The Office of Fair Trading is calling for a new banking code that ends hidden charges on customers and aids small businesses.

A submission to an independent review of the existing banking code calls for it to include the OFT’s recommendations on banking for small and medium size enterprises, in particular “a commitment to give SMEs information displaying transaction volumes on monthly statements”. OFT chief executive John Fingleton says this is essential for customers to assess the benefits of switching.

“Significant change is needed to the banking codes of practice, particularly to address the lack of transparency that pervades the retail banking sector,” says Fingleton. “We aspire to a self-regulatory framework in UK retail banking that achieves sufficiently high levels of fair treatment of customers that little or no external regulatory intervention is called for.”

The Banking Code Standards Board produces the voluntary code but has no financial sanctions to ensure compliance and there has been criticism that the existing code is weak. The Financial Services Authority is also calling for radical change.

The OFT submission is important because the watchdog is already investigating penalty charges imposed by banks and is expected to produce a critical report next month. Banks claim OFT action could lead to the end of free banking for retail customers.

Besides implementation of measures directly affecting SMEs, the OFT submission on the code also calls for the code to:

• Include greater pricing transparency, in particular the reliance on hidden charges and the quality of information to allow pricing comparison,
• Require at least 14 days’ notice of charges before they are taken from accounts
• Take account of changes in legislation such as the Unfair Commercial Practices Directive due to come into effect in December and the Consumer Credit Act,
• Improve cheque-clearing times.

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