Banks Won’t Approve a No-Benefit Co-Borrower Unless They’re Satisfied There’s No Financial Abuse. Your Interview Is Where That Gets Decided

On 17 September the Australian Banking Association released an updated Industry Guideline: Financial Abuse, folding what had been separate resources on elder abuse and family and domestic violence into a single framework. Most of the coverage framed it as banks tightening their protections. Read the document itself and a more useful picture emerges for brokers — because the guideline leans hard on a Banking Code test that banks cannot answer without information only you collect.

That test is paragraph 70 of the Banking Code of Practice. It says that where an individual applying in their personal capacity will not receive a substantial benefit from a loan, a subscribing bank will not approve them as a co-borrower unless it has taken reasonable steps to ensure they understand the risks and the difference between being a co-borrower and a guarantor, has taken into account their reasons for wanting to be a co-borrower, and is satisfied they are not experiencing financial abuse.

What actually changed on 17 September

Start with what the guideline is, because the trade headlines overstate it. Section 1.2 is explicit: “Industry guidelines are voluntary in nature and do not impose binding obligations on individual banks.” Examples in the document “do not represent a requirement or commitment on behalf of any member bank,” and it is up to each bank to decide independently whether to adopt any practice in it. Where a bank does adopt a practice, the guideline says it should implement it within 12 months of the release date. The ABA proposes to review the document every three years.

So this is not a new rule landing on your lender panel next Monday. It is a statement of good industry practice, with a twelve-month runway for the banks that take it up.

The ABA listed four uplifts: expanded support for customers experiencing vulnerability, including how financial abuse can present in First Nations communities; a stronger focus on product and service design, including safety by design, staff training and safer ways for customers to disclose abuse; recognition of small business lending as a channel for financial abuse, with safeguards to test genuine borrower benefit; and updated expectations for managing third-party authorities where there is a risk of abuse.

The scale behind it is not marginal. The Australian Bureau of Statistics’ 2021–22 Personal Safety Survey found 23 per cent of women — about 2.3 million — and 7.3 per cent of men, about 692,600, had experienced violence by an intimate partner since the age of 15.

The paragraph that reaches your desk

Paragraph 71 defines substantial benefit narrowly. A co-borrower receives one where they acquire a reasonably proportionate legal or equitable interest in assets purchased with the loan funds, or where a reasonable portion of the funds repays their own debts or obligations.

Run your current pipeline against that definition and the files that surface are familiar ones. A partner added to a loan for servicing where the security will be held in one name. An adult child signed onto a refinance that clears a parent’s business debt. A spouse joining a facility that funds the other spouse’s company. None of those arrangements is improper. Plenty are ordinary, well-understood and exactly what the client wants. But each one puts the bank in a position where, under paragraph 70, it has to form a view about understanding, reasons and coercion before it approves.

The bank forms that view from an application, a servicing position and whatever narrative came with the submission. You are the one who met both applicants, watched who answered which question, and heard how the structure was explained the first time.

Best interests runs to each applicant separately

This is where it stops being the bank’s problem and becomes yours, because the obligation you carry is not borrowed from the Banking Code. The Code binds banks that have signed up to it. Brokers are not subscribers.

What binds you is the best interests duty in section 158LA of the National Credit Act, and ASIC’s guidance on it is unambiguous about how it works with more than one applicant. RG 273.16 states that mortgage brokers “must act in the best interests of each individual consumer to whom credit assistance is provided,” and that the obligations require brokers to assess what products and what credit assistance would be in each consumer’s best interests.

ASIC goes further at RG 273.18: brokers need to exercise judgment about what is in the consumer’s best interests, and “in some situations, this will include challenging the consumer’s perception of their best interests.” The consumer decides whether to proceed, but ASIC puts it plainly — it is the sole responsibility of the broker to ensure the recommendation is in the consumer’s best interests.

For a co-borrower who acquires no interest in the security and whose own debts are not being repaid, that is a live question you are expected to have formed a view on, separately, and recorded.

The email habit that now cuts against you

The operational change the guideline implies is smaller than a policy rewrite and more awkward than it sounds.

Section 4.5 tells banks that where they suspect financial abuse, they should make further enquiries when it is safe to do so, may present the request as standard practice or follow up later to avoid raising suspicion, and “should also avoid contacting or questioning the suspected perpetrator during the lending process if doing so could endanger the victim-survivor.” On jointly held products, the guideline says banks should engage with each party separately, including separate communication channels and verification.

Now look at how a joint application runs through a brokerage. One shared email thread. Both applicants copied on every request. A single mobile number in the CRM. Document portals where either party sees the other’s uploads. A fact-find completed with both people at the same table, because that is efficient and because it is how it has always been done.

