If you think the new Banking Code of Practice only affects the banks, think again! The code has far wider reach than the banking industry and may even lead to amendments to the Bankruptcy Act, causing ripples in the debt collection industry.
The Banking Code of Practice 2019 (‘Code’) commenced on 1 July 2019.
It is the first banking code considered and approved by ASIC. The Code is not compulsory upon the banks and it is up to the individual banks to adopt it. At present, 25 banks including all major banks have voluntarily adopted the Code.
Chapter 43 of the Code sets out requirements which the banks must adhere to when recovering debts. Of significance for the debt collection industry, paragraph 182 of the Code requires a bank to only sell a debt to a third party who has agreed to comply with the ACCC’s and ASIC’s Debt Collection Guideline: For Collectors and Creditors (‘Debt Collection Guideline’) and the Department of Human Services’ Code of Operation: Recovery of Debts (‘Code of Operation’).
The Debt Collection Guideline and the Code of Operation are non-legally binding statements of practices. They will only have legal effect if a party contractually agrees to adhere to their provisions.
The effect of paragraph 182 of the Code is to give the Debt Collection Guideline and Code of Operation a legally binding effect upon those who undertake recovery of bank debts.