Building Societies
Members Association
6
Bramley Court, Marden, Kent TN12 9QN
www.building-societies-members.org.uk
Tel:
01622-831904
30 January 2002
Elaine Kempson
c/o British Bankers’ Association
Pinners Hall
105-108 Old Broad Street
London
EC2N 1EX
Dear Ms Kempson
Re Banking Code Review
We welcome the recommendation by the Banking Services Consumer Codes Review Group for an independent Reviewer for the Banking Code. We very much appreciate the opportunity to put forward to you the views of the Building Societies Members Association.
This organisation is not in favour of self-regulation by the industry but as this has already been decided upon, we cannot comment further on the matter.
We are concerned about the title of the present code, which we feel can be misleading as there is no reference to building societies either in the title or on the front page. It does little to encourage awareness of the code by members of building societies and we note that one of the concerns of the Review Group was lack of public awareness. We found that many members of our own organisation were unaware that the code has relevance to building societies. We would prefer that the words “Building Societies” were included in the title or that a separate code existed for each section of the industry.
Although we would prefer every member to be in possession of a copy of the full code when an account is opened, we nevertheless support the recommendations of the Review Group for three formats as an economical approach to increasing public awareness, albeit over a period of time. However, it is important that the spirit of the recommendation should also be upheld and the presentation, content and availability of all three should be carefully considered to ensure that the correct message is conveyed and properly, indeed eagerly, disseminated.
The present procedure for obtaining copies of the code from a branch office needs to be personally experienced to be appreciated. It would not be too much of an exaggeration to say that there is a need for staff at some branches to know the combination of the safe in order to gain access to them.
We believe that if there really is genuine intent by the industry to promote the code then efforts could be made quite easily that would go some way towards demonstrating a commitment to increase the public profile of the code and enhance the information available (as in the Australian model) by:
· making copies of the full code both readily available and, more importantly, easily accessible at branch offices by being on display alongside relevant product literature. We have found neither lack of space nor lack of display facilities that would give any reason why this should not be an acceptable practice.
· using eye-catching posters in branch offices typical of those used for product promotion.
· using larger text size rather than the smallest possible text size for this (and other information under the heading “Important Notes”) on product information leaflets as practiced by some societies.
· providing a dedicated covering letter with the code and not including references to publicity for either internally or externally sourced products in the same letter.
· providing information in the code document on the review process and an invitation for bank customers and building society members to put forward suggestions or comments on the code through the BCSB.
· providing a highlighted reference and an easily located navigation bar link between all building society websites and the Banking Code Standards Board website. We see this as essential on all websites that include, or are specifically for, internet accounts.
There is a need for the industry to conform to the spirit as well as the letter of the code and for building societies this should be fundamental to the principles of mutuality. There would certainly be no desire for a code that has to be produced in legal language simply to obviate loopholes that lawyers are paid to find. Nevertheless we do not accept that Key Commitment (a) is being met in its full sense by management of building societies.
Clear and better definitions are needed that will end the practice whereby new account issues can be regularly and quickly superseded then become downgraded by means of skilfully drafted terms and conditions. This practice is not in the spirit of a code of good conduct and does nothing to enhance the credibility of either the code or the industry.
Similarly a code for good practice should ensure that where the Ombudsman finds against a society on a matter that affects all members with similar accounts it should not be the responsibility of every individual member to be aware of the matter and to go through an obstructive complaints procedure in order to force the management to rectify a wrong that would otherwise continue to exist.
In addition to any terms and conditions that an account may include, we would like to see the inclusion of a clause in the code applicable to notice accounts, which requires members to be reminded that immediate access to their funds is available for a given period without penalty, whenever savings rates are changed adversely out of line with base rate movements. Such an approach would not be uneconomical even for the smallest society.
The present code permits decreases in interest rates of some types of savings accounts to be backdated by up to one month from the date of notification irrespective of the circumstances that give rise to the change (section 4). This period is in addition to the time lapse between the date on which the decision is taken to change the rate and the date from which the change becomes effective. Depending upon the circumstances some organisations notify members in advance of the effective date, which is obviously preferable, whereas others consistently notify members on or after the effective date and some work consistently close to the limit of one month.
We do not know the basis upon which the period of notice was founded, however, we believe that the use of a period of up to one month delay in giving notice to members is excessive and out of date with present day technology and gives rise to abuse. We do not believe there should be any logistical problems, given the technical facilities that are available at banks and building societies, which could cause the need for such a long delay. We see no reason why the period between the effective date and the date of notification should exceed fourteen days. Perhaps those societies that consistently operate near the limit could learn from those that are able to notify members in advance.
We understand that the current edition of the code falls short of the standards set in the Office of Fair Trading Guidance Note OFT 297 section 4, even though the OFT is usually consulted. We also understand that the Ombudsman expressed disappointment following the last revision. We would prefer to see active involvement rather than consultation, which appears to us to have been more in the form of a presentation of a virtually finalised package. In your review we hope that you will extend your contacts and discussions as widely as possible with adequate publicity and a reasonable time frame for responses.
The Review Group accepted that “naming and shaming” is an effective means of ensuring that businesses will conform to a voluntary code. However, we feel that “naming and shaming” should mean what it says and should not mean, what appears to be, “appeasing and pleasing”. The work of the BCSB has revealed that many subscribers are not complying with the terms of the Banking Code but members are left largely unaware of the culprits and the extent of their non-compliance. A provision that requires adverse publicity for “code breakers” that is readily and widely available, easily understood, meaningful and effective would be advantageous to all concerned.
We acknowledge that the Banking Code has evolved over a period of time. However, we are concerned about the pace of evolution and the painful process experienced by members that only produces marginal rather than significant improvements. This letter is evidence of the discrepancy between the code in its present form and the basis of standards towards which members aspire. The response to the Treasury from the BSA on “Cracking the Codes for Banking Customers” gives us cause for concern in this respect. Our desire would be for a totally fresh approach whereby the code becomes, in effect, the possession of consumers’ (a consumers’ charter) and rephrased accordingly rather than belonging to the sponsors. We feel that if part of the board of the BCSB and an independent reviewer can be independent of the BBA then the same could apply to the code itself.
Finally we fully agree with the Review Group’s recommendation that the whole process and particularly your report should be open to public view prior to any response from any source. We feel that this action would be in keeping with the spirit of openness and transparency for the review process that the Review Group sought to achieve. We believe that if this recommendation is not adopted it would not free the industry of accusations of controlling the agenda to its own advantage and would appear to undermine the independence of the Reviewer.
If you find that our recommendations are unacceptable the reasons for your rejection would be appreciated as well as your confirmation of receipt of this letter. We thank you again for being able to put forward our views which we hope are constructive and positive as well as critical and we hope that you will give them due consideration. We should be happy to discuss with you, any item herein that you feel may need clarification.