Banks that are signatories to the Code of Banking Practice and finance brokers that arrange credit to be provided by Code regulated banks.
What do you need to do?The 2007-2008 Review of the Code of Banking Practice is a wide-ranging inquiry into the Code. Organisations have an excellent opportunity to comment on the interim recommendations suggested by the Independent Reviewer.
Partner
T +61 3 9643 4143
Sydney
Andrea Beatty
James Moore
Melbourne
Katherine Forrest
Ros Grady
Author
Chris Kontis
On 28 May 2008 the independent reviewer of the Code of Banking Practice published an Issues Paper as part of the 2007-2008 Review and invited comment from stakeholders. Submissions in response to the Issues Paper are invited by 11 July 2008.
The Final Report is then expected to be completed by 10 October 2008.
What does the review mean for you?
Given the extensive recommendations proposed and the likely impact on signatories to the Code, the submission process is a valuable opportunity for relevant entities to seek necessary changes and clarifications.
Significant recommendations in the Issues Paper
The Issues Paper outlines significant interim recommendations and issues on which further comments are sought.
A few examples of key proposed changes are to:
- Increase the prescriptiveness of the Code’s requirements in relation to credit assessment, customer hardship and debt collection.
- Incorporate by reference a series of separate policies or guidelines to be developed in relation to credit assessment, customer hardship, debt collection and guarantees involving principal and agent arrangements. These policies are to be developed by the ABA in consultation with consumer representatives, regulators and banks and reviewed on an annual basis.
- Amend the reference to “standard fees and charges” be deleted and replace by a reference to “fees and charges” which term is defined to include reference to the reasonable recovery of costs incurred by the banks when customers default on their repayments, exceed their overdraft limit or are overdrawn on their account.
- Include new provisions on switching accounts between banks.
- Broaden the range of sanctions available to the Code Compliance Monitoring Committee such as a warning, requirement to rectify an issue within a specified time and conduct of a compliance audit.
- Amend various provisions to allow the use of electronic communication for notification of changes to product terms and conditions and annual information on chargebacks.
- Reduce the required cooling off periods for guarantors if the guarantor has obtained independent legal advice or has requested a shorter period of time.
- Extend to unincorporated business structures the reduced disclosure obligations that are applicable to guarantors who are directors of a debtor company.
Specific Issues for which submissions are sought
The paper also seeks comment on a series of specific issues, including:
- how the Code should deal with undisclosed principal or agent arrangements (I.e. where a Code regulated lender makes a loan through a non-regulated reseller and the agreement with the end customer does not disclose the existence of the lender)
- whether a breach of a requirement to act “fairly and reasonably” should be a breach of the Code, and
- whether the definition of “small business” and the application of those provisions should be amended.
Links
A copy of the issues paper can be downloaded here.
How we can help
We have considerable experience and expertise in advising on the Code. We can assist you in considering the Issues Paper and preparing submissions in response to the paper.