This new framework will deliver wide-ranging benefits for consumers, including:
Getting information up front
Banks will have to provide prospective customers with full information on the service or product that interests them. Previously customers only received limited information up front, with the remainder following once they had signed up to the service or product. The change in approach will let consumers make more informed decisions.
Advance notification of changes
Banks and building societies must provide advance notice of changes to key terms and conditions. For current and instant access accounts, they will have to give customers at least two months' prior notice of any disadvantageous interest rate changes (except if the account explicitly ‘tracks' a reference rate; e.g. 2% above the Bank of England Base Rate or the change is an explicit part of the contract).
Unauthorised transactions
Where a customer claims that an unauthorised transaction has taken place, the bank must refund the amount unless they can show some good reason why they need to investigate the claim.
Giving value when money is received
For current and instant access accounts, consumers will now begin receiving interest on money transferred into their account from the moment that the bank receives the funds. This is referred to as giving value, and will be extended to all accounts from 1 February 2010.
Unexpected sums
If a debit is made from a customer's credit or debit card, or indeed a direct debit, and it is more than they could reasonably have expected, the entire amount must be refunded by the bank unless they can provide evidence to justify refusing the refund. They must do so within 10 days.
Commenting on these reforms, Dan Waters, the FSA's director of conduct risk, said:
"From the 1 November there will be specific standards covering many aspects of everyday banking transactions that have been major concerns for customers.
"New regulations will put banking customers in the driving seat by setting down clear standards that people can expect from their institution, like speeding up payments between accounts, adequate notice of changes in terms and conditions, and smoothing the procedure for querying an unauthorised or unexpected transaction.
"If firms fall short of these standards or fail to treat their customers fairly, the FSA will take action."
From 1 November 2009 the FSA will also regulate money remitters - firms that transmit money across the world. For the first time their customers will have the protection of the Financial Ombudsman Service.
Other benefits for customers of money remitters:
Remitters will have to provide more information to customers before they commit to using their services - for example how long the transfer will take, how much it will cost, details of any applicable exchange rate and if they are FSA regulated.
Where transfers are made within the European Economic Area, firms will have to clear payments more quickly - once remitters have received money from the customer they will need to ensure the payee receives it the following business day (although until January 2012 as long as the customer agrees this can be extended to the third business day).
Areas of retail banking which fall outside the FSA's remit, such as overdrafts and credit card lending, will continue to be regulated by the Office of Fair Trading under the Consumer Credit Act.
