The updates in the March 2020 Code include changes to:
- introduce the concept of ‘basic accounts’ that have minimum features (including no account keeping fees, no minimum deposits, free direct debit facilities and access to a debit card);
- provide for eligible low-income customers to access basic accounts and other low and no-fee accounts, each of which must not feature informal overdrafts, dishonour fees or overdrawn fees;
- clarify the restrictions on non-monetary defaults on small business loans;
- extend protections to guarantors of small business loans – banks will now be required to first pursue the borrower in the event of default, before the guarantor (previously the Code limited these protections to guarantors of consumer loans), and
- prohibit default interest on small business loans secured by agricultural and commercial property in the event of drought or natural disaster.
There is no change to the application of the Code to small businesses: it only protects small businesses with up to $3 million in total debt to all credit providers.
ASIC’s decision to approve the March 2020 Code is on the understanding that the ABA will revisit the Code’s definition of ‘banking services’ and include an amended definition in the Code from 1 March 2021. The amended definition will address a concern that stakeholders and ASIC raised about the consequences of the current definition (which refers to the Chapter 7 Corporations Act 2001 definitions of ‘retail client’ and ‘wholesale client’) for small business coverage under the Code.
ASIC also notes future additional changes relating to informal overdrafts on basic accounts. These changes are required by the Australian Competition and Consumer Commission’s determination and conditional authorisation, issued on 21 November 2019.