Banking Law
Disputes with banks and lenders in NSW for borrowers, guarantors and businesses: loans, guarantees, mortgage enforcement and responsible lending.
Banking law governs the relationship between a bank or other lender and its customers, including loans, guarantees, mortgages and the rules on how credit is provided and enforced. Vamp Law acts for borrowers, guarantors and businesses in disputes with banks and lenders in NSW, from a default notice through to AFCA or court proceedings.
What does banking law cover?
Banking law governs the relationship between banks and other lenders and the people and businesses they lend to: the loan or facility agreement, any guarantee and mortgage given as security, and the rules on how credit is provided, managed and enforced. Vamp Law acts for borrowers, guarantors and businesses in disputes with banks and lenders across NSW.
These disputes usually arrive at a point of pressure: a default notice, a demand under a guarantee, a lender's decision not to renew a facility, or proceedings for possession of a home or business premises. Vamp Law also acts for lenders in separate matters, with a conflict check before any new matter is accepted.
What disputes arise under loan and facility agreements?
Most disputes with lenders fall into a handful of categories:
Defaults and demands
whether a default has actually occurred, and whether the lender gave the notices the contract and the law require.
Interest, fees and charges
how interest and fees were calculated and whether they were charged in accordance with the contract.
Business facilities
reviews, covenant breaches, and a lender's decision to call in a facility or not renew it.
Financial hardship
requests to change repayments where a borrower cannot meet them for a period.
Enforcement of security
a lender's steps to sell mortgaged property or other secured assets, and any shortfall claimed afterwards.
Can a guarantee given to a bank be set aside?
In some circumstances, yes. In Garcia v National Australia Bank Ltd (1998) 194 CLR 395, the High Court held that a guarantee given by a wife for the debts of her husband's company could be set aside where she obtained no benefit from the transaction, did not understand its effect, and the bank neither explained it to her nor reasonably believed it had been explained by a competent, independent and disinterested person. In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, the High Court upheld an order setting aside a mortgage given by elderly parents to secure their son's business debts, because their special disadvantage was evident to the bank and enforcing the transaction would be unconscionable.
The Contracts Review Act 1980 (NSW) also allows a court to refuse to enforce, vary or declare void a contract that was unjust when it was made. Relief is not available to a corporation, or to a person for a contract entered into in the course of or for the purpose of their own trade, business or profession (other than farming), and time limits apply. The Banking Code of Practice contains further protections for individual guarantors.
What happens when a lender enforces a mortgage?
Default
The borrower misses repayments or breaches another term of the loan.
Default notice
For credit regulated by the National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)), the lender must generally give the borrower and any guarantor a default notice allowing at least 30 days to remedy the default before it begins enforcement proceedings. Loans outside the Code have their own notice requirements, set by the loan documents and the general law.
Hardship and negotiation
A borrower under a regulated credit contract can give the lender a hardship notice asking to change the repayments, and a payment arrangement can be negotiated at any stage.
Possession proceedings
If the default is not remedied, a lender seeking possession of mortgaged land in NSW usually starts proceedings in the Supreme Court of NSW, where these claims are managed in the Possession List. A claim that is not defended can proceed to default judgment.
Sale and shortfall
Once it has possession, the lender can sell the property and pursue the borrower or guarantor for any shortfall.
What are a lender's responsible lending obligations?
For consumer credit, the National Consumer Credit Protection Act requires a lender to make reasonable inquiries about a borrower's requirements, objectives and financial situation, to take reasonable steps to verify that financial situation, and not to enter a credit contract that is unsuitable, including one the borrower could only repay with substantial hardship. The National Credit Code applies to credit provided to individuals wholly or predominantly for personal, domestic or household purposes, and to some residential investment property lending, so most business lending falls outside it.
A borrower whose loan should not have been approved may have a complaint or a claim. The answer depends on what the lender asked, what it verified and what it knew.
Does the Banking Code of Practice apply to my bank?
It applies if your bank subscribes to it. The Banking Code of Practice is an industry code approved by ASIC, and the current version commenced on 28 February 2025. Australian Banking Association member banks with a retail presence in Australia must subscribe, and the Code applies to individual customers, small businesses and guarantors. Its rules form part of the contracts between subscribing banks and their customers, and compliance is monitored by the Banking Code Compliance Committee.
Separately, misleading or deceptive conduct and unconscionable conduct in connection with financial services are prohibited by the Australian Securities and Investments Commission Act 2001 (Cth), rather than the Australian Consumer Law, and those provisions are not limited to banks that subscribe to the Code.
This page is general information only. Whether a lender has acted properly depends on the facts, the loan and security documents and the correspondence.
Frequently asked questions
If the lender is an AFCA member and you are an eligible consumer or small business, yes, usually after first complaining to the lender itself. AFCA also considers some complaints from guarantors.
AFCA does not charge complainants, but it has monetary limits, compensation caps and time limits, and it cannot deal with a complaint a court has already decided.
Read it carefully, note the date by which the default must be remedied, and contact the lender before that date. If you are in financial hardship, ask about a hardship variation, and get advice promptly, because options narrow once enforcement proceedings begin.
Generally no. A guarantee exists to protect the lender if the borrower cannot pay, so a company's liquidation does not usually release a director who gave a guarantee for its debts.
Vamp Law's insolvency page explains how liquidation works.
Generally not. The responsible lending obligations apply to consumer credit regulated by the National Credit Code, and most loans to companies, or to individuals for business purposes, fall outside that regime.
Other protections, such as the Banking Code of Practice and the prohibition on unconscionable conduct, may still apply.
Speak with Vamp Law about a dispute with a lender
If you are a borrower, guarantor or business in dispute with a bank or lender, make an enquiry or call +61 431 569 686 to speak with Kyra Pastrovic. Read more about Vamp Law's commercial litigation practice.
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