Can you really trust your bank?
Twenty years ago the answer to that question would probably have been an irrefutable, “Yes.” But in the wake of numerous scandals and allegations of nest-feathering, can consumers really rely on their bank to play it straight?
Here are 11 good reasons why you should ask yourself, “Can I really trust my bank?”
1. The Credit Crunch
The rot began to set in back in 2007 when the notorious Credit Crunch saw UK taxpayers spending billions on bailing out some of the country’s largest banks. Irresponsible lending practices and bankers’ greed caused the problem, and the taxpayer footed the bill.
2. IT failures
Computer meltdowns are an increasingly frequent occurrence among the banks. RBS, Clydesdale, Yorkshire Bank, and TSB have all experienced IT failures that left millions of customers struggling to access their online bank accounts or use their debit cards.
That leaves the customer asking how safe is their money when the banks are apparently unable to put in place robust computer systems. After all, if day-to-day routine transactions are frequently disabled because of computer glitches, how long will it be before a large-scale account hack takes place, seeing customers’ accounts emptied?
3. PPI Mis-selling
Perhaps the most worrying scandal to hit the banks is that of Payment Protection Insurance (PPI) mis-selling. PPI is intended to cover your loan and credit card repayments in the event that you are unable to work. However, the banks sold PPI policies to millions of customers, either without the account holder’s knowledge or without checking that the customer was eligible for the insurance.
Why? Well, the banks were paid commission by the PPI providers. So, bank sales advisors were incentivised and actively encouraged to sell as many PPI policies as possible, whether the product was suitable for the customer or not.
Also, in many instances, the banks failed to tell their customers that they were paid commission. In 2014, a Supreme Court decision on the case of Plevin v Paragon Personal Finance Limited ruled that non-disclosure of the commission, or a failure to tell the client how much commission the PPI policy had earned the bank, equated to mis-selling for which the customer should be compensated.
4. Mis-selling investments
Some banks have been found to have given poor investment advice and mis-sold investment products to customers. The Financial Services Authority (FSA) has fined RBS, HSBC, Lloyds, and Barclays for investment advice failings.
5. Mis-sold Packaged Bank Accounts (PBAs)
The latest scandal to hit the banks surrounds the sale of Packaged Bank Accounts (PBAs). PBAs are sold with “benefits” such as travel and roadside recovery insurance, for which the account holder pays a set fee to the bank each month.
However, some customers have been told that they had to sign up for a PBA if they wanted to be granted the loan or business account they originally applied for. And in many cases, the insurances included with the PBA were not suitable for the customer.
6. Inflated Banker Bonuses
One major bugbear among bank customers is the huge bonus payments that bankers continue to receive, despite the banking industry suffering big losses. Although banker bonuses have been capped, it look likely that the cap will be scrapped after Brexit.
7. Sales Targets
Have you ever visited your local bank branch on a simple errand, only to be on the receiving end of a hard-sell by the counter staff?
Ever increasing pressure on bank staff to reach sales targets means that you’re likely to have to endure a long sales pitch, and if you’re not careful, you could even end up buying a product you don’t need.
8. Poor savings rates and sky-high borrowing rates
Even though the Bank of England base rate has been at an all-time low for the past few years, that hasn’t stopped the banks from stealthily increasing mortgage and overdraft rates, citing increased borrowing costs.
So, while your savings pot sits stagnating year after year, your outgoings get higher and higher.
9. Disappearing Bonus Savings Rates
Banks have been heavily criticised recently for enticing customers to take out savings accounts with competitive interest rates, only to reduce the rate 12 months later without notifying the customer.
If you sign up for a savings account with an excellent rate, remember to switch your money out of that account before the rate drops.
10. Extortionate Bank Charges
A number of years ago it emerged that banks were using over inflated bank charges to secure roughly a third of their retail revenues. The Supreme Court overturned two previous rulings by the Office of Fair Trading in favour of the banks. However, the banks still had to pay out over £1billion to customers who were slapped with unfair bank charges.
11. Tax Avoidance
The banks’ reputation as trustworthy took another severe hit recently when HMRC stepped in to warn them against “aggressive avoidance” of tax.
Barclays’ reputation was further tarnished ten years ago for using two highly abusive tax avoidance schemes. Although their actions were not illegal, they were not in the spirit of the law either! It seems that the banks have yet to learn to play fair!
So, can you really trust your bank?
In the light of the above, it’s hard to answer that question. Most customers regard banks as a necessary evil. And in the light of recent mis-selling scandals surrounding PPI, PBAs, and investments, customer awareness is key.
As for the computer-related problems, customers can only cross their collective fingers and hope that the worst doesn’t happen.