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ARTICLE · 13 DECEMBER 2018

Substantial Benefit And Borrowers Of Convenience

The new Banking Code of Practice (BCOP) mandates procedures for situations where joint borrowers will not obtain a ‘substantial benefit'.

AustraliaFinance and Banking

Introduction

The new Banking Code of Practice (BCOP) mandates procedures for situations where joint borrowers will not obtain a 'substantial benefit'. However, there is a threshold question of whether a person should be a borrower at all.

It is likely that the principles set out in BCOP will be considered best practice by AFCA, courts, and regulators and so this report raises issues which are relevant to all lenders and not just ADIs who subscribe to BCOP.

Clauses 54 and 55 of BCOP provides that if borrowers will not receive a substantial benefit from the loan, lenders should ensure that (amongst other things) they have taken into account why the customer wants to be a co-borrower and that the customers understand the risks they are taking.

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