Banks that adopt codes of practice such as the Code of Banking Practice (CBP) and the Mutual Banking Code of Practice (MBCP) are contractually bound by the codes’ obligations. These require FSPs to try to help a client overcome financial difficulty (for example, by helping them work out a repayment plan). Further, a FSP is not to accept a client as a joint debtor where it is clear they are not to receive any benefit from a credit arrangement. All reasonable steps must be taken by the FSP to ensure that a co-debtor understands their rights and liabilities.
See Code of Banking Practice (developed by the Australian Bankers Association).
CBP Clause 28, for example, includes a requirement for the guarantor to sign the guarantee in the absence of the debtor (to avoid undue influence on the guarantor) – that is, the FSP is aware of the possibility of say, an older parent’s will being overborne in guaranteeing a son’s company debts. (See Undue influence in Equity).
See Mutual Banking Code of Practice (for credit unions, mutual banks and mutual building societies).
And note the Centrelink Code of Operation with Participating Financial Institutions, which protects individuals who depend on Centrelink payments.