The FSA has produced warnings to banks that they should charge clients for current accounts, as the free services currently provided have caused a mis-selling problem.
Trust in British banks has been slashed after a series of hard-selling scandals, over charging rows and more recently mis-selling on Payment Protection Insurance (PPI). Andrew Bailey, Director of banking at the Financial Services Authority, told a conference on the future of retail banking that the illusion of being provided with free accounts has caused many of these problems, which is why many live now in such distrust of their banks and building societies.
Mr Bailey said: ‘In certain activities there was arguably suicidal competition in the run-up to the crisis, of a sort that we do not want to see repeated. The most obvious case of this was mortgages, where margins on lending were squeezed heavily in the decade running up to the crisis, and we also saw another, I would say undesirable, development of the retail banking scene, namely the recourse to earning returns from opaque fees. The business model of squeezed lending margins and mis-sold products, whether it be Payment Protection Insurance (PPI) or mortgage products, was wholly undesirable.’
He then added: ‘There is of course no such thing as free banking. What it really stands for is that charges are levied inconsistently across products supplied by banks, with the consequence that some appear to be free. It also leads to what in my view are unhelpful and damaging decisions on the supply of products. The philosophy should be, give the public what they want but at a fair price which is transparent to them.’
The first casualty of the end to free banking, according to banking industry figures, would be those which are on low incomes as it is less profitable to the bank to use free current accounts as window shopping for other products which they offer.
Banks have been ordered to refund the victims of PPI mis-selling the refunds owed to them, which includes the interest occurred on the insurance they were wrongly sold, however despite this, they are continually being forced to wait before they are dealt with.
With Christmas and the New Year fast approaching, customers should get the refunds they deserve, as well as receive an early present by their banks. In order to rebuild the trust in the financial services industry, British banks should deal with claims quicker – only time will tell.
Sally Bowyer, Managing Director of Brunel Franklin said, “BrunelFranklin.com has helped thousands of people who have been victims of PPI mis-selling. If you have grounds for a refund, it will be pursued by our dedicated staff, experienced in the complexities involved to give you the very best chance of securing the maximum payout.”
Learn more about PPI refunds and find out if you could apply for a refund today! Visit the website www.brunelfranklin.com or call Brunel Franklin, free, on 0800 051 54 51.