The new chairman of Barclays has claimed that mis-selling scandals are a consequence of free banking.
We agree with the consumer group Which? that this is ridiculous.
Banking has never been free, although the banks have done a reasonably good job of convincing their customers that it is free.
As Which? is right to point out, banking customers currently pay over £9bn a year in various fees and lost interest on their current accounts.
Along with being a target for the sales of financial products by the banks, this is the real cost of ‘free’ banking.
Charging a monthly fee for current accounts would not have stopped the mis-selling of payment protection insurance or the regular mis-selling of investment products by banks.
Only cultural changes at the High Street banks can stop this happening. Greater transparency could also help.
A suggestion made by the Independent Commission on Banking that customers’ annual statements should include the amount of lost interest has real merit. If banking customers saw the true cost of their current accounts in pounds and pence each year, they might start to more closely scrutinise their commercial relationship with the bank.
We would also like to see more competition on the High Street, with less of a monopoly held by the big four banks; something that currently results in a great deal of inertia to change banks when shoddy service is provided.
Regardless of how the issue of ‘free’ banking is addressed, banking customers need to view their banks with a great deal of caution. This is particularly important when financial products are being sold.
Photo credit: Flickr/OliverN5
