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?