One writer shares his views on the Government's decision to make a legally-binding code of behaviour for banks.
I once wrote about a journalist who had asked me for my comments on the FSA's then-latest project: Treating Customers Fairly (TCF).
What I didn't mention that time was that she was deeply unimpressed when I actually told her the truth. It just didn't fit with the nice, happy story she wanted to write. So she went ahead and wrote the piece how she wanted anyway, saying how great TCF would be. She didn't quote me, and I never heard from her again.
The concept of TCF has been around for a few years now. Do you feel more fairly treated?
The Banking Code will continue to fail customers
In that same piece, I wrote about the Banks' main propaganda document, The Banking Code. (Read the article here: New Banking Code Fails Consumers.)
One of the Government's announcements this week is that the Banking Code will change from a voluntary code to a legally binding one. However, by itself that doesn't deal with the problems in the code that I outlined in March.
The code remains, for the most part, a collection of loose statements and minor concessions that the banks would have been forced to agree anyway, if they hadn't written a voluntary code.
In the same way that political parties promise to `make a difference', the Code promises such things as to `act fairly and reasonably'.
The wily banks say: `All written terms and conditions will be fair', yet this hasn't made the banks remove the thousands of nasty tricks buried in all their small print, be it in insurance, investment products, or a credit cards. Nor have promises to be `sympathetic' put a stop to overwhelming criticism from the struggling debtors who find their way to The Motley Fool's discussion boards.
All the other concessions in the code that you could call concrete are already legal requirements for the banks, or they simply suit the banks' interests.
This code also doesn't cover mortgages, investments, insurance or currency accounts. Crikey.
Banks may not have to give greater notice of increased interest rates or account closures
The code promises 30 days' notice before increasing penalty charges. It also promises 30 days' notice of unfavourable changes to terms and conditions. I believe the banking industry follows its code on these points, at least most of the time.
On the other hand, and despite several recent reports, nowhere does it specifically state that a bank has to give notice of unfavourable changes to interest rates, or that it must give a reasonable notice period before closing an account or loan.
This means that we'll have to rely on the Government's interpretation of the banks' vague promise to treat customers fairly. Even so, I'm somewhat optimistic that we'll get some sort of victory out if this, as it would be a popular move for politicians to support the public over the banks at this time.
Unfortunately, the code is for personal customers only, so the many small businesses that have recently seen sudden changes to their terms and conditions will need to lobby the Government. Hopefully it'll extend any popular moves that it makes to include these entrepreneurs.
Banks to avoid most fines
Some banks will be fined, no doubt. From time to time. But that's no different to now.
Occasionally, the regulatory machine will announce some sort of measure it's taken to discipline the banks, which will sometimes include fines. But it will still not be enough to encourage fair treatment of customers on most issues. The banks simply shift their unfair treatment to somewhere else.
Another factor is that the Government must consider how sensible fines are as the main means for deterring banks when it's the fact that banks are struggling with funding which is causing our problems.
It's the FSA that's due to ensure the banks follow their code when it becomes legally binding, but readers of my articles will know I have little faith in that organisation's handling of big banks. It doesn't always get it wrong, but it misses far too much.
`The FSA has begun consulting on the move', reports the Guardian. Yes, it will of course be consulting. Consulting the banks.
Regulation of the code will still help a little
But it's not all useless changes. The FSA won't put a stop to the majority of the banks' behaviour, but whilst all this attention is focused on the banks - from the media, the public, and MPs - we can expect the FSA to be relatively rigorous. It's better than nothing.
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