Key Takeaways

In mid-2024, ASIC approved updates to the Banking Code of Practice (Code) which take effect from 28 February 2025.

New Code

The updated Code has a keen focus on inclusivity and accessibility and offers further protections for banking customers, guarantors and vulnerable customers. The updates include:

• Updated conduct standard

To bring the Code in line with the standard applied in the Corporations Act and the National Consumer Protection Act, the Code’s conduct standard is being updated so that banking services must be provided “efficiently, honestly and fairly”.

• A new definition of “small business”

The expanded definition for small business includes a small business test and covers businesses that had less than $10M in annual turnover the previous financial year, less than 100 employees and less than $5M debt (formerly $3M).

The increase to the debt allowance is estimated to extend the Code’s application to a further 10,000 banking customers.

• Increased protections for guarantors

Signatories to the Code will now be required to meet with a guarantor, absent the borrower, to discuss the guarantee prior to accepting it, unless:

• a lawyer confirms that they have provided independent legal advice in respect of the guarantee, or
• the guarantor is: a director guarantor, commercial asset financing guarantor, sole director guarantor, trustee guarantor, partnership guarantor or vehicle asset financing guarantor.

Prior to enforcing security provided by a guarantor, a signatory must encourage the guarantor to provide details of their circumstances so that reasonable alternatives to repay the guaranteed liability can be discussed.

• Expanded provisions relating to vulnerable customers

Expansion of the Code’s provisions require signatories to take extra care with customers experiencing vulnerability, including a non-exhaustive list of possible vulnerabilities which increased to 14 identified vulnerabilities, compared to the 7 which were identified in the 2021 Code.

Signatories are also required to make it as simple as possible for vulnerable customers to appoint a third-party representative, such as a lawyer or financial counsellor, to deal with the signatory on behalf of that customer.

• A new definition of “financial difficulty”

The 2025 Code introduces an expanded definition of financial difficulty which extends not only to customers who are unable to repay, but also to customers who expect to be unable to pay upcoming repayments.

• Enhanced accessibility and inclusivity of banking services

The 2025 Code includes a commitment to inclusivity by enhancing access to banking services to all customers, including those who are older, people with disabilities, Aboriginal and Torres Strait Islander customers, customers with limited English, people of diverse sexual orientations, and customers in remote locations. The commitment requires signatories to make referrals to external support where appropriate including interpreters, National Relay Services or accessible information, free of charge.

Implications

Banking services provided on or after 28 February 2025 that do not comply with the updates to the Code are at risk of being the subject of complaints, sanctions or held to be void or unenforceable.