| UK BANKS - The announcement of a new Banking Code and promise by providers to treat customers fairly and reasonably may sound like an empty promise to some, despite some noteworthy commitments. |
Below is the British Bankers' Association (BBA) press release announcing the New Banking Code and the new provisions.
NEW BANKING CODE LAUNCHED
31/03/2008
The new Banking Code and Business Banking Code contain an enhanced promise by banks and building societies to treat customers fairly and reasonably. That promise is supported by eight key commitments and the standards of the revised Code.
The new Codes take effect today following an independent review. Changes to the codes were made after consultation with consumer groups, HM Treasury, the Financial Services Authority, the Office of Fair Trading and other interested parties. As well as the enhanced promise of fairness, further key improvements to the Banking Code include:
• a new commitment on responsible lending;
• more help for customers who may be heading towards financial difficulties;
• strengthened credit assessment practices to enhance responsible lending;
• clearer information about products, including pre-sale summary boxes for unsecured loans and savings accounts;
• prohibition of account closure as a result of a customer making a valid complaint;
• information on how to find your lost account (dormant account);
• greater clarity of cheque clearance times; and
• clearer information about credit cards and credit card cheques.
ANGELA KNIGHT, CHIEF EXECUITVE OF THE BRITISH BANKERS' ASSOCIATION, 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."
ADRIAN COLES, DIRECTOR GENERAL OF THE BUILDING SOCIETIES ASSOCIATION, SAID:
"The FSA is reviewing the longer term interaction between itself and the Banking Codes. This runs alongside the Office of Fair Trading study of the retail banking market and HM Treasury’s consultation on banking regulation generally. We will work closely with the OFT, FSA and the Treasury on these reviews, including bringing about an over-arching application of appropriate fairness principles to all aspects of retail banking as soon as possible."
PAUL SMEE, CHIEF EXECUTIVE OF APACS, THE UK PAYMENTS AGENCY, SAID:
"The new Banking Code benefits consumers by bringing in practical enhancements to the service they already receive from their bank or building society. This can be seen in the greater clarity of cheque clearing to the additional transparency of information relating to credit cards and credit card cheques."
ROBERT SKINNER, CHIEF EXECUTIVE OF THE BANKING CODE STANDARDS BOARD, SAID:
"We welcome the improvements in the Code. We look forward to working with the industry and other regulators to ensure equivalent standards of fairness for all banking products."
There will be further discussions with the BCSB, sponsors, subscribers and consumer experts on how the Banking Codes will look in the future. The aim is to bring the Codes more in line with the FSA’s principles-based regulatory approach. We will also be asking if the Code should include a section devoted to helping customers help themselves, drawing together issues such as guarding PIN numbers and understanding interest rates. This was proposed in our public response to the review in November 2007.
The FSA is reviewing whether, in areas falling within its remit, the current arrangements for regulating retail banking remain appropriate. This runs alongside the Office of Fair Trading market study into competition for personal current accounts and HM Treasurys consultation on banking regulation generally. We will engage with these reviews to further explore application of the Treating Customers Fairly principle for retail banking.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Lesley McLeod, BBA (020 7216 8825 Lesley.McLeod@bba.org.uk )
Rosalind Sellers, APACS (020 7711 6280 rosalind.sellers@apacs.org.uk )
Rachel Le Brocq, BSA (020 7440 2205 rachel.lebrocq@bsa.org.uk )
Neil Johnson, BSA (020 7440 2260 neil.johnson@bsa.org.uk )
NOTES TO EDITORS:
The Codes updated promise on fairness states:
"We promise we will treat you fairly and reasonably when providing you with products and services covered in this Code. We will keep this promise by meeting all of the key commitments shown below.
1. We will make sure that our advertising and promotional literature is clear and not misleading and that you are given clear information about our products and services.
2. We will give you clear information about accounts and services, how they work, their terms and conditions and the interest rates which may apply. 3. We will help you use your account or service by sending you regular statements (where appropriate) and we will keep you informed about changes to the interest rates, charges or terms and conditions.
3. We will help you to switch your current account between financial institutions subscribing to this Code.
4. We will lend responsibly.
5. We will deal quickly and sympathetically with things that go wrong and consider all cases of financial difficulty sympathetically and positively.
6. We will treat all your personal information as private and confidential, and operate secure and reliable banking and payment systems.
7. We will publicise this Code, have copies available and make sure that our staff are trained to put it into practice.
In order to meet these promises we will as a minimum take the steps and meet the standards set out in the remainder of this Code. The Banking Code and Business Banking Code are voluntary codes which sets the standards of good banking practice for banks and building societies to follow when they are dealing with personal customers in the United Kingdom. As voluntary codes, they allow competition and market forces to work to encourage higher standards for the benefit of customers. The first Banking Code was introduced in December 1991 and took effect from 16 March 1992. The first Business Banking Code was introduced in December 2001 and took effect from 31 March 2002. Both codes are monitored independently by the Banking Code Standards Board. The British Bankers' Association (BBA), the Building Societies Association (BSA) and APACS the UK payments association are the three industry sponsors of the Banking Code.
