Code protects against credit crisis

Personal debt is rising, but many do not realise the protection available in the Banking Code.

17:05 08 June 2004

As personal debt continues to rise many appear not to realise that there is a level of protection written into the Banking Code.

Ahead of the possible of interest rate rises on Thursday, the Banking Code Standards Board is detailing how banks and building societies are obliged to help people in financial difficulties.

Top of the list is the fact that banks must give "straightforward information in plain English" and the provisions of the Code apply to all agents, including debt collectors.

The chief executive of the Banking Code Standards Board, Seymour Fortescue, said: "We have worked hard with the industry to ensure that people in financial difficulty are treated fairly, without forgetting that customers have responsibilities too."

He added: "I believe it is this partnership approach amongst ourselves as the policemen of the Banking Code, the industry and consumers that will be most effective in helping those in need."

'Priority' debts must take precedence over 'non-priority' debts. This means that those where the customer's failure to pay could lead directly to the loss of their home, liberty, utility supplies, (such as water, gas, and electricity) or their essential goods or services must take first place over any other debts.

It is essential that any repayment plan can "leave the customer with sufficient money for reasonable day-to-day expenses"; and banks must not "subject customers to harassment or undue pressure when discussing their problems".

However, consumers and their advisors also have responsibilities.

According to the Code, customers must: "Be prepared to enter into dialogue and disclose their financial position", and co-operate fully with their bank in developing a plan. If necessary people must also be prepared to sell any assets they may have.