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Which?: Ridiculous to suggest axing free banking will stop misselling

Peter Vicary-Smith MM blog

Over recent weeks we have heard too many senior bankers and regulators saying that if the banks charge a monthly fee for current accounts this will prevent the misselling scandals of the past. This suggestion is completely ridiculous and a damning indictment of the current culture of the banking industry.  Consumers should not be forced to pay even more when the banks have let us down so badly.

Our research has shattered the myth that banking is free. Consumers who stay in credit are paying because they are missing out on lost interest and are paying hefty fees for such basic services as withdrawing and spending cash abroad, let alone those that go overdrawn.  

There is no crisis in profitability in UK retail banking. The retail banks have been profitable throughout the financial crisis. Even now, despite the record low base rates, the authorised overdraft rate is at a 17 year record high of 19.53 per cent. It defies logic to suggest that the only way to persuade bankers to behave responsibly and stop mis-selling is to give them even more money.

It’s also a disgrace that the very people who bailed out the banks may be asked to pay more for the most standard accounts, while the industry continues to be rocked by scandals like PPI mis-selling, LIBOR rate-rigging and IT failures.

John Howard is right to say customers do not really know what it costs for the banks to offer us their core product – that is why we want to see the banks being far more transparent about the true cost of banking. Consumers need clearer information so they can see exactly what they’re being charged, can make easy comparisons between accounts and move to the bank that offers them the best deal.

However, he is wrong to suggest the new regulators should get all the banks to agree to impose a monthly fee. It is their job to recommend significant changes to the structure and culture of the banking industry, to restore public confidence and properly protect consumers from a repeat of the financial crisis. The only justification for a monthly fee is if all the other hidden charges are removed, but experience tells us this will not happen.

We want to see the Parliamentary inquiry put consumers first, and not bow to the pressure of the banks to increase charges.

At a time when consumer trust in the banks is so low the banks’ leaders should be engaging with this reform agenda and improving services, not making their customers pay even more.

Peter Vicary-Smith is chief executive of Which?


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Totally I agree Peter. What its got to do with the FSA is a mystery to me.

  2. I do not always agree with Which but in this instance I do. The Bank want to be paid extra so they do not mug their customers.

    Can I be paid for not mugging members of the public? Makes just as much sense.

  3. I am no fan of Which, however I do agree on this point, it is complete nonsense that making people pay will bring an end to the many malpractices that the banking industry has, no more than making people pay will bring and end to the problems we have in our industry.
    We all know there is no such thing as free banking as we all know there is no such thing as free advice (at least when a product is take up) when will these people wake up and realise that the people of this country are not as “cabbage looking” as they would like to think, I think its time to realise that the morons who push this propaganda are the greedy ones lining their own pockets.

    It wont make thinks any cheaper, it wont make cut out malpractice, it just makes everything more expensive for everyone.

    Just look at decimalisation as a prime example or the introduction of the Euro it is a simple way of adding 30% profit, and by the time people have realised its to late !!!

  4. how can we be charged for current accounts when we’re forced to use them. it’s not like we have the chance not to use banks. our wages are paid into these parasitic criminal institutions.

  5. Wow! I never thoght I’d say it – spot on Which? You’ve got that right.

  6. Suhan Srinivasan 22nd August 2012 at 9:06 am

    Given that the banks’ primary objective is to maximise profit, how would charging a fee help. Just because the banks would make more money on one side, does this mean that they would reduce income from other sources?

    Mis-selling occurs because selling is profitable for the bank. The staff are incentivised to sell and punished if they do not sell enough. The bank will continue to try and increase sales year on year by increasing targets. Selling more helps to maximise profits. This excessive incentive for staff is what results in mis-selling. Part of the problem is that staff move every few years, so have no consequence of mis-selling. Lack of good training is a problem; staff may not know the details of the products and are only taught how to sell it; an example would be exclusions for PPI.

    Limit or ban targets.
    Training for products would need to meet independent standards.
    Staff will need to be disciplined for mis-selling, maybe fined and have it put on a permanent record.
    Increase the fines for banks for mis-selling.

    Charging customers to use a bank account will make no difference to mis-selling.

  7. PS

    What does that tell you about Howard and the efficacy of the FSA Consumer panel? I know he’s not on it anymore, but it does highlight their out of touch and erroneous mind-set. They hand down their ‘wisdom’ to the FSA who swallow it whole and it all contributes to the cock up.

    At the same time each member receives at least £10k p.a for plonking their backsides on a chair and spouting drivel once a month. When you consider there are 16 of them – that’s at least £160k per annum – if not considerably more.

    And who are these people? A selection of Quangonistas – those who have made a career of sitting on Quangos – a selection of journalists (need I say more!) a leavening of professional bleeding heart complainers, the obligatory member of the ‘revolving door brigade’ from one of the big four accountants and a Civil Servant or two (heaven help us!). Of those with any experience of the subject there are two economists and an ex member of the CAB. So out of 16 we might possibly have 3 who know anything at all about that on which the panel pontificates.

    Today the Government is crowing about their ‘Cull of the Quangos’ estimating that 100 have been closed and another 150 merged since the Coalition took office. Saving every household £150. Hey lads over here! There’s more to be saved!

  8. It’s becoming a really weird world.

    Fifteen plus years ago the maximum commission agreement aimed to cap the levels of commission payable, to try and stop the public being overcharged. That was deemed anti competiteve and illegal.

    Now we have a suggestion that there must be a minimum charge imposed on banking…..err in order to protect the public by ensuring they’re not undercharged. Ummmm….how exactly insn’t that anti competitive and also illegal.

    It’s probably my age, but I just can’t keep up nowadays with how things just keep standing on thier heads…..

  9. Banks wanting the penny and the bun as usual but now being assisted by what the Russians during the cold called “helpful fools”
    If you let them the banks as a cartel will introduce fees accross the board and still carry on trying to flog crap products to the foolish and unwary.
    I think I’ll buy some bank shares as the profit hike will be spectacular

  10. Of course the FSA will agree with this drivel – many of the FSA staff will be working for one of the major banks a few years from now.

    It’s only about once in every 5 years that I agree with the outpourings of Which ? This is one of those occasions.

  11. It is beyond my why anybody would make a link between bank charges/ free banking and mis-selling in the first place.

    To be fair, I do think most banks now produce a list of their charges and unauthorised overdraft fee is one of them.

    I cannot see why Which? and other consumer groups objects to that the account holder has to pay a high fee for going over the agreed overdraft. Will they think it was ok if I went to the bank till and helped myself that way? Don’t think so.

    I think the bank and a new account holder should agree from the start how to proceed if an account holder was about to go over the agreed facility. Option 1, being charged an hefty fee; option 2, the bank rejecting all new transaction and option 3, the bank to call the customer and agree a way forward, and account holder pays a fee for this service.

    But I guess this would be too simple…

  12. This is the first ‘Which’ representative uttering that has had any merit. They are responsable for encouraging RDR which will only leave their members full exposed to this type of FSA/FCA/Bank drivel and the consequeces of higher charges. Make no mistake, the banks will have a feeding frenzy on ordinary people when there are much less IFAs to ‘police’ them. We consistantly have made the banks be more competitive by pitting one against the other but this will soon be removed as IFAs become a dying breed.
    e.g. why should the banks charge a fee when they take our combined salaries paid into these accounts and lend them out at high rates. They are already earning from us and to pay a further fee would be ridiculous! But what do you expect from a bank lead FSA/FSA? They are biased and a member of the FSA/FCA should be banned for life from becoming a banker and bankers should be banned from being regulators (Fred the shred anyone?).

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