Current Account Lending Code

High street banks have come under fire recently for their allegedly unscrupulous conduct in the current account market. Levying disproportionately high charges on overdrafts, charging for products that used to be free and introducing unnecessary add-ons are all practices that banks have been criticised for.

So, perhaps it is unsurprising that the independent Lending Standards Body (LSB) has launched a code for lending, in order to better-monitor the behaviour of providers of these financial products. The code will be overseen by the LSB and covers good practice in the unsecured loans market, credit cards and charge cards, as well as current accounts overdrafts.

The chief executive said: "The LSB will ensure that the new code strengthens the protection customers will have when borrowing.”

"It will independently monitor and enforce the code and take action where lenders fall short of the codes standards."

The new guidelines cover the credit and debt elements of the old Banking Code, but also represent a broader and more up-to-date moral framework for the industry.

The move follows research published by consumer watchdog Which? last month which revealed that many packaged current accounts are a "waste of money". It was found that those who take out such accounts could be spending up to £300 per year on these products, which now make up a quarter of current accounts on the market.

Packaged accounts are those which consumers pay a fee to have, but according to the research they may offer consumers no more than a standard product.

Of those consumers with packaged accounts who took part in the survey, one in ten failed to use any of the extra services that come with the products, such as breakdown cover or a will-writing service.

Furthermore, the products were often failing to offer consumers a better rate of credit interest than the Which? Best Buy current accounts, which have no monthly fee.

A spokesperson for Which? Money, said: "Anyone considering one of these accounts needs to look carefully at the alternatives before agreeing to pay a monthly fee for extras they may not need.

"Unfortunately, we've also seen banks automatically upgrading customers to these accounts without them asking for them, which we believe is unfair and should be stopped."

If you would like to know more about current accounts why not ask AnswerBank Business and Finance.