The Banking Code and Business Banking Code are reviewed every three years. Mike Young was appointed as independent reviewer for the 2007 Code review.
The review process included roundtables for stakeholders together with numerous bilateral meetings for those who preferred to put their points of view to the independent reviewer individually. Copies of the independent review and the industry’s response are similarly available on all the sponsors websites. In a 2001 report to the Chancellor of the Exchequer DeAnne Julius described the Banking Code as something of an exemplar. In 2005 the then Financial Secretary Stephen Timms told the Treasury Select Committee: I think the Banking Code is an excellent example of self-regulation. Copies of the new Banking Codes are available from the links below. Codes are also currently being distributed to all subscribers branches. Subscribers to the Banking Code are allowed a three-month transitional period to achieve compliance with new Code provisions requiring changes to written customer communications. Compliance must be achieved by the 1st July 2008. Details of these provisions can be found on this website.
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THE BANKING CODE 2008 - THE KEY NEW PROVISIONS
31/03/2008
A NEW COMMITMENT ON RESPONSIBLE LENDING
Section 2 of the new Banking Code and Business Banking Code include key commitments requiring banks to treat customers fairly. One of these key commitments is to lend responsibly. Further information is included in the Banking Code Guidance.
A NEW COMMITMENT ON CURRENT ACCOUNT SWITCHING
Section 2 of the new Banking Code and Business Banking Code includes key commitments requiring banks to treat customers fairly. One of these key commitments is to help customers switch their current account to another bank. Further information is included in Section 7 of each Code.
MORE HELP FOR CUSTOMERS WHO MAY BE HEADING TOWARDS FINANCIAL DIFFICULTIES
Section 14 of the Guidance to the Banking Code requires banks to proactively contact customers whom the bank feels (from the information available to it) may be heading towards financial difficulty. Customers will be encouraged to talk to their bank and given information on sources of free independent money advice.
STRENGTHENED CREDIT ASSESSMENT PRACTICES TO ENHANCE RESPONSIBLE LENDING
Section 13 of the Guidance to the Banking Code requires banks to consider credit reference agency data in assessing all applications for credit. Banks must also consider at least one of: (i) income and financial commitments; (ii) the customer’s previous financial behaviour; and (iii) internal credit scoring techniques.
CLEARER INFORMATION ABOUT PRODUCTS, INCLUDING PRE-SALE SUMMARY BOXES FOR UNSECURED LOANS AND SAVINGS ACCOUNTS
From 1st October 2008, Section 3 of the Banking Code will require banks to provide customers with important information about unsecured loans and savings accounts in a standard summary box before customers purchase a product.
PROHIBITION OF ACCOUNT CLOSURE AS A RESULT OF A CUSTOMER MAKING A VALID COMPLAINT
Section 7 of the Banking Code and Business Banking Code prohibits banks from closing a current account or savings account simply because the customer has made a complaint. Further information is included in the Banking Code Guidance.
INFORMATION ON HOW TO FIND YOUR LOST ACCOUNT (DORMANT ACCOUNT)
Section 9 of the Banking Code and Business Banking Code gives information on how customers can trace lost accounts. This includes details on the forthcoming unclaimed assets scheme. Further information is included in the Banking Code Guidance.
GREATER CLARITY OF CHEQUE CLEARANCE TIMES
Section 9 of the Banking Code and Business Banking Code requires banks to give customers details of the revised cheque clearing process, including when money starts to earn interest, is available for withdrawal, and when customers can be certain that the money is theirs. Further information is included in the Banking Code Guidance.
CLEARER INFORMATION ABOUT CREDIT CARDS AND CREDIT CARD CHEQUES
Section 10 of the Banking Code and Business Banking Code requires banks to give information to customers on how to decline a credit limit increase and on the important features of credit card cheques. Further information is included in the Banking Code Guidance.
UPGRADING CURRENT ACCOUNTS
Section 7 of the Banking Code and Business Banking Codes prohibit banks from upgrading a customer from a free account to a fee-paying account without their permission. Further information is included in the Banking Code Guidance.
MOVING OR CLOSING BRANCHES
Section 7 of the Banking Code and Business Banking Codes require banks to give customers at least 12 weeks notice of any intention to close or move a branch. Further information is included in the Banking Code Guidance.
ALTERNATIVES TO CHIP AND PIN
Section 10 of the Banking Code and Business Banking Codes require banks to give customers information about alternatives to Chip and PIN if the customer is unable to use a PIN due to a disability or medical condition. Further information is included in the Banking Code Guidance.
PROTECTING YOUR ACCOUNT
Section 12 of the Banking Code and Business Banking Codes give customers the most up to date information on how to protect their accounts from fraud. Further information is included in the Banking Code Guidance.
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Examples of some other materials on consumer issues to be found on the self-regulation section of the BBA website include the links below on: The Hunt Review (an independent review of the Financial Ombudsman Service), a Glossary, a guide to credit scoring (which is a 2000 update of the second edition drawn up in 1993), and a very basic guide to Payment Protection Insurance (PPI)
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| ID: |
41259 |
| Author(s): |
SCR |
| Publication date: |
31/03/08 |
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Created: 07/05/08. Last changed: 07/05/08.
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