Banking Code will change in March
09 January 2008 11:38:30
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| Change will see banks having to protect borrowers from defaulting |
Under changes to banking rules, lenders will have to warn borrowers if they are at risk of getting into financial difficulties.
The code change has arisen with the aim of preventing an increase in the number of homes that are being repossessed. This new rule will mean that banks have to offer alternative debt repayment plans as well as contact details for free money advisers to customers who are at risk of defaulting on their payments.
March will see the change in the Banking Code come into effect. As it stands, the customer must contact the bank if they think that they are going to experience problems with their repayments. The imminent change will mean that borrowers still must do this if they are in trouble, but should prevent them from getting into severe difficulties.
Banks will be instructed to only claim back debt from credit cards, mortgages and personal loans only if the customer has enough money to first pay for ‘priority’ household bills such as heating and electricity.
Debt charities welcome the change, but still think that more could be done.
Chris Tapp, director of Credit Action said: “The change to the code is a step forward, but it is not the kind of change we need. If what we want is responsible lending in the first place, this does not go far enough.”
Additionally, the director of public policy at the Citizen’s Advice Bureau, Teresa Perchard said: “While these and other changes represent progress, 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.”
The British Bankers’ Association (BBA) oversees the Banking Code and has said that borrowers will still be more likely to reach a suitable repayment agreement if they cooperate with their lender.
Brian Capon, of the BBA, said: “Where the customer contacts the bank and is actively cooperating with it, the bank will be obliged under the code to consider granting concessions on interest, fees and charges. This will be decided upon a case-by-case basis, but one of the elements will be the extent to which the customer is working with the bank to resolve the problem.”
“It was always best practice for banks to get in touch if they noticed someone was struggling. Now this is in the code, although it is still best to get in touch with your bank straight away if you are struggling,” he added.
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