A new version of the banking code is to be launched next year. The FOS believed it should be more transparent in what it expected to achieve and should cover a wider range of issues in order to provide greater clarity.
The organisation gave the current code’s guidelines for assessing customer loans as an example. At present the code asks subscribers to assess whether a customer will be able to repay the loan or overdraft before lending more money.
However, Jane Hingston, head of banking and credit at the FOS, argued that a bank’s interpretation of a financial status assessment could be simply checking the customer’s identity and asking why they want the loan.
She said: “This appears very light indeed in terms of what banks undertake to do, given the growing concern in many areas about affordability in lending. It is surprising when compared with the stronger commitments that exist in some other codes in the lending industry.”
Paul Banfield, partner at Best Advice Financial Planning, commented: “When it comes to the mortgage side of lending, banks are sensible. Generally speaking, repossessions occur when people lose their jobs, not because they cannot afford their mortgages.
“When it comes to unsecured loans, banks can behave irresponsibly. We need regulations to prevent this, not just enhancements to the banking code.”
