The ABA has introduced a new set of guidelines in regard to sector practices. The code of practice aims to improve banking outcomes for all Australians. It is important to understand just how banking will change through this initiative.
The new set of guidelines, which will apply to all ABA members, introduce an array of measures designed to protect consumers and SMEs in an attempt to regain the trust lost amid the fallout from the ongoing banking commission.
“It represents a stronger commitment to ethical behavior, responsible lending, greater financial protection and increased transparency,” ABA chief executive Anna Bligh said in a statement.
“Banks value their customers and the new code is a big step towards providing better banking for all Australians.”
The code introduces new rights and protections for Aussie SMEs, specifically around access to loans and the enforcing of those loans. The code will ensure loan contracts are written in simple English, and loans under $3 million will have fewer conditions.
Changes to loan conditions will also have more notice attached, and ‘one-sided’ or unfair contract terms for SME borrowers will no longer exist in contracts with banks signatory to the code.
The most significant change is that banks who adhere to the code will not be able to take enforcement action against businesses that have met their loan repayments, in situations where the total value of all loans by that business is under $3 million. However, some events such as bankruptcy, noncompliance with the law, and misuse of loan funds will negate this assurance.