/ Money

Why are banks still failing to prioritise their customers?

Overdrawn

Last Tuesday, I appeared before the House of Commons’ Treasury Select Committee to give evidence on the Competition and Markets Authority’s banking inquiry.

Alongside me were representatives from Atom Bank and Tesco Bank, and it soon became clear it isn’t just Which? who feels the Competition and Markets Authority’s [CMA] work fell short.

Why does it matter?

As previously mentioned, Which? is concerned that the CMA failed in its report to go far enough. It’s long been clear that the banking sector isn’t competitive enough, resulting in poor outcomes for consumers, so seeing the CMA going through a long and detailed investigation, only to provide seemingly rushed remedies, is a real problem.

This issue became clear multiple times in the session with the MPs digging in to issues around unauthorised overdrafts, free-if-in-credit accounts and switching, among others.

Unauthorised overdrafts are a key area of concern for Which?, with some banks charging four times as much for an unauthorised overdraft than a payday loan, raising the sector funds of over £1bn per annum.

In a clear shortcoming, the CMA has simply suggested that banks cap unauthorised overdrafts to a level they themselves can set. A clear example of marking your own homework if ever there was.

What can be done?

Of course, spotting the problem is only one part of it, and there was a real appetite in the committee to find solutions for the problems the CMA had failed to address.

For unauthorised overdrafts, the ball has been dropped, but a real opportunity lies in the Financial Conduct Authority’s [FCA] upcoming review of the pay day loan cap, which is due to take place in January.

Happily, the committee were keen to understand what role they could play, and there certainly is a need for a strong voice in Parliament to support the FCA taking on this work and finding effective remedies.


Stepping closer to better banks

Such issues do have to been seen against a back drop of overall change in banking. For too long banks have done what they have to do, rather than what they should do. Changing this will take time, but hopefully by tackling one issue at a time, and using sessions such as this one to shine a light on what still needs to change, we can get a better market with real options for consumers.

What more do you think can be done to improve banking?

Comments
Guest
Lynn says:
31 October 2016

Its time these charges where sorted out, £10 for going over £2, for a few hours is ridiculous, I’m a carer, Ido my best on llimited funds.

Guest
Terry says:
31 October 2016

I have serious concerns not just with banks but the FSA. The banking industry may just as well be regulating itself. Has anyone ever won a bonefide dispute with a bank and been supported by the FSA ? I personally have had no joy with them whatsoever on two occasions. Apart from getting us in our current financial mess the banks are still holding everybody to ransom with fees. How can it make sense to charge the people who I presume have the least and reward the few who have the most to invest or save ?

Guest

Due to the prevalence of miss selling and outright fraud it is essential that banks with credit cards deliver the correct paperwork with the relevant questions by first class mail if not by recorded delivery within three weeks at the outside. Documentation should include consideration of money back guarantee claims and section 75 claims. My recent experiences indicate that nobody should assume that either the cc company or the FSA is on the side of customers

Guest
Paul Hancock says:
31 October 2016

Is it not possible to give 48 hours grace if the overdraft is no more than , say, £100. This would allow people to obtain the monies to restore there account to credit and also not penalise them due to debits hitting them when funds are low. The principle is simple: don’t penalise someone on a low income/low funds. Instead help keep their finances fluid.

Guest
Anne says:
31 October 2016

People tend to trust banks it’s about time these banks earned this trust and stopped there deviouse dealings it’s time to put the customer first the banks will still earn there profits just not as much .The things I find most annoying are the constant misseling by the banks using products which are designed to confuse and mislead customers it’s time to come clean

Guest
alan says:
1 November 2016

Banks, by their very nature are deceptive and corrupt. They have no reason to be benevolent or helpful to their customers, they view us as unwitting sheep to be led and exploited

Guest
Neville says:
1 November 2016

As well as the environmental impact of products, I’d like to see Which? introduce some awareness of ethicality (beyond the obvious head-liners) in their/our reviews, even if merely garnered from internet sources (with citations), given the extra effort required.

Guest
Brian Ord says:
1 November 2016

Well done by your Chief Executive, Mr Smith. Whilst I manage to get by without an overdraft myself, I can emphasise with those who can not. Prices continue rise and wages do not. Charging unfair overdraft fees simply exasperates the customers position pushing them deeper in debt. Banks are currently paying as little as 0.01% and this should be reflected in overdraft fees.

Guest
Laura says:
1 November 2016

Clearly some banks are getting away with murder…….because we let them. Vote with your feet and change your bank account to an ethical bank.

Guest
David Carter says:
1 November 2016

It’s our money they play with and without us they have no business.
It should be them who are grovelling to us!

Guest
pauline spearman says:
1 November 2016

I think it is wrong to have to pay a fee for an agreed overdraft,as well as they
could stop charging horrendous charges if they are only a small amount overdrawn,as sometimes a wage may go in late or its a bank holiday which is quite often when people go overdrawn.

Guest
Linda Godden says:
1 November 2016

It is the case that we the customer should be able to monitor our accounts so that they do not go overdrawn. We do not prioritize it enough, even though these high charges apply if we go overdrawn. Perhaps we as clients should not be so “blase” and keep our account so “tight” and we should start cutting back earlier instead of keep letting the account go further and further overdrawn and increasing our bank costs. Perhaps Banks should allow 3 free months per year of these discrepancies after which the account may be closed or a notification that an agreed float of £100 to £500 for instance should be maintained in the account by the customer. This would stop the public being so “blase” and building up more unnecessary debt to the bank, when the customer is already having difficulty but keep hanging on without confronting the fact that they may be living beyond their means. Most of the time it is our own fault and we cannot expect the Banks to supplement millions of accounts month after month free of charge. It’s out own fault but the banks then take advantage of perhaps.

Guest
Ron Carney says:
1 November 2016

You will not get much done while the Tory’s are in power. Most of them are bankers, or in some form of finance. They own some of these payday loan firms, and do not care who they rob as long as they are alright jack.

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Guest

I don’t think Convos should get political but it might be worth remembering who was in power when the crisis hit.

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Guest

Not really. I’d suspect you’d have to go back to whomever loosened the rules under which the banks operate.

Profile photo of malcolm r
Guest

All governments have the ability to make the appropriate rules if they see fit. I doubt when things are going well, borrowing is up so spending is high, house prices rise so everyone feels wealthy, and the Government of the day can be profligate with the taxes, that they have the guts to bow to common sense. I seem to remember a “light touch” being applied when regulation was mentioned. Followed by a note to say there was no money left. A pity we entrust the running of our country to children (no, that maligns kids). 🙂

Guest
Derek says:
1 November 2016

It is about time these banks stopped being so greedy, no matter which party is in, they take advantage making huge profits for themselves and start to respect the hard working people who pay there wages and keep them in a job

Guest
Jacqueline Tucker says:
1 November 2016

It is important that bankers are not allowed to charge in a disproportionate manner as it is as unacceptable as high charges by payday lenders. People can be pushed into debt.

Guest
Morag Hollinghurst says:
1 November 2016

The Banks are greedy and basically only look after themselves. They forget that the Taxpayer bailed them out in 2008 and that without us, they would be no longer trading! I suggest that the Bank of England regulates them, Mark Carney the Governor seems pretty sincere and has plenty of commonsense, morally and legally I am sure he would stop bad investing & over the top bonuses for Bank Directors, who refuse to own up to their bad judgement and greed!

Guest
Wendy Dunne says:
1 November 2016

Banks are penalising the very people who can least afford it. To charge astronomical fees to those people who go into overdraft, particularly by a small amount, is morally unacceptable. It’s like kicking someone who is already down.

Guest
peter witt says:
2 November 2016

The excessive charges are a form of bullying people and kicking them when they are down.
It causes people into deeper financial problems when they are probably struggling financially and nets the banking system a small fortune.

Guest
Patricia Hammond says:
2 November 2016

BANKS ARE OUT AND OUT ROBBERS. PLEASE CONTINUE, WHICH, IN OUTING THESE DREADFUL CHARGES.
THANK YOU.

Guest
Charles Batten says:
6 November 2016

Modern day ‘highway robbery’: with the difference being, instead of firearms they use very low interest rates for savers: combined with UNNECESSARILY exorbitant and EXCESSIVE charges: while, at the same time, ALLOWING stock brokers and associates, unregulated and uncontrolled FREEDOM to GAMBLE in diverse CASINO stock markets where they, regardless of success or failure , ARE ‘rewarded’ by CRIMINALLY exorbitant bonuses.

Guest
Mike Emerson says:
2 November 2016

Iceland had the right idea. Jail time for corrupt bankers and scrap these rediculous bonus’s.

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Guest

“and scrap these rediculous bonus’s.” Would those be the ones being paid to the CEO of Which? and his three mates last year? £2.24m.

If you are a subscriber you can become n Ordinary Member to do something about it. When a charity goes wrong …

Profile photo of malcolm r
Guest

We appear to have a culture of giving bonuses to people for simply doing the job they were employed for. I would have thought “increasing turnover” was part of the job description; actually I’d prefer “increasing the profits”. Providing bonuses can distort the way business is done; when our salespeople were given bonus targets they were not too bothered about profits, just turnover, so would try anything to reduce prices to ensure they won an order.

I’d generally pay people a sensible wage for doing their job properly.

