VITAL SMALL BUSINESS PROTECTIONS SAVED IN NEW BANKING CODE OF PRACTICE

Olivia Pearce — Mon, 08 Jul 2024 22:57:40 +0000

VITAL SMALL BUSINESS PROTECTIONS SAVED IN NEW BANKING CODE OF PRACTICE Olivia Pearce Tue, 07/09/2024 - 08:57

09 July 2024

The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, says he welcomes the regulator’s decision to retain and enhance vital protections for small businesses in the new Banking Code of Practice.

“A push by the banks to shrink the Code has been rejected and they must continue to include an explicit and detailed pledge outlining how they will handle complaints,” Mr Billson said.

“The code will also be expanded to cover at least 10,000 more small businesses and it will include clear information about how a small business can enforce their rights.”

The Australian Banking Association’s code, which aims to set a consistent standard of good industry practice, has been approved by the Australian Securities Investments Commission and will come into effect on 28 February, 2025.

The Ombudsman strongly advocated against the Australian Banking Association’s proposal to remove from the code detailed ‘how to’ requirements regarding complaints-handling and instead refer customers to ASIC Regulatory Guide RG 271.

“It was never reasonable to expect busy and resource-constrained small businesses to read and understand regulator guidance for financial firms, and then to decipher and be clear on how to exercise rights afforded to them,” Mr Billson said.

“We are pleased ASIC has rejected this absurd change that would have omitted from the code existing explicit commitments by banks when there is a complaint to conducting a fair and reasonable process, as well as providing information on progress, a contact person, a written response, and an explanation and monthly updates regarding delayed responses.”

Mr Billson said small, family and farming businesses were frustrated with the banks, particularly in regional areas where branch closures and the removal of automatic teller machines have deprived them of face-to-face service.

“The banking code, like all industry codes, should be viewed as the ‘floor’ of minimum standards, not the ambition,” Mr Billson said.

“Competitive access to finance has been a longstanding challenge for small and family businesses. Policy incentives need to strike the right balance between managing risk and supporting entrepreneurship, including by ensuring small businesses have reasonable and reliable access to banking services.”

Mr Billson said the protections of the code will cover at least an extra 10,000 small businesses (and potentially many more), by increasing the value used in the aggregate borrowing criterion from $3 million to $5 million.

He said the code will also contain an updated introduction with information about how eligible individuals, small businesses and their guarantors can enforce their rights.

It will also commit banks that have signed the code to take reasonable steps to make sure a meeting is held with a prospective guarantor before taking a guarantee, and to discuss customer circumstances and reasonable alternatives to repay a guaranteed liability before selling a guarantor’s primary place of residence.

It also includes an updated conduct pledge by the banks to do all things necessary to ensure that banking services provided under the code are provided efficiently, honestly and fairly.

An updated definition of vulnerability and an enhanced definition of financial difficulty aims to cover customers who are likely or expecting to be unable to meet future repayments.

Mr Billson said while the banking environment was continually evolving, rising best-practice standards and expectations should be captured in each new version of the code.

“I call on the banks to make sure the benefits of their expanded commitments and the updates in the new code apply to both current and prospective small business customers,” he said.

Mr Billson also urged the independent review of the 2020 General Insurance Code of Practice, now under way, to follow ASIC’s example by applying the same lens of protecting small businesses and consumers.

Media contact: 0448 467 178 / www.asbfeo.gov.au

Banks offer certainty to small businesses impacted by lockdowns

Toby — Thu, 02 Dec 2021 01:59:33 +0000

Banks offer certainty to small businesses impacted by lockdowns Toby Thu, 12/02/2021 - 12:59

10 July 2021

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson has welcomed the banks’ ongoing efforts to support small businesses impacted by COVID-19 lockdowns.

The Australian Banking Association says banks will defer loan repayments for small businesses affected by lockdowns throughout Australia for three months.

“This is a positive initiative that will help many struggling small businesses stay afloat in these challenging times,” Mr Billson says.

“The banks’ commitment to support small businesses through this period is highly valued and is the kind of a key support element that could be incorporated into an agreed predictable and known national framework of support.

“Such a framework, involving both Government and private sector elements, step up as COVID-inspired economic constraints and introduced, up-levelled or extended that small and family businesses can count on when seeking to navigate these challenging and uncertain times

“I would encourage all small businesses owners who are experiencing financial difficulties to call their banks now to make the necessary arrangements.

“Home loan support, including deferrals on a month-by-month basis, is also available to small business customers.

“Banks are promising to support small businesses if they need it - so long as the loan is in good standing with repayments up-to-date or there’s a payment program in place.

“It’s encouraging to see our banks taking this proactive approach and leading by example.

“This consistency from the banks will help small businesses navigate and adapt to periods of uncertainty such as this.”