2025 Banking Code of Practice: seven key changes you need to know

The Code amends the definition of ‘Small Business’ to capture more businesses that will benefit from its protection.^[1] This is done by increasing the limit of the total debt held by the Small Business from $3 million to $5 million and by excluding both debt to which the National Credit Code applies and the ‘double counting’ of debt owed between members of a business group. 

The new $5 million limit includes any undrawn amounts under existing loans and any loan being applied for.  

The Code builds on the meaning of ‘vulnerability’ in the 2020 Code by expressly recognising  a customer’s circumstances may change over time and in response to particular situations, such that a customer may become vulnerable.^[2] 

The Code also expands the range of circumstances that may contribute to a customer being vulnerable to add:

1. disability;
2. serious medical conditions;
3. ‘Financial Difficulty’;
4. literacy and/or language barriers including limited English;
5. cultural background;
6. Aboriginal or Torres Strait Islander customers;
7. remote locations; and
8. incarcerated persons or persons recently released from incarceration.

The Code builds on the existing obligation on ABA member banks under the 2020 Code, which requires them to be committed to providing banking services that are inclusive and accessible for all customers, by requiring banks to take reasonable measures to enhance access to their services for customers, including: 

1. older customers;
2. people with disability;
3. Aboriginal and Torres Strait Islander customers, including those in remote locations;
4. people with limited English; and
5. people of diverse sexual orientations, gender identities and sex characteristics.^[3] 

Additionally, the Code introduces a new obligation on ABA member banks to “work to improve inclusivity and accessibility” for their customers. Where appropriate and practicable, this includes organising or referring a customer to external support free of charge, including: 

1. interpreter services;
2. National Relay Services; or
3. accessible information.^[4] 

The Code introduces a new obligation on ABA member banks to encourage, before enforcing a mortgage over a guarantor’s principal place of residence, the guarantor to tell the bank about their circumstances so that it can discuss other reasonable alternatives for the guarantor to repay the guaranteed liability.^[5]

The Code builds on the existing obligations imposed on ABA member banks under the 2020 Code regarding the sale of debt to third parties by introducing a new requirement that a debt cannot be sold if the debtor is experiencing vulnerability and:

1. the bank is of the view that the vulnerability is likely to be ongoing; and
2. there is no reasonable prospect of the debt being recovered.^[6]

In the event that a debt is sold to a third party, the Code requires the buyer to consult with the bank (the previous owner of the debt) prior to commencing bankruptcy or insolvency proceedings to recover an unsecured debt.^[7]

The Code introduces a new obligation on ABA member banks to take reasonable steps to meet with a prospective guarantor before accepting a guarantee.^[8]

The bank must also take reasonable steps to ensure the borrower is not present during the meeting.^[9]

These new obligations do not apply if:

1. the prospective guarantor or their lawyer confirm they have received independent legal advice about the guarantee;
2. the prospective guarantor is a ‘Director Guarantor’, ‘Commercial Asset Financing Guarantor’, ‘Sole Director Guarantor’, ‘Trustee Guarantor’, ‘Partnership Guarantor’ or ‘Vehicle Asset Financing Guarantor’; or
3. the existing guarantor is accepting an extension of the guarantee.^[10]

The Code introduces a streamlined approach to assisting a representative of a deceased estate in relation to customer accounts where the customer is deceased. 

Following notification of a customer’s death, the bank must take reasonable steps to promptly secure any accounts in the sole name of the deceased by:

1. removing the deceased customer’s internet and app banking login credentials; and
2. restricting the types of debit transactions that can be performed on the account.^[11]

The bank must also:

1. promptly identify and stop charging any fees that are for ‘Banking Services’ that can no longer be provided, or will not be provided to the deceased’s estate; and
2. if any such fees have already been charged since the customer’s death, refund those fees.^[12]

The Code clarifies the process for an individual to be recognised as a ‘Deceased Estate Representative’ by stating the bank will usually only require, in addition to the following, proof of the representative’s identification:

1. if the deceased customer has made a will and the representative is an executor nominated in that will, a verified copy of the will; or
2. if the deceased customer has not made a will, a verified copy of the death certificate identifying the representative as the next of kin(s) or other documentation that recognises them as the next of kin.^[13]

The Code also provides more information on how a legal representative can be appointed and when a grant of probate or letters of administration are required for the bank to accept instructions.^[14]

[1] Code, Part E.
[2] Code, s52.
[3] Code s45.
[4] Code s46.
[5] Code s124.
[6] Code s190(c).
[7] Code s188.
[8] Code s109.
[9] Code s110.
[10] Code s111.
[11] Code s135.
[12] Code s136.
[13] Code s137.
[14] Code ss 142-4.