We explain why updates to the banking code mean customers will be getting a more responsible service.
Yesterday the British Banking Association announced changes to the Banking code that should see a fairer deal for all customers.
While voluntary, the code sets out standards of practice that are accepted by the majority of UK banks and building societies and so plays an important role in determining the level of service customers should expect.
Despite addressing issues across the personal finance sector, the amendments largely focused on lending with banks and building societies pledging to do more to prevent customers from racking up unmanageable debt.
As a result, once the code comes into practice later this year financial institutions will need to take a ‘responsible lending’ approach to their products. This will see providers assessing affordability on a one to one basis before approving a loan or credit card application and taking into consideration a customers credit rating, income and other financial commitments as part of this.
In addition, there will be greater help for those already struggling under excessive debt with banks providing practical advice and assistance to those facing difficulties, potentially even going as far as to help customers create realistic repayment plans.
The code will also go on to provide greater protection for current account holders with banks and building societies pledging to maintain their customers’ accounts in the face of valid complaints (a lesson evidently learned from the bank charges debacle) and prohibited from switching customers from a no-fee account to one that charges a fee without their consent. They will also do more to help customers find lost accounts.
Practices governing the use of cheques were also mentioned, with the changes now requiring banks to provide information about cheque clearing times and the costs involved with using credit card cheques more openly.
Commenting on the 2008 amendments Chief Executive of the British Banker’s Association, Angela Knight, said: "This new Banking Code gives strong commitments that banks will lend responsibly and will help customers who may be heading towards financial difficulties. The long consultation process, now complete, has shown clearly what customers want and expect from their banks. That has been the driver for these changes."
The changes announced by the BBA were agreed after consultation with representatives from the Treasury, the FSA, the Office of Fair Trading and a number of consumer groups and, according to Paul Smee of APACS, the UK payments agency, “should bring practical enhancements to the service customers already receive from their bank or building society”.
