not apply to that sole director’s guarantee of the company’s loan. This recognises the sole director who, in operating a corporate business, is the person solely responsible for the company’s financial performance.
4. There have been two changes regarding the definition of a small business:
i. The definition of what is a “small business” now makes it clear that the number of people engaged in the business includes employees, who are people employed under a contract of service, and people engaged, for example, via an employment agency.
ii. The definition also helps to clarify that a business that acquires a banking service is not a small business if it uses the banking service in connection with a business that does not meet the “people engaged in the business” test in the definition. This avoids the possible unintended capture of large businesses under the Code.
For further information:
Heather Wellard
ABA Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
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