None of that is negligent. But it means that if one applicant wanted to say something, there was never a moment in your process where they could. And if a bank later decides it needs to make a safe enquiry, the channel it inherits from you is a shared one.

The fix is procedural, not dramatic. Capture a separate email address and mobile for each applicant at the outset, as a data-quality step rather than a safety intervention. Have at least one short conversation with each applicant on their own — verification, identity, confirming their understanding of the structure — framed as standard practice for every joint file, because a step applied to everyone never signals suspicion on a particular one.

What to listen for

The guideline’s warning-sign list was written for bank staff, but much of it describes interactions brokers have routinely. Its indicators include:

• A customer appearing to be directed or controlled by another person, or deferring to another person’s authority.
• Not understanding, or seeming unaware of, transactions, loans or other products in their name.
• Financial hardship or non-payment of debts with no obvious cause.
• Referring to the sharing of debit cards, online banking passwords or contact details between family members.
• Expressing reluctance to involve the other co-borrower when seeking assistance.
• Having someone interpret for them who is also a beneficiary of the transaction.

That last one is worth sitting with. Interpreting for a family member is normal and often generous. The guideline’s point is narrower — that where the interpreter also benefits from the transaction, understanding cannot safely be assumed.

The guideline is careful that these are not conclusions. It tells banks that what looks suspicious “could simply reflect unconventional but legitimate arrangements between partners or family members,” that monitoring should be “a prompt for safe inquiry, not automated decision-making,” and that concerns should be escalated to trained specialists before engaging customers. The equivalent for a brokerage is that a warning sign triggers a question and an escalation to your licensee — never an accusation, and never a note on file that asserts something you have not established.

Where the coverage thins out

Two gaps are worth knowing about, and the guideline exposes both.

The first is commercial. The ABA’s recognition of small business lending as an abuse channel matters because guarantees and director appointments are where the largest exposures sit. The guideline’s own case study makes the point: a woman is made a director of her husband’s plumbing company and signs personal guarantees for a commercial loan with a non-bank lender, and is later pursued for more than $1 million after the business fails. The Banking Code test she might have been caught by does not apply to a lender that has not signed up to it.

The second is credit reporting, and it is now partly addressed. The guideline notes that a perpetrator applying for credit in a victim-survivor’s name damages their file, and says that where a bank becomes aware of fraudulent enquiries it should remove them. In August the Australian Retail Credit Association released its Principles of Best Practice: Domestic Abuse and Credit, which Australian Broker reported covers accurate credit reporting, accessible services, staff capability, safety by design and continuous improvement.

For brokers, that changes a conversation that used to end in a shrug. A client whose file carries coerced or fraudulent entries now has a documented industry pathway to raise it with the credit provider, rather than simply waiting five years.

What to review this week

A short, contained piece of work, not a project:

• Split the contact record. Audit your CRM for joint applications sharing one email or one mobile. Make separate contact details a mandatory field on new joint files.
• Add a solo touchpoint. Build one brief individual conversation with each applicant into your joint-file process. Apply it to every file so it never reads as targeted.
• Write the benefit line. On any file where an applicant will not take an interest in the security and is not clearing their own debt, record in your own words what benefit they told you they were getting and why they wanted to be on the loan. ASIC’s record expectations at RG 273.165 already call for relevant conversations with the consumer, the recommendation and the reasons for it. This is that, applied to the applicant who is easiest to overlook.
• Check your guarantor and director files. Identify commercial and self-employed deals where a spouse or adult child is a guarantor or recently appointed director without an operational role, and confirm they received independent legal advice.
• Agree an escalation route. Decide now, with your licensee, who a broker calls when something feels wrong on a file — before the file where it matters.

The strategic read

Nothing here obliges a broker to become an investigator, and nothing in the guideline asks for that. What it does is make the quality of the broker interview load-bearing for a decision the bank has to make and cannot make well without you.

That is the part worth acting on. Paragraph 70 is not new; the Banking Code version containing it took effect in February 2025. What is new is an industry framework that tells banks to look harder, ask more carefully, and — where there is evidence of lending under coercion — review the lending decision after the fact against the policies and laws in place at the time. Files get looked at again. When they are, the record of what was asked and by whom is the broker’s, and it either exists or it does not.

Where a client discloses abuse, the guideline’s own direction is to refer rather than solve: financial counselling services, community legal centres and legal aid, and specialist family and domestic violence services, with the customer’s consent before details are shared. The National Debt Helpline, Mob Strong Debt Help and the Small Business Debt Helpline are named in the document. Knowing which number to reach for is a reasonable thing for a broker to have sorted out in advance.