UK banks labelled ‘uncompetitive and dishonest’ by MPs

11th April 2011

Our trust deed forum often includes stories from members of the public who consider the treatment they have received from their banks to be unfair. The issues reported are wide-ranging, regular including subjects such as the difficulties of setting up a new account, aggressive collection procedures as well as an inability to support people who have become financially overstretched.

MPs that sit on the Treasury Committee have been looking into such issues and have reached a damning verdict. They deflate the myth of free banking. According to the MPs we all pay, whether it’s through lost interest or the imposition of overdraft interest or penalty charges. The illusion of a free banking provision has been a central defence used by the banks to protect them against forced regulation which gives consumers a fairer deal. One MP stated, “… for all practical purposes it is impossible to find out how much we are being charged by our bank”.

Such comments will be well understood by many individuals who have commenced with a trust deed in order to help them deal with their debts. High overdraft interest and penalty charges play a key role in establishing a debt spiral which ultimately becomes impossible to halt without serious measures such as a trust deed.

Bank complaints have surged. Barclays now tops the table of banking miscreants according to their volume of complaints. In the last six months of 2010 they received 276,315 new complaints.

It might be assumed that Barclays would be contrite and working hard to provide a better level of service to their clients. They have announced some steps being taken to improve the situation.

However Barclays, along with other banks, seem unwilling to accept tougher regulation despite the dreadful number of complaints and increasingly negative public perception of them. Their new stance, that tougher rules will reduce their profits leading to less taxation for the government and potentially less employment, is falling on unsympathetic ears.

Some have gone even further. Barclays has spoken with regulators in the US about potentially making the move across the Atlantic. HSBC has announced it might consider moving to Asia. Many people will consider this to be a revealing response to the threat of having to be more transparent, customer-friendly and prudent.

A scenario in which a small number of banks can effectively fail to compete, lack any real transparency and attract enormous numbers of complaints is one in which customers will find themselves getting into debt difficulty.

As the financial squeeze gathers pace banks could play a key role in helping individuals get through to the other side. Good current-account handling, fee transparency, tolerance of temporary repayment difficulties and fair lending terms could play a huge role in minimising the number of people requiring a trust deed to solve their financial problems.

Hopefully the banks might turn their attention to this sort of positive response rather than planning to escape tighter regulation by fleeing overseas. At present there is no sign of such a change.

For further information regarding every aspect of a trust deed you will find our trust deed forum to be an accessible and informative resource representing the views and opinions of experts and members of the public alike.

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