Consumer code to ban pre-approved credit increases

Regulator tells financial institutions to implement all provisions by July

Unsolicited pre-approved credit and unasked for increases in customers' credit limits will be banned and cold calling will be restricted under long-promised provisions of a consumer code that come into force next July.

The Irish Financial Services Regulatory Authority has written to all banks and other financial institutions informing them that its Consumer Protection Code (CPC) must be fully implemented by July 1st.

Sections of the code were implemented when it was originally published last year, but the remaining provisions have yet to be brought into force.

As well as the above measures, the code includes new complaints-handling procedures, new suitability requirements for institutions offering financial products to customers and the provision of more information to customers.

However, the Irish Banking Federation (IBF) warned yesterday that not all its members would have implemented all the provisions of the 40-page code in time for the July deadline.

"Our members are working hard at implementation, but consumers should not expect each and every aspect of the code to be in place by July 1st," said the IBF's head of public affairs, Felix O'Regan.

Mr O'Regan said the regulator had allowed the financial institutions extra time after the deadline in which to develop consistent systems to handle the charge.

He pointed to a reference in the letter from the regulator in which its consumer director, Mary O'Dea, states that "in the initial six-month period following full implementation of the code, we will be particularly cognisant of issues relating to systems development or other technical difficulties that financial service providers may experience".

Asked why the institutions had not made these changes in the year since the code was published in July 2006, he stressed the complexity of the systems changes involved, with the requirement for new software code and extensive training for staff.

The Consumer Protection Code, which has been in development since 2004, supersedes most existing rulebooks and codes which were developed on an ad hoc basis in different parts of the financial services industry.

The regulator says it will establish a "level playing pitch" for the industry so customers can expect a consistent level of service from all financial service providers and be treated in a fair and transparent way.

Its publication was delayed several times to allow for further examination of its possible impact.

Mr O'Regan suggested that its publication last year, before full implementation, unduly raised expectations among the public.

Plans to stop banks increasing a customer's credit limit unless it was requested to do so by the customer were first unveiled two years ago, for example, but will not be implemented until July.

This is in spite of the fact that the regulator is concerned this practice may encourage overindebtedness.

Consumer code main provisions

• a ban on unsolicited pre-approved credit;

• a ban on increasing a customer's credit limit unless requested;

• financial service providers will have to ensure the products they offer are suitable for that customer;

• quotes for loan repayments must be exclusive of any payment protection premium and must state that this insurance is optional;

• cold calling: limits will be placed on unsolicited contacts with potential and existing customers.