Do consumers need "protecting" from financial institutions? The Irish Financial Services Regulatory Authority, which has overseen a reimbursement programme totalling €118 million over the past two years as a result of overcharging by banks and insurance companies, thinks that they do writes Laura Slattery

The financial regulator this week published the final version of its consumer protection code - which one bank wanted renamed the consumer "relationship" code to avoid any big bad bank / vulnerable little consumer connotations. The main change since the draft code is that basic banking products, defined as current accounts, overdrafts, ordinary deposits and term deposits with terms of less than one year, are excluded from many of the regulations.

There will be no obligation on the banks to conduct factfinding exercises on customers to discover their financial objectives and position before they take out these products, nor will the banks have to issue customers with a "reason why" letter, explaining why a particular product is in their best interests.

On most products, regulated firms must ensure that the product or service they offer to a consumer is suitable for that customer, based on what they have discovered from the factfinding.

But in the case of basic banking products, the bank only has to alert the consumer to any restrictions on the account and/or the availability of a lower cost alternative from its own product range.

Groups such as the Professional Insurance Brokers' Association (Piba) believe the code, which should be in place by early 2007, short changes consumers for this reason.

Piba does not regard deposit accounts as basic products. Deposits are often subject to "inflation risk", or the possibility that the interest rate being paid on the account is lower than the rate of inflation, thus eroding the real value of the cash over time.

"Consumers will continue to be overexposed to what are effectively, limited and low-yielding products," says Piba's chief executive, Diarmuid Kelly.

The move takes billions of consumer deposits out of the regulatory loop, according to Kelly, and allows the big banks to continue making high margins by lending on the money they have sitting on deposit.

The Irish Brokers' Association (IBA) is also disappointed by the exclusion of basic banking products.

"Why discriminate in the service, information and advice that a consumer can get based on whether he invests for periods of less than 12 months as against investments for 12 months and over," asks IBA financial services director Pat O'Sullivan.

"The financial regulator stands accused of supporting retail banks," says O'Sullivan, who believes the code has, if anything, widened rather than levelled the playing field between independent financial advisers and the big, highly profitable banks.

Brokers believe banks could introduce 11-month or 364-day accounts and then "roll" consumers' money over into a new account in order to escape regulation.

There is lots of extra protection for consumers in the new code, however, most notably in relation to loans.

A ban on unsolicited pre-approved credit offers means there will be "no more mail shots", as the financial regulator's consumer director, Mary O'Dea, puts it.

The ban means no more credit application forms with householders' names pre-printed on them will be stuffed into letterboxes and there will be an end to those thoughtful increases in credit card limits just as your spending is starting to spiral out of control.

There are also new rules for debt consolidation loans, which are offered by mortgage lenders bidding for the custom of existing homeowners who have run up a few pesky loans on the side - a car loan, a holiday loan and/or a credit card or two - and can't pay them off.

The debt consolidation advocates say that consumers should roll all of these debts, which are usually subject to a high interest rate, into their lower interest rate mortgage, thus reducing their total monthly repayments.

While this might get overextended borrowers out of a squeeze, repaying short-term debts over the term of a mortgage will push up the total cost of the credit.

Under the new code, advertisements for debt consolidation that include sample "before and after" repayment figures must also show the difference between the total cost of credit of the consolidated mortgage and the total cost of credit of the individual debts.

The advertisements must also carry this warning: "This new loan may take longer to pay off than your previous loans. This means you may pay more than if you paid over a shorter term."

Meanwhile, advertisements for the increasingly popular interest-only mortgages must now include a warning that the entire amount borrowed will still be outstanding at the end of the interest-only period.

Parents and other people who act as guarantors on mortgages will be advised to seek independent legal advice before signing any guarantee that commits them to repaying the mortgage if the borrower cannot.

Older consumers taking out "lifetime" or equity release mortgages where no repayments are due until after they die or move out of the property will also be advised to seek legal advice.

On the investment side, new warnings will be attached to the sale of tracker bonds and the nature of these investments must be clearly explained to consumers in a "key features" document.

Advertisements for investment products that can fluctuate in price or value must caution consumers that the value of their investment can go down as well as up.

Sadly for consumers, for all its new rules, regulations and words of warning, the financial regulator cannot protect them from either increases in interest rates or sinking investment markets.

The Consumer Protection Code is available to view on the financial regulator's website, located at www.itsyourmoney.ie