Banks hold their noses for a new dose of self-discipline
Tighter lending rules could be on the cards as the industry code of practice is reviewed
Sunday 18 February 2007
Your bank is about to look again at the way that it deals with you.
The Banking Code, a voluntary set of rules devised by banks and building societies and governing their conduct towards customers, is up for review.
Held every three years, the review is a chance for the industry to analyse its behaviour and make sure consumers are being dealt with fairly. Last week saw the deadline pass for submissions.
Up to 30 documents were handed in to Mike Young, the code's independent reviewer, formerly of the Bank of England and the British Bankers' Association. Interested parties included the consumer body Which? and the Consumer Credit Counselling Service; the Treasury and Department of Trade and Industry; the Financial Ombudsman Service (FOS); the banks themselves; and even members of the public who take an interest in the way banks run their affairs.
While elements of the banking industry - mortgages, for example - are regulated by the Financial Services Authority, there is much that is covered instead under the Banking Code. It applies to current accounts, savings and deposit accounts, cash individual savings accounts, basic bank accounts for low-income earners, and debit and credit cards.
It includes the following pledge to consumers from the industry: "We will act fairly and reasonably in all our dealings with you by meeting all the commitments and standards in [the code]." This might come as a surprise to any regular reader of this section, in which punitive action by the regulator is frequently reported (see News, page 18).
Under the code, banks that behave badly can be publicly named and shamed by the Banking Code Standards Board. However, parts of the code remain contentious. For example, say the Bank of England raised its base rate by a quarter point but your own bank reacted by putting up the interest on your variable-rate savings account by just 0.2 percentage points. Under the current rules, the bank is not obliged to contact you about this.
The FOS sounds off about this in its submission for the review. Pointing out that in 2005 banks had indicated they hoped to tighten their "notification" rules, it writes: "We have [since] been disappointed to note that no real progress has been made."
One particular concern is found across a number of review submissions: the need for tougher rules to test the creditworthiness of individuals before banks lend to them. The existing code tells consumers: "Before we lend any money or increase our overdraft, or other borrowing, we will assess whether we feel you will be able to repay it."
The FOS points out that other codes - from the Finance and Leasing Association (FLA), for example - are far more stringent. The FLA code says: "We must make sure that all loan applications go through a sound and proper credit assessment."
Given the record billion-pound debt write-offs made by banks last year, the current rule "appears very light indeed", the FOS says.
Mr Young will publish his suggestions for revisions at the end of May, reporting to the three sponsors of the code: the payments body Apacs, the British Bankers' Association and the Building Societies Association.
They must publish their responses, but they don't have to agree with Mr Young's recommendations and can make their own amendments instead. The revised code must be implemented by March 2008.
- 1 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ashya King: 'Cruel NHS has not given us the treatment we need', says father of five-year-old with brain tumour who fled to Spain
iJobs Money & Business
£35000 - £38000 per annum + benefits: Ashdown Group: Executive Assistant/Event...
£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...
£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...
£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony