The competition regulator has said it will impose conditions beefing up protections for consumers on a new code of conduct proposed by the banks because the current version doesn’t properly address the recommendations of the Hayne royal commission.

Moves by the Australian Competition and Consumer Commission to heap pressure on the banks come even as the political pendulum has slammed back in the finance industry’s favour, with the treasurer, Josh Frydenberg, joining a chorus of government backbenchers in attacking regulators for pursuing the industry.

In his final report in February, banking royal commissioner Kenneth Hayne said the banking code, which is controlled by the Australian Banking Association, needed to be changed to protect vulnerable customers and farmers who default on loans due to drought.

The new code requires approval from the ACCC, which accepts the ABA’s proposals do enough to help farmers but wants stronger consumer protections.

The ACCC deputy chair, Delia Rickard, said the regulator wanted to impose a prohibition on charging steep interest rates on basic accounts that fall into overdraft and for banks to do more to track down existing customers who are eligible for a no-frills, low-fee basic account.

“We’ve seen interest rates of 19%, and that just undermines the spirit of the royal commission,” she told Guardian Australia.

She said the ACCC also wanted the 10 banks that currently offer basic banking products to commit to continue doing so.

“If they were to stop offering it, then those public benefits would diminish, or would disappear altogether, depending on how many stopped,” she said.

She declined to comment on a political climate in Canberra that has become increasingly torrid for regulators striving to implement the Hayne commission’s recommendations.

Sister agency the Australian Securities and Investments Commission faced a barrage of hostile questioning from MPs at a parliamentary hearing this month over its decision to appeal the “wagyu and shiraz” responsible lending case it lost against Westpac.

And on Thursday Josh Frydenberg added his voice to the backlash against the regulators, telling a financial tabloid’s property conference a too-stringent application of responsible lending rules could hurt “hard-working families”.

In May, he watered down a Hayne recommendation to ban trailing commissions on mortgages.

“The government’s put out a timetable for implementing the recommendations, they have accepted them all, and our hope is that they all go through,” Rickard said.

“We need people to have trust in banks and they need to earn it, so I think change does need to happen.”

The ABA has until 14 October to respond to the ACCC’s proposed new conditions.

An ABA spokeswoman said the body would respond to the ACCC’s proposal after discussing it with its members.