A better deal for small businesses proposed by ABA
The new and improved Banking Code of Practice has already been sent to ASIC for approval.
A new Banking Code of Practice which will see simplified small business loan contracts and greater transparency from banks has been proposed by the Australian Bankers' Association (ABA). The new code, which the ABA said will be "simplified and customer-focused", was drawn up after nine months of research and meetings with banks and stakeholders. It is currently with the Australian Securities and Investments Commission (ASIC) for approval.
Under the proposed code, small business customers would be provided with a longer notice period when changes were made to loan conditions or of changes in the bank's decision to provide the loan facility.
The ABA has also proposed simplified loan contracts written "in plain English" and improved communication and greater transparency by banks in the use of property valuers, investigative accountants and insolvency practitioners.
The announcement comes after months of criticism from both ASIC and the Australian Small Business and Family Enterprise Ombudsmen (ASBFEO) Kate Carnell around small business loan contracts. In May, all Big Four banks announced the elimination of "non-monetary default" clauses in loan contracts for small business customers.
Then in August, the Big Four agreed to eliminate unfair contracts terms following pressure from ASIC and Carnell.
However, it was an independent review conducted by Phil Khoury, released earlier this year, which spurred the overhaul of the Banking Code of Practice.
“The industry has achieved the ambitious task of developing a new Code only nine months after receiving the final report from independent reviewer Mr Phil Khoury," said CEO of the Australian Bankers' Association Anna Bligh.
“The new code means we are making banking easier by making changes to processes, providing customers with more info and introducing higher standards for how banks serve their customers."
The new code is broken into ten key parts with four new sections. One of these is dedicated to small businesses.
Consumers can also look forward to improvements in banking processes as part of the proposed changes. For example, customers will be informed when a bank reports a payment default on a loan to a credit reporting body and giving customers the right to close a credit card online.
“This new set of rules and behaviours will go a long way in addressing the expectations that Australians have of their banks."