ASIC is assessing changes to the Code proposed by the ABA in two stages, the first of which has been approved and is reflected in the latest version which took effect on 1 July.
ASIC (the Australian Securities and Investments Commission) has approved an updated version of the ABA (Australian Banking Association)’s new Banking Code of Practice.
Since ASIC approved the Code in August 2018, the ABA has applied to ASIC requesting approval of a number of changes, which the regulator is assessing the changes in two stages.
The first stage of changes has been approved, and includes:
- new provisions that will stop bank from charging fees for services to deceased customers where services are no longer being provided to that customer’s estate
- changes to the commitments around provision of valuations to small business customers
- changes to implement responsible lending rules for credit cards
- other minor and technical corrections
A new Code has been published on the ABA’s website reflecting the approved changes. The Code took effect today (1 July).
All ABA member banks will be required to subscribe to the Code as a condition of membership, with relevant protections of the Code forming part of the banks’ contractual relationships with their customers, ASIC said.
“The ASIC-approved Banking Code of Practice represents the most significant increase to customer protections under a code in the industry’s history,” the ABA said in a statement.
From 1 July, under the new Banking Code of Practice, banks will no longer:
- Offer unsolicited credit card limit increases
- Charge commissions on Lenders Mortgage Insurance
- Sell insurance with credit cards and personal loans at the point of sale.
Under the code banks must:
- Offer low-fee or no-fee accounts to low income customers
- Have a 3 day grace period on all guarantees to give guarantors enough time to make sure it’s the right option for them
- Actively promote low-fee or no-fee accounts to low income customers
- Provide reminders when introductory offers on credit cards end
- Simpler and fairer loan contracts for small business using plain English that avoids legal jargon
- Provide customers a list of direct debits and recurring payments to make it easier to switch banks.
“Banks understand they need to change their behaviour and this new rule book represents an important step in earning back the trust of the Australian public,” said ABA chief Anna Bligh. “The new Code will form part of every customer’s relationship with their bank and will be strongly enforced both by an independent body, the Banking Code Compliance Committee, and the Australian Financial Complaints Authority.”
The second stage of changes ASIC is reviewing is designed to:
- address recommendations of the Royal Commission, including provisions to improve vulnerable customers’ access to banking products and services, and ensure default interest is charged on agricultural loans in the event of natural disasters, and
- address stakeholder feedback relating to various small business protections.
ASIC aims to decide on these proposed changes later in the year. The ABA had proposed they would commence from 1 March 2020.