The Code of Banking Practice should be re-written to improve the treatment of small businesses in financial difficulty, the Financial Ombudsman Service argues in a submission.FOS has published its submission to the independent review of the Australian Bankers Association's Code of Banking Practice. Among its other recommendations, it calls for the code to specify the consequences of non-compliance and it wants financial difficulty provisions to be extended to guarantors.FOS said the code represented good industry practice and generally reflected common law obligations of financial services providers. "We approach disputes on the basis that standards set by the code apply not only to its subscribers but also to non-subscribing financial services providers" it said.It recommended that the treatment of small businesses in financial difficulty should be altered to give small business customers better information about loan variations and expiry, and dispute resolution processes."FOS has been concerned for some time that bank staff operating small business collection departments are not aware of the code, particularly its provisions for financial difficulty," the submission said."While there have been significant improvements by banks in dealing with individuals in financial difficulty, the same level of improvement has not occurred in areas of banks responsible for dealing with small business financial difficulties."It recommended that staff involved in small business collections should receive more extensive training about the code.Another of FOS's concerns is that while a customer's request for financial difficulty assistance is being considered, the code does not prevent the bank from recording a default listing or taking collection action.It said the financial difficulty provisions should be changed to prevent a bank from taking action, such as selling a debt, listing a default or taking enforcement action, for a specified period after a customer requests financial difficulty assistance."It is important that banks focus on giving real support and genuine consideration to a customer's financial difficulties rather than continuing with collection activity."FOS said the code should specify the consequences of non-compliance. In particular, the code should be changed to state that a breach of the provisions for guarantees causes the guarantee to be unenforceable."FOS adopts this approach in resolving disputes. We have determined that guarantees that breach the code are unenforceable."It wants financial difficulty provisions to be extended to guarantors. It said new disclosure requirements could be added to the code to improve communication between banks and customers who use brokers, so that the customer has a clear understanding of the nature of the relationship between broker and bank.And it said disputes concerning cancellations of direct debit authorities arise regularly. "The code covers direct debits but the provision does not appear to be well understood by bank staff."