Financial institutions could face fines of up to €5 million if found to have sold a product not suited to a customer's needs under a plan being proposed by the Financial Regulator.
The Regulator today published its proposals for a new code of conduct for lenders - which include an end to unsolicited offers of credit and a ban on credit card providers increasing credit limits without the customer's request.
A key requirement of the code is that institutions must have a proper knowledge of the customers' needs and their suitability for the products they are offered. They will be required to have proper internal procedures for monitoring compliance.
"Before entering into a relationship or transaction with a potential or existing customer we will require the firm to find out as much about that customer as it needs to know in order to provide the right product," Mary O'Dea, the Regulator's consumer director, said.
The code will be rolled out beginning in July 2006, pending consideration by the Minister for Finance and will supersede the existing code.
Other provisions include:
- Loan-repayment quotes must not include payment protection charges.
- All institutions must have a written procedure for handling complaints. including specified timeframes for updating the complainant on the progress of a complaint.
- New limits on institutions making unsolicited personal visits or phone calls to potential or existing customers.
Failure to observe the code could lead to sanction by the Regulator - which can be anything from a reprimand to fine of up to €5 million.
By applying a common standard among all regulated operators, it is hoped that increased marketplace competition will be generated and that consumers will be afforded greater protection.