The non-major has revised its guarantor policy in response to provisions in the new banking code of practice.
BOQ has announced that as part of its commitment to complying with the new Banking Code of Practice (BCP), it has made additional changes to its guarantor policy, effective Sunday, 1 March.
The non-major will now require interviews with loan guarantors to be conducted face-to-face and separately from the borrower.
Guarantors will also be required to independently review and sign the guarantee documents, with brokers asked to ensure the guarantor signs the guarantee and indemnity in the absence of the borrower.
The Australian Securities and Investments Commission (ASIC) provided its final approval on the updated version of the Australian Banking Association’s (ABA) banking code in December.
The new changes are due to come into effect as of 1 March 2020.
The amended code of practice is intended to strengthen protections for vulnerable and low-income customers, including agricultural borrowers affected by drought and natural disasters.
Further, the changes are designed to ensure appropriate protections for consumer and small-business customers and their guarantors.
Under the new code of practice, banks will also be required 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.
[Related: ASIC approves banking code changes]