Why your bank needs to be must clearer when dealing with its customers.

Consumers must have a clear and concise code when it comes to banking and financial services, says one of the UK’s leading financial mediators.

Jane Hingston, the head of banking and credit at the Financial Ombudsman Service, has written to Mike Young, the Independent Reviewer of the UK’s Independent Banking Code Review, asking for firmer action.

Mrs Hingston was expressed her concern about the diminution of the effect of the Codes. This is something that Peopleschampion.com also feels strongly about. Peopleschampion.com chairman, Jim Spowart, said: “It is one of the central aspects of our financial system – how banks and financial institutions serve their customers, it can’t be watered down.”

Mrs Hingston wrote: “Prior to March 2003, the Banking Code and Business Banking Code included an unqualified key commitment to “... act fairly and reasonably in all our dealings with you”. But the March 2003 editions qualify this commitment by limiting it to just four specific areas.”

 The limitations on such a key commitment represents a significant down-grading of the codes, says the Ombudsman. “In our experience, better subscribers have always tried to act within the spirit – and not just the letter – of the codes. So it was unfortunate that the approach of less good subscribers, who might look to just ‘tick the boxes’ rather than to do the right thing, was apparently reinforced in this way.”

 “We appreciate that it is important for the codes to be concise and accessible for consumers and subscribers. But they must also cover a wide range of issues and situations.”

 The Ombudsman is also concerned about another piece of fine print for consumers – the “Guidance for Subscribers” section which is intended to augment the codes and provide greater clarity to consumers. “We do not consider that the average consumer is likely to appreciate that the Guidance exists, let alone realise what it says. So we would suggest greater transparency in how the Guidance is worded, produced and made available – perhaps as Guidance for Consumers and Subscribers,” she said.

Mrs Hingston also referred to the ease with which consumers are allowed to borrow. She cited Banking Code which says: “Before we lend you any money or increase your overdraft, or other borrowing, we will assess whether we feel you will be able to repay it.”

This assessment could be as little as checking on the customer’s identity and finding out what he wants to borrow the money for.
“This appears very light indeed in terms of what subscribers undertake to do, given the growing concerns in many areas about affordability in lending. And it is surprising when compared with the stronger commitments that exist in some other codes within the lending industry,” she said in her letter.

And, on consumer getting into financial difficulty, she made some other remarks. The Banking Code undertakes that subscribers will “consider cases of financial difficulty sympathetically and positively.”

“We recognise that what sympathetic and positive means in an individual consumer’s case is likely to depend on the particular facts and circumstances …much of what the Guidance says appears to be geared towards telling a subscriber what it could expect the consumer to do about his or her debt, rather than telling the consumer what he can expect a subscriber to do to help him,” she said.

“We would welcome guidance that is more transparent and which supports – rather than dilutes – this commitment,” said Mrs Hingston.

Compare over 300 bank accounts with Current Account Champion »

« return to news index