Government ‘encouraged’ by Banking Code review
The Government is “encouraged” by finance industry proposals to provide basic banking facilities and “health warnings” on credit cards.
The move has also been generally welcomed by consumer groups, but campaigners are disappointed the Banking Code review falls short of standardising the way interest rates are calculated and speeding up the time it takes for a cheque to clear.
The recommendations by Professor Elaine Kempson, who was asked by the industry at the beginning of 2004 to conduct a review, include making basic bank accounts more readily available, providing a “health warning” on credit card statements where a customer is only making the minimum repayment, and greater transparency on clearing cycles for electronic payments and cheques.
It also includes the introduction of summary boxes on credit card agreements and proposals to improve the way banks and building societies handle the relationship with customers in financial difficulty.
A spokesperson for the DTI said: “The Government is encouraged by the positive moves outlined in the industry’s response to Professor Kempson’s excellent recommendations to update the Banking Code.”
“In some areas the industry is only able to make interim commitments pending future work, and we will continue to work with it to develop the proposals to strengthen the industry’s generally high standards of responsible lending.”
Ian Mullen, chief executive of the British Bankers’ Association, said Professor Kempson’s recommendations for the Banking Code were “sensible, practical and appropriate” and the industry was “pleased” to adopt them.
Adrian Coles, director general of the Building Societies Association, said the code was already good for consumers, but today’s changes made it even better; while Sandra Quinn of APACS said it showed the industry’s “commitment to improve transparency”.
But Emma Bandley, personal finance campaigner for the consumer group Which?, said the industry had missed an opportunity to demonstrate its commitment to customers. Which? wants to see faster cheque clearing, rather than more awareness; a standardised way of calculating interest rates; and changes to minimum payments on credit cards so they make inroads into the debt.
“Today’s revamped banking code provided the industry with an opportunity to demonstrate its commitment to its customers but sadly they still seem to be several paces behind when it comes to meeting their needs,” she said.
“We’ll continue to agitate for either voluntary or statutory regulations to provide this much needed consumer protection.”
Jill Johnstone, director of policy at the National Consumer Council, welcomed the announcement on basic bank accounts but called on the industry to actively promote them to increase take-up.
She said: “We are glad to see today’s code has tightened up procedures to make basic bank accounts more available to customers. However, we need evidence from industry that this more than just a paper exercise. Giving people a basic bank account at their request only is not likely to increase take-up significantly. We want to see the banking industry promoting these accounts much more actively.”
Malcolm Kurston of the Consumer Credit Counselling service, which helps customers in financial difficulty, was disappointed that the industry did not accept the recommendation to behave in a fair and reasonable manner to comply with the code. “In practice, in our experience, nearly all subscribers to the code behave fairly and reasonably nearly all of the time. Why can’t they just bite the bullet and say so?” he asked.
However, the introduction of a summary box on credit card agreements was warmly welcomed by financial education charity, Credit Action. “We have been pushing for a summary box for some time” says the charity’s National Director, Keith Tondeur, “as we find many people struggle to understand even the basic concepts as to how credit works.”
The proposals will be implemented from March 2005.
