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New Banking Code to Give Better Debt Protection
The new Banking Code calls on banks to take a more proactive approach to customers facing financial troubles.
The voluntary code commits banks and building societies to responsible lending and urges them to contact account holders who may be facing debt problems.
Previously, it was up to customers to contact their bank if they thought they were running into difficulties.
Banks should also take into account whether customers are capable of repaying debts before they receive loans or are given a higher credit limit, by examining credit ratings and assessing customers' income and outgoings.
British Bankers' Association chief executive, Angela Knight, said: "This new 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."
Additionally, the new code urges banks to give customers easy-to-understand summaries of important information concerning unsecured loans and savings accounts.
It says that banks should assist customers who wish to switch accounts to a rival and calls on them to provide clearer information on the amount of time cheques take to clear.
The code goes on to prevent banks from switching customers from a "free banking" account to one with charges without prior permission and calls on banks to ensure that account-holders get the latest information on how to combat identity theft and fraud.
However, former Lloyds TSB head of personal banking, Peter McNamara, stressed that, "people have to look at their own affairs."
He warned: "It is wrong to imagine that the banks are always going to be able to protect you when you are going to run into difficulties."
Consumer group Which? said that the code could have been stronger, with measures such as increased minimum credit card repayments to reduce debt.
Loan News posted on 04 April 2008
