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New Lending Code provides improved protection for borrowers

28 March 2011

Customers who borrow from the UK’s major lenders will benefit from changes being introduced following an independent review of the Lending Code.

The sponsors of the Lending Code (the British Bankers’ Association, the Building Societies Association and The UK Cards Association), today announced a range of new provisions designed to strengthen the protection available to customers who have personal loans, credit cards and current account overdrafts and to small business customers.

The independent review, commissioned by the Lending Standards Board, was undertaken by Professor Lorne Crerar. The Reviewer received over 30 submissions from a range of consumer, debt advice, regulatory and governmental bodies as well as the industry. The Code sponsors accepted a large number of recommendations made by the reviewer and more than 30 new provisions will go into a new edition of the Lending Code, to be launched at the end of March.

Key recommendations being adopted include:

  • Stronger requirements for responsible credit assessment
  • New provisions on customers’ ability to opt-out from unarranged overdrafts
  • More support for customers who may be in, or approaching financial difficulties
  • Extension of the Code’s temporary breathing space moratorium on debt collection to customers using ‘self-help’
  • New standards on the appropriate use of the Right of Set-Off
  • Further assistance for customers in financial difficulty who have a mental health condition

For the first time, customers will be able to easily find the key protections that lenders should offer, as plain language guides to the Code will be available in branch and online for both personal and small business customers from April. Additionally, from July 1st onwards all new borrowing customers will be provided with a copy of these guides.

Professor Crerar said:

“I am grateful to all those who made submissions to the review. Not surprisingly, given the current economic situation, many of the submissions focused upon the support given to customers who are in or are at risk of financial difficulties and my report reflects this. I am pleased that the majority of my recommendations have been accepted by the Industry”.

Eric Leenders, BBA Executive Director, said:

“The Lending Code continues to play a key role in providing customers with appropriate and timely protections. A wide range of stakeholders participated in the independent review and the sponsors’ willingness to accept the majority of the reviewer’s recommendations and add to the Code’s protections, demonstrates the importance of the Code and the ability of self-regulation to respond to the needs of customers.”

Adrian Coles, Director-General of the Building Societies Association said:

"The new Code shows the flexibility inherent in self regulation. We have been able to update the Code as appropriate to provide helpful additional protections for borrowers. Importantly, borrowers will now receive a handy summary of the protections they enjoy under the Code."

Paul Marsh, Managing Director of The UK Cards Association, said

“The review and publication of the new Code is timely as it has provided us with the opportunity to include important new commitments to customers that have recently been implemented by the card industry. As a Code sponsor we are pleased with the outcome of the review process; its result is a Code strengthened in the customers' interest.”

For further information, please contact:

British Bankers’ Association:
BBA press office 020 7216 8989

Building Societies Association:
Tel: 020 7520 5905 E:

The UK Cards Association:
Press Office 020 3217 8251

Lending Standards Board:
Robert Skinner : 0207 012 0082 E:

Notes for editors

  • Copies of the review and the industry’s response are available on the websites of the Code sponsors and the Lending Standards Board Lending Code, which was introduced in November 2009, is co-sponsored by the British Bankers’ Association, the Building Societies Association and The UK Cards Association. The Lending Code is followed by all major providers of personal loans, credit and charge cards and current account overdrafts. The Code also covers lending to micro-enterprises and small charities.
  • The Lending Standards Board, which is the successor body to the Banking Code Standards Board, independently monitors and enforces the Lending Code and takes action where lenders fall short of the Code’s standards. The LSB’s directors include a majority of independent members as well as representatives of the Code sponsors. Details of the Board members can be found on the LSB website.
  • The Banking Code, which formerly set out the relationship between financial service providers and their customers, ceased to operate in November 2009 following the introduction of new Banking Conduct of Business rules by the FSA.
  • Professor Lorne Crerar is Chairman of Harper Macleod, a leading commercial law firm in Scotland which won Firm of the Year at the Scottish Legal Awards 2010. He is the firm’s Senior Banking Law Partner. Since 1979, Professor Crerar has lectured at the University of Glasgow and was appointed Chair of Banking in 1994. He also provided and taught the Honours course in Banking Law for Strathclyde University. Professor Crerar is the author of “The Law of Banking in Scotland”, which is recognised by many as being the leading text in Scotland. He was also commissioned author for the leading Scottish text Stair Memorial Encyclopaedia for financial institutions, banking and currency.
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