BANKS and building societies will have to do more to help customers who get into financial difficulties under the new banking code.
The code, which is due to come into force today, contains an "enhanced promise" that banks will treat customers fairly and reasonably.
It states that banks must proactively contact customers they think may be heading towards problems, based on the
information they have on them.
Customers will also be encouraged to talk to their bank about their difficulties, with banks pledging to do all they can to help them, including assisting them in developing a plan to deal with their financial problems.
Banks must also be "sympathetic and positive" when dealing with people in difficulties, giving them information on where they can get free, independent advice and working with debt-counselling groups such as Citizens' Advice if customers ask them to.
The move goes beyond the provisions in the old code, which simply stated that banks would treat people in difficulties "sympathetically and positively", but left the onus on consumers to approach their banks if they faced problems.
The new code also contains a commitment to responsible lending, under which banks must assess whether people will be able to repay their debt, before they are advanced new loans or have their credit limits increased.
Banks will have to look at people's credit references when assessing all applications for credit. They must also take into account a consumer's income and financial commitments, or a customer's previous financial behaviour or internal credit-scoring techniques.
Angela Knight, chief executive of the British Bankers' Association, said: "This new banking code gives strong commitments that banks will lend responsibly and will help customers who may be heading towards financial difficulties. The long consultation process, now complete, has shown clearly what customers want and expect from their banks. That has been the driver for these changes."
The new code follows an independent review and a consultation with consumer groups, as well as the Treasury, Financial Services Authority and Office of Fair Trading.
But consumer group Which? said the new code was a missed opportunity, adding that more could have been done to protect consumers at a time when many people were struggling with their finances.
Vera Cottrell, principal policy adviser at Which?, said: "A lot more could have been done to really benefit consumers, such as increasing minimum repayments on credit cards and stopping companies from sending unsolicited credit-card cheques to their customers.
"It is encouraging to see new measures such as summary boxes on loan and credit-card statements, which will help people to better understand the real cost of their borrowing."
AT A GLANCEThe code says banks must:
• Provide customers with important information about unsecured loans and savings accounts in a standard summary box before they purchase a product.
• Give help to consumers switching their current account to another bank.
• Provide customers with information on how they can trace lost accounts, including details on the forthcoming unclaimed assets scheme.
• Give customers greater clarity on the time it takes for cheques to clear.
• Offer customers the most up-to-date information on how to protect their accounts from fraud.
• Inform customers about the alternatives to chip-and-pin cards for people who are unable to use these because of a disability.