Profile photo of wavechange
Guest

I agree on paying a sensible wage for doing a job properly, though I’m not sure about increasing profits because this is so often associated with poor customer service, poor workmanship and so on. In my job we had annual staff appraisals, where there was an opportunity to discuss performance and responsibilities. I believe it is vital to have people doing a job they enjoy, can cope with and one that provides sufficient challenge to keep them motivated.

Profile photo of malcolm r
Guest

My comment in the context of Which? was that its aim should be to increase profits, not turnover. If increasing turnover reduces profits (by, for example, injudicious decisions) then we suffer from a reduced service. However, I think adequate salary should be all that is necessary to motivate someone.

Profile photo of wavechange
Guest

We can agree that people need to be paid a sensible wage but I don’t believe that even a good salary always provides adequate motivation or job satisfaction and have met many who have moved to lower paid jobs. For example, my first PhD student had a couple of highly paid jobs in the brewing industry but took big pay cut to get back into research. He finds it expensive to live in Paris but is financially secure thanks to his previous income and is enjoying running a research lab.

Profile photo of SallyHughes
Guest

My son left TSB because they would not give him a student account.. The reason for this was that he did not have a student loan. Duh? So he went to Santander and opened a student account there . Santander said they would transfer his DDs from TSB. He believed his TSB account to be closed. In fact, Santander failed to transfer his 2 DDs so a debt was incurred and the account NOT closed, but no-one informed my son. After two months, the enforcement firm wrote obo TSB to enforce a debt of the (unauthorised) overdraft plus 2 x unplanned OD fees of £90 each. We immediately informed TSB and Santander of the true position. At first he was told the charge would be held, pending confirmation from Santander – that later turned out not to be the case. Santander said they could not deal with the matter for another week. On contacting TSB by phone we were at first told my son ‘should have looked at his old account online’ (it was an online only account) and avoided the problem. (He believed the account to be closed.) TSB said the charge would continue until the debt was cleared, at £90 per month. We went to formal complaint. In the meantime, Santander admitted they had failed to make the transfer, in addition to failing to make statements available (‘teething troubles’). TSB required confirmation. It seems TSB cannot pick up the phone to Santander, even with consent. We pressed ahead with formal complaints. They asked to speak to me and on a pre-arranged call with the complaints handler it seemed to me that they had looked up my banking history with them. (A Lloyds customer originally from 45 years ago.) Annoying, but they were more amenable. TSB withdrew the charges, and I cleared the debt by phone, although I never saw it debited from my account. Both TSB and Santander made compensatory payments for inconvenience. But what a fandango. Hours of work.
AND another thing. Why don’t they pay decent interest?- it isn’t as though there isn’t good interest on the markets. What is the rationale for following the base rate?

Guest

I got falsely accused , arrested and falsely detained for allegedly downloading child pornography because my cc company had not followed my written instructions to close my account. The bank eventually supplied documentary proof that no CC transactions had been made on the months in question and that the bank had failed to follow my instructions to close the account. Police demanded to conduct a search of my premises without a warrant on grounds that I had invited them into my home before asking what business they were engaged in. I had assumed they were there to tell me that a family member had had an accident. They used recently approved terrorist legislation to justify false charges and false arrest On reflection I should have sued the Bank

Guest
Amanda Key says:
5 November 2016

Banks are using antiquated laws to fleece their customers and the Government are letting them getting away with it. Remember the Banking Industry needs or us more than we need them and “Floor Boards” and “Mattress” spring to mind!

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Guest

Quite so Amanda. Due to these “antiquated laws” it is easier for us to drop our bank than for our bank to drop us – they don’t have a contractual headlock on us like the other companies that supply us with services.

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Guest

Sky News announce UK banks are weighing up revolutionary digitised cards to fight online fraud.

Gemalto who are developing a version of the card claims the technology will make it virtually impossible for fraudsters to steal a customers bank card details and use them to make purchases on the victims account.

See: news.sky.com – UK banks weigh up using revolutionary digitised cards to fight online fraud.

Profile photo of John Ward
Guest

I think this would be a very effective counter-measure and probably popular. Presumably the internal battery will last a reasonable period before a new card is required. It has always concerned me that we have to give the security number on credit and debit cards when ordering something over the telephone where there is no encryption system in place. So much crime starts on the inside of companies and this development should thwart much of that.

In the same article I read that – with Cyber Monday coming up – “Police are warning on-line shoppers to be extra careful, as many promising-looking bargains on the web are simply criminal deceptions aimed at tricking people into entering sensitive bank card details, which will then be used to commit fraud“.

Guest
Jason Bourne says:
1 December 2016

The banks should be prevented from making extortionate charges particularly when their interest rates for savers are beyond a joke, we can punish them by moving our business.