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The Australian Banking Association (ABA) is urging for the new code of practice to be adopted across the entire industry.
Recently approved by the Australian Securities and Investments Commission (ASIC), the new Banking Code of Practice standards are currently only a requirement of ABA members.
The code aims to lift standards in banking with a commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency. It will be fully implemented by July 1, 2019.
But the association has now recommended to the Royal Commission and the rest of the industry that non-members such as credit unions, building societies and other lenders adopt the standards to ensure there are no gaps in protections for customers.
CEO of the ABA, Anna Bligh, said while the new code was tailored specifically for the types of banks it represents it was important that customers were protected regardless of who they choose to bank with.
She added, “Members of the Australian Banking Association have lifted the standard in banking with this new Code, with customers the big winners.
“Initiatives such as reminders when introductory credit card offers are ending, proactive contact with customers who might be at risk of financial difficulty and simple, easy to understand contracts should be adopted across the entire industry.
“Particularly for small business, every lender, including building societies, credit unions and others, should give sufficient notice when loan conditions might change to help with future planning.”
Saying the ABA member banks were “proud” of the new code being implemented, Bligh said, “Other lenders are offering similar products however the standards are not the same, which creates both confusion for customers and a loophole in protections.
“These common standards for customers could be achieved by making membership of an ASIC approved code, such as the ABA code, a requirement of a licence.
“While we fully expect further changes to be made to banking following the final report of the Royal Commission, it’s important that all lenders, such as credit unions, building societies and others adopt the same rigorous standards to ensure there is consistency across the industry.”
Initiatives in the new Code include:
• Customer reminders when an introductory credit card offer is about to end
• New measures to assess a customer’s ability to repay their entire credit card limit within five years
• Proactive contact with customers deemed at risk of financial difficulty & have measures to help them
• Give customers lists of direct debits and recurring payments making it easier to switch
• Simplified loan contracts that are written in plain English and easier to understand
• Given more notice to small business when loan conditions change – helps with business planning
• Better protections for guarantors to ensure they understand their obligations, including a cooling off period and advocating that they seek independent legal advice to ensure they understand what they’re signing
• A new independent body which will investigate breaches and apply sanctions as needed.
