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03 April 2006
The British Banking Association has issued new guidance on the Banking Code that it claims will offer greater protection for customers who borrow from banks, building societies and credit card companies.
Published on April 1st , the new guidance covers areas such as consolidation loans, where lenders working with those in financial difficulties, should take reasonable steps to ensure that any in-house borrowing is repaid with the proceeds of the consolidation loan.
It also covers credit assessment and said this should include at least two of the following four points: Income and financial commitments; how finances have been handled in the past; information from credit reference agencies or, subject to the customer's permission from other sources such as the customer's employer or landlord; credit assessment techniques such as credit scoring.
Seymour Fortescue, chief executive of the Banking Code Standards Board said: "The BCSB actively monitors compliance with the Banking Code, including its provisions on credit assessment.
"In the context of rising concerns about personal indebtedness, our reviews have suggested ways in which the Code could be strengthened. We are pleased that our recommendations have been accepted by the industry and believe they should encourage responsible lending and responsible borrowing. Greater care with joint lending and consolidation loans should result in fewer problems for borrowers and lower bad debts for banks."
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