MONEY COMMENT
New Banking Code: Same Old Problems

By Cliff D'Arcy
February 27, 2003

Here's some really exciting news: there's a new Banking Code launching on 1 March – yippee! Ironically, this is over a weekend, when many branches do not provide a full service, which perhaps someone missed. In addition, the government's savings arm, National Savings & Investments, has become the latest subscriber to the Code.

In theory, the Banking Code promotes good practice among its members (largely banks and building societies) when dealing with personal customers. It covers current accounts, personal loans, savings and credit cards but not mortgages or investments. The aim of the Code, which sets out the minimum standards to which its members should subscribe, is to ensure that we:

• are treated fairly and reasonably;
• receive "Plain English" information;
• are given help to choose appropriate products;
• have safe and reliable banking systems; and
• don't suffer because of errors and have complaints handled quickly.

Here's a common problem with all minimum standards: many members will do the minimum and no more, thus failing to meet most customers' expectations. In fact, the Financial Ombudsman Service registered a 25% increase in complaints under the Code last year. To me, this is a clear indication that banks are falling far short of the service we expect to receive.

Another drawback is that the Code is a voluntary code of practice, so has no regulatory basis and is not binding on members. Also, it's riddled with small print and jargon, which means that it's practically incomprehensible to the everyday punter.

Sadly, the new Code is hardly changed from the old Code. From 1 March, banks have agreed to make it easier to switch current accounts, be more candid about charges, and inform savers if interest rates are cut by 0.5% or more.

So, despite the new improved Code, very little will change with the everyday banking problems that make our blood boil, such as:

• poor savings rates and expensive debts;
• offering the best deals to new customers while neglecting faithful clients;
• high-pressure selling of low-value, high-cost products;
• branch cutbacks, poor service, shoddy complaints handling and "call centre centralisation";
• misleading or confusing financial advertising;
• being charged an extortionate £30 for being 27p overdrawn for one day; and
• the random mistakes and blunders that British banks do so well!

Though I hate to say it, it appears that the only way we'll get the banking service we deserve is through more legislation, not minor tweaks to a voluntary code. However, it's always worrying when we leave things up to the government.

Read Ten Things I Hate About Money or visit the Banking Code Standards Board.