Millions of consumers have been promised a better deal from banks and building societies when the City watchdog takes over regulation of customer service standards tomorrow.

Under the new regime, banks and building societies will be forced to give savers advance notice of cuts to interest rates on their accounts. Transferring accounts such as Isas should be easier, money transfers should be quicker, and there will be a greater onus on banks to pay out when a saver is a victim of fraud. It has been hailed as an important overhaul of the banking system that will “put consumers in the driving seat” for the first time.

However, many experts fear that the new rules from the Financial Services Authority (FSA) will not help consumers. They warn that the rules are too vague to bring customers any tangible benefits, too complex to understand and that banks will find it too easy to flout them. Alex McDermott of Citizens Advice, the charity, says: “The new rules are not sufficiently clear for consumers to understand what rights they have. They also leave too much room for firms to interpret how they should treat customers.”

FSA regulation replaces the Banking Code, by which the banks have regulated themselves for 17 years. Although experts say the code had flaws, it allowed consumers to see exactly what to expect from their bank when something went wrong. But from tomorrow, banking customers will have no single point of reference detailing their rights. Instead, account holders will have to wade through their terms and conditions, or consult the FSA’s two new Money Made Clear guides, which offer only a limited overview.

To make matters more complicated, the new rules are comprised of three parts: the Banking Code of Business (BCOB), which covers deposits; the Payment Services Regulation (PSR), which covers direct debits and other payment methods; and the Lending Code, which covers credit cards, overdrafts and other borrowing.

Times Money has trawled through the rules and here we explain the key changes. We also highlight where the FSA could do better.

Chip-and-PIN fraud

This is one of the most significant rules for consumers and is buried in article 59.2 of the PSR. The wording is long and complicated, but it says that the use of a PIN in a disputed transaction does not automatically mean that the responsibility lies with the customer.

Times Money receives dozens of letters from victims of chip-and-PIN fraud whose bank has refused to compensate them because the original card and correct PIN was used in the disputed transaction. Banks often say that if the PIN was used, the transaction cannot be fraudulent.

A spokesman for the FSA says: “If you think a transaction on your account was not authorised by you, the bank or building society will need to prove either that you authorised it, or that you either deliberately or carelessly allowed someone else to get hold of your PIN. Unless the bank or building society can prove this, it will have to refund your account immediately.”

Hotels and car hire

If you leave your credit or debit card with a hotel or a car-hire company and are charged more than you expected, the new rules mean you should be reimbursed by your bank. This could be useful if, for example, a hotel charges you for the services of a mini-bar that you did not use.

An FSA spokesman says: “Now the bank will give you back your money and may seek to claim it back from the hotel or car hire firm. However, the firm will still have the right to pursue the cardholder for any amount owed.”

Isa transfers

Times Money receives many letters from exasperated readers whose bank has taken months to transfer money from one Isa account to another (see case study, above). Section 5.1.5 of BCOBs states that banks must provide a “prompt and efficient service” to enable customers to move to another firm. The FSA says: “The Banking Code had no such requirement. Consumers were experiencing problems with switching, particularly in products such as cash Isas.”

However, there is nothing in the new rules that forces providers to work to a specific timeframe when dealing with Isa transfers. Instead, section 5.1.8 of BCOBs simply refers banks to their own industry guidance, which was drawn up in August 2008. This says that Isa transfers should take no more than a month to complete. This is worth quoting to banks should your Isa transfer take too long.

Rate cuts

From tomorrow, anyone with an instant-access savings account or current account will have to be told two months ahead of any reduction to their interest rate, under section 42 of the PSR.

This is welcome as many savings providers lure customers with high interest rates only to reduce the rate a few months later without the customer realising. This month Halifax and Leeds Building Society have reduced the rates on some savings accounts by up to 0.25 per cent, according to Moneyfacts.co.uk.

However, the rules do not apply to accounts that explicitly track a rate, such as the Bank of England base rate. It will not affect other types of account, including notice accounts and Isas, until next May, when customers will also have to be reminded when their bonus or introductory interest rate expires.

Money transfers

Transferring money electronically from one account to another, including the payment of bills, will have to be completed by close of business the next day. However, until January 2012 banks can actually extend this to three days by writing to customers and changing the terms and conditions of their account. Many banks have already done this in preparation for the new regime. The rules does not apply at all to transfers where currency conversions are involved.

Treating customers fairly

The FSA is adopting a “high-level principled approach” to regulation, which means that for the first time banks have an overarching requirement to treat customers fairly. The Banking Code required firms only to meet the specific standards laid out in the code. The FSA says that consumers can now expect to be treated fairly at all times. However, consumer groups say the rules are not prescriptive enough.

Vera Cottrell of Which?, the consumer watchdog, says: “Without specific guidelines it will be difficult for consumers to tell whether they are being treated fairly or not — plus the interpretation of fairness is likely to differ between banks.”

What isn’t mentioned

Citizens Advice is concerned that there is very little in the new rules to help customers in financial difficulty or those who struggle to access banking services, such as people declared bankrupt, those living in rural areas, and those who struggle to use chip- and-PIN.

The Banking Code, for example, specifically stated that banks must offer customers an alternative to chip- and-PIN. Elderly and partially sighted people found this useful as they could demand a chip-and-signature account instead. However, there is no alternative provision for chip-and-PIN in the new rules.

Case study: ‘A step in the right direction’

Primary school teacher Jane McDonald, 53, is disappointed that the FSA’s new rules do not provide more specific guidance on Isa transfers, although she says the rules are a step in the right direction.

In July Mrs McDonald requested an Isa transfer from Bradford & Bingley to Nationwide. It took two months for the Isa account to be opened. “Each provider blamed the other for the delays,” she says.

Mrs McDonald, who lives in Leicestershire, eventually found the British Bankers’ Association’s Isa transfer guidelines and quoted this to Bradford & Bingley and Nationwide. “I only found the guidelines after researching on the internet,” she says. “It was very useful to know my rights in this situation. There should be a simple ‘one-stop shop’ for consumers when something goes wrong with their banking.”

While the industry guidelines that Mrs McDonald found on the internet are still applicable, she could now also quote section 5.1.5 of the new Banking Code of Business, entitled “Moving a retail banking service”, which says customers can expect a “prompt and efficient service” when transferring accounts.

What the new rules say

- A bank cannot refuse a refund on a fraudulent transaction just because the genuine card-and-PIN was used.

- Savings account providers must give customers two months’ notice before reducing interest rates.

- Unexpected debits made from your credit or debit card — such as from a car-hire firm — must be refunded by your bank.

- From January 2012, all electronic payments must be credited to an account by the following business day. Until then, this can take up to three days.