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ARTICLE · 21 MAY 2019

BCOP – Impact On Loan And Security Documents

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Drafting loan documents to deal with the new Banking Code of Practice is a major challenge. This report explains why.

United StatesFinance and Banking
Amber Warren
Amber Warren
Elise Ivory
Elise Ivory
Rachel Walker
Rachel Walker
Jon Denovan
Jon Denovan
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Drafting loan documents to deal with the new Banking Code of Practice is a major challenge. This report explains why.

The challenge is not only for ADIs subscribing to BCOP but also for other lenders because FOS and CIO (the predecessors of AFCA) both stated that BCOP is likely to be seen as good practice which should be applied to non-subscribers. We expect AFCA to continue this line of thinking.

We have previously alerted you to the problems with the substantial benefit provisions and the ‘sleeper issue’ about borrowers of convenience – see attachment.  

Another major issue is that BCOP 80 and 85 limit the permissible non-monetary defaults for business lending. This challenge is complicated by the need to remove any unfair contract terms from existing contracts (remembering that not only will unfair contract terms be void, but there has been discussion about imposing penalties for including unfair terms in contracts). A loan will be subject to BCOP’s small

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Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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