Shutting the stable door…
Although it’s apparently not a new addition, the latest update of its code of conduct from the British Banking Association (BBA), which took effect from last Monday, has warned that users of online banking may be liable to losses if they don’t keep their security software up to date.
Section 12.13 of the code states: ‘Unless you have acted fraudulently or without reasonable care (for example by not following the advice in section 12.9), you will not be liable for losses caused by someone else which take place through your online banking service.
Reasonable care? That’s nice and vague. It’s almost like they’re saying: ‘Here are all these safeguards and layers of protection for you – all of which we can retract if we think you’ve behaved with some undefined level of impropriety.'
Section 12.9 opens: ‘Online banking is safe and convenient as long as you take a number of simple precautions. Please make sure you follow the advice given below.’ The first bit of ‘advice’ is: ‘Keep your PC secure. Use up-to-date anti-virus and spyware software and a personal firewall.’
While undoubtedly a sound principle, how are banks going to know if customers are not in compliance? The BBA said it was not aware of any bank having invoked the proviso to deny liability, and it is easy to see why, but that doesn’t mean they won’t.
‘The new banking code gives strong commitments that banks will lend responsibly'BBA CEO Angela Knight proudly announced: ‘The new banking code gives strong commitments that banks will lend responsibly and will help customers who may be heading towards financial difficulties.’ Subscribers have until 1 July to bring practises into line.
But the horse bolted long ago. Bank of England figures show that unsecured borrowing leapt by £2.4 million during February, the biggest monthly increase since 1987.
Meanwhile the government regulator, the Financial Services Authority (FSA), has launched an investigation into the treatment of homeowners who fall behind in their mortgage repayments, and ‘unfair’ treatment of borrowers with poor credit history. Report due in June.
Following a commendably frank internal review of its own negligence in the case of Northern Rock, the FSA wants to regain credibility. It can’t: lenders are the main culprits in the sub-prime mortgage-backed securities fiasco, but financial regulators cannot escape their full share of the blame.
Nor can well-intentioned legislation aimed at ‘unfair’ treatment of poor risk borrowers. The seed for the current crisis was planted by President Carter’s Community Reinvestment Act of 1977, which tied approval of new branch openings, mergers and acquisitions to banks’ willingness to lend money in ‘predominantly minority neighbourhoods.’
The act explicitly tied growth and consolidation within the US banking industry to unsafe lending practises. Granted, an inverted pyramid of dizzying greed was built on that foundation stone, but that’s the law of unintended consequences for you.
