The revised Code applies to all consumers and to small businesses borrowing up to $3m and replaces the previous version, The Code of Banking Practice 2013. The Code will commence operation from 1 July 2019.

Other changes

Among the changes highlighted by ASIC as significant are the following.

• Extension of protection against unfair contract terms to businesses who borrow up to $3m: ASIC states that the 'new Code provides for improved protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms'. More particularly, for small businesses that borrow up to $3 million, the Code provides that lending contracts should not contain a range of potentially unfair and one-sided terms. ASIC comments that 'at its current setting of applying to small businesses who borrow up to $3 million, the Code will cover the considerable majority – between 92-97% – of businesses in Australia'.
• Expanded protections for consumers include: provisions for inclusive and accessible banking, including for vulnerable customers (and training for staff to assist); protections relating to the sale of consumer credit insurance including a deferred sales period of four days for CCI for credit cards and personal loans sold in branches and over the phone; protections for guarantors of loans (eg giving prospective guarantors generally a three day cooling off period and requiring banks to only enforce a guarantee once they have taken action against the borrower); rules requiring credit card customers to receive reminders about balance transfer promotional periods ending, as well as more consistent treatment about how repayments are applied; and enhanced processes for assisting customers in financial difficulty and processes for resolving complaints.
• Review of the definition of small business within 18 months: In addition to the independent review of the Code within 18 months, and the review of the Code 3 years after commencement ASIC states that it will collect quarterly data from banks and the Australian Financial Complaints Authority to monitor the extent of the Code’s coverage of small business. This information will be made public every six months and provide 'ongoing transparency about the coverage of the Code' ASIC writes.

Commenting on the approval of the Code Australian Banking Association CEO Anna Bligh said: ' It represents a stronger commitment to ethical behaviour, responsible lending, greater financial protection and increased transparency…Customers will see real tangible benefits, including more information about changes to their accounts, delay in offering on add-on insurance products and simpler contracts, with fewer conditions for small business loans…For the first time there is a new dedicated section on small business lending and another on inclusive and accessible banking. In addition, when required, a small business and or agribusiness expert, will be asked to assist the independent Banking Code Compliance Committee, which is responsible for monitoring Code compliance'. Ms Bligh added that though signatory banks have until July 2019 to implement the Code, some are expected to be compliant earlier. 

Initial response 

• Treasurer Scott Morrison welcomed the revised code as 'a significant step the banks are taking to alter their behaviour'. In particular, Mr Morrison highlighted changes to sales of add-on insurance being (deferred for at least four days when a customer applies for a credit card or loan) the requirement for banks to provide customers a list of direct debits and recurring payments, the extension of the code to small businesses, changes to non-monetary default clauses as examples of 'tangible' benefits for customers. Mr Morrison added that 'It is encouraging that the banks are starting to listen to the public and are looking to lift their game when it comes to how they behave and treat their customers….While they [the banks] have a long way to go, the new code is a step in the right direction'.
• The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell issued a statement welcoming the ABA Banking Code of Practice but expressing disappointment that 'the cap for small business loans was set at a total loan facility of $3 million, as we had recommended a credit facility of at least $5 million which would encompass capital intensive small businesses such as farms, building and manufacturing'. Ms Carnell also welcomed the fact that ASIC will monitor the extent of the Code's coverage of small business and publish data every six months adding that 'We will be keeping a close eye on those figures, with particular focus on industries we think require a higher lending cap, and also on ASIC’s work on the review of the small business definition.'
• CBA CEO Matt Comyn issued a statement welcoming the Code as 'another positive step by the industry to listen to our customers and undertake genuine change'. Mr Comyn added that the Code 'has the full support of everyone at Commonwealth Bank and it represents one of the steps we are taking to be a better bank for our customers and to build community trust'.
• NAB CEO Andrew Thorburn said: 'The Code raises the bar that banks must meet every day for our customers to deliver the service they can and should expect…We will prioritise implementing the Code as quickly as possible as part of our determination to be better.'
• Westpac CEO Brian Hartzer is quoted by The SMH as welcoming the approval, saying the industry had worked with the regulator to 'completely rewrite' the industry's commitments to customers. 'Westpac fully supports the new banking code which is one part of how we are strengthening transparency and relationships with our customers' Mr Hartzer reportedly said. 
• ANZ chief executive Shayne Elliott reportedly said via Twitter the bank would implement the code ahead of schedule.
• Bank of Queensland CEO Jon Sutton is quoted in The SMH as stating that the Code means that the community can 'look forward to a more customer-focused and sustainable banking industry'.

The New Daily and The Conversation have both separately queried whether self-regulation via The Code is likely to address/be effective in addressing the sorts of issues uncovered by the Financial Services Royal Commission.

[Note: Self-regulation of the SME lending sector is one of the issues that has emerged during the Financial Services Royal Commission Round 3 hearings. Among other things, comment was invited on whether the (then proposed) Code is 'adequate to address any residual concerns about the coverage of obligations imposed on the banks'. See: Governance News 28/05/2018; 08/06/2018.]

[Sources: 18-223MR ASIC approves the Banking Code of Practice; ABA media release 31/07/2018; Australian Banking Association Banking Code of Practice 2018; [registration required] The Australian 31/07/2018; 01/08/2018; CBA media release 31/07/2018; NAB media release 31/07/2018; [registration required] The SMH 31/07/2018; Australian Small Business and Family Enterprise Ombudsman media release 01/08/2018; [registration required] The AFR 02/08/2018; The Conversation 02/08/2018; The New Daily 31/07/2018; Treasurer Scott Morrison speech to the Australian British Chamber of Commerce: 'Consumer powered competition in our banking sector' 03/08/2018]