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Last Updated: Monday, 26 November 2007, 12:32 GMT
Banking code changes 'not enough'
A man with his head in his hands
The new code promises more help for customers in financial difficulty
The latest review of the voluntary banking code does not go far enough, consumer groups have warned.

They welcomed commitments on fairness and responsible lending but wanted tougher action on issues such as bank charges and credit card cheques.

One group said the time had come for compulsory regulation.

The new code followed an independent review by Mike Young, formerly of the Bank of England, and will take effect in March 2008.

The banking code sets voluntary standards of good banking practice for banks and building societies.


New measures include more help for customers facing financial difficulty, clearer information about unsecured loans and savings accounts, better assessment of credit risk to support responsible lending and greater certainty regarding cheque clearance.

This is too crucial an area for consumers to rely on a voluntary banking code
John Howard, Financial Services Consumer Panel

The industry has also said it will consider including an "overarching fairness objective" which would mirror Financial Services Authority (FSA) requirements that firms adhere to its 'Treating Customers Fairly' principles.

The Financial Services Consumer Panel (FSCP), which advises the FSA on consumer issues, supported the new code's commitments on responsible lending and customers in financial hardship, but called on the industry to go further.

FSCP chairman John Howard said it was "extraordinary" that an overarching principle of fairness was not already in place, and urged the industry to make "swift progress" on this issue.

Lending practices

He believes statutory regulation by the FSA would lead to a better deal for customers.

These revisions to the code reflect the need to keep up with a changing world
Angela Knight, BBA
The first code was introduced in March 1992, although the present version of the regulations has been in place since 2005.

"This is too crucial an area for consumers to rely on a voluntary banking code," he said.

"If the FSA had already applied the principle of Treating Customers Fairly, the issue of unauthorised overdraft bank charges could well have been dealt with much earlier," he added.

Citizen Advice also welcomed the proposals on treating customers fairly, but criticised the lack of progress around lending practices.

"We are disappointed that the opportunity has not been taken to end the practices of unsolicited increases in credit limits and unsolicited issuing of credit card cheques," said director of public policy Teresa Perchard.

"Such practices do not sit easily, in our view, with the commitment in the code to lend responsibly," she added.

Mike Young's review is the third independent examination the code has undergone in recent years. He said "most of his recommendations" had been accepted, "in one form or another".

'Changing world'

Angela Knight, chief executive of the British Bankers' Association, which sponsors the code, said financial institutions and customers would both benefit from the strengthened rules.

"These revisions to the code reflect the need to keep up with a changing world," she said.

"It will continue to underpin the treatment and protection customers value and have every right to expect".

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