How Angela is the white Knight for a banking industry that’s under siege.

The banks are now biting back against customer anger on a range of issues over fair trade. And the former Conservative treasury minister, Angela Knight, is prepared to pick up the fight in a much more combative manner.

 She warned that free banking could end if the Office of Fair Trading takes further punitive action against the industry, while she launched a broadside at Which? for a press release which heavily criticised the banks without any proper research.

The OFT is poised to announce a formal investigation into the penalty fees charged on current accounts, having last year forced banks to cut similar fees on credit cards from £30 to £12.

The banks and financial institution have been stung by a growing consumer challenge - with Peopleschampion.com playing its part in this campaign. Banks have been ordered to reduce or refund mortgage exit fees, while their much-criticised sales of payment protection insurance (PPI) were referred to the Competition Commission.

In a speech in Edinburgh, Mrs Knight, who is now chief executive designate of the British Bankers’ Association, warned: “We wait for the OFT's decision in this area. I am one of the 80% of individuals who are in credit and don't pay unauthorised overdraft banking fees, and I hope the OFT decision will not take a narrow view and fail to look at the big picture - and so adversely affect them. There are no ‘no consequence’ options --banking is not a cost-free public utility.”

The banks have been accused of charging around £30, and sometimes adding on further fees of up to £90, where an account slips over into the red for even a day.

Peopleschampion.com chairman Jim Spowart said: “ I’ve noted some of Angela Knight’s views and she makes some valid points – but I still believe the consumer is being shortchanged when it comes to financial services. I’m sure Mrs Knight’s arrival at the BBA will ensure that there is some lively debate.”

Mrs Knight said: “People don’t like paying overdraft fees? They don't like parking tickets either, or speeding fines. But these are things which are part of normal life. The reality is that a bank charge pays for the credit check and the other things that have to be done when an individual writes a cheque, or a direct debit comes in, when there is no money in the account.”

She added: “If you are in credit in the UK, banking is free - unique in developed countries. It is a sensitive area, but a bank charging a fee for an unauthorised overdraft is not illegal.”

The legality of the current level of fees, however, is under challenge from the Consumer Action Group. It was yesterday said to have helped 5283 people obtain over £7.3m in claims against all major banks, an average of £1386 each, without a single case having been allowed to go to court.

Ms Knight said: “If one of the banks takes a case right now in court, we will end up with two or three years’ worth of a court case as it goes through all its processes; it doesn't seem to be the most appropriate way of handling something while an (OFT) investigation is under way.”

She complained banks had three regulators - the OFT, the Financial Services Authority, and the Financial Ombudsman Service, which seemed to be in competition, “making similar requests about one particular issue”.

She also attacked as “rubbish research and rubbish data” last week's report by uSwitch, the price comparison website, which accused the banks of failing to ask for proof of income when issuing credit cards. Ms Knight said the system of electronic credit checking was standard across all lenders.

On PPI, she said: “You need no more than a look at bank websites to see that there is the choice of buying with or without protection. And it’s not just on websites either. There are a number of independent providers of PPI as well.”

“PPI provides valuable financial protection against unforeseen events but it’s not compulsory. There have been many significant enhancements in the sales process during the past two years and banks follow strict processes that have been agreed with the FSA. Individuals have to sign separately if they purchase PPI with a loan and its virtually impossible to be sold PPI without knowing it.”

“The OFT themselves say that consumers are satisfied with the product and our concern is that the continuous adverse comments are in danger of discouraging the very people who would benefit from it the most.”

Mrs Knight also hit out at the consumer group Which was what she called: “exaggerated inaccurate and unsubstantiated press release on the banking industry” issued on Sunday 28th January 2007.

She wrote to them saying: “Your press statement related to findings of a supposed survey you had undertaken. In it you accused the banking industry of "tricks", of illegally charging for overdrafts", for overcharging for repeat statements, for closing accounts unfairly, for delays in complaints handling and for mis-selling personal loans.

I reject these allegations and draw your attention to the following facts:

• Charges levied for unarranged overdrafts are not illegal. Customers are made fully aware of the terms and conditions when they open accounts. Terms and conditions are always available at branches and on the internet and banks frequently advertise and write to customers to keep them abreast of any changes. There is no "trick" involved;
• Customers receive an original copy of their bank statements for free. There is no charge cap for repeat statements as you allege. In the absence of any other information, we can only assume you are seeking to contrive data protection legislation to suggest this. Complaints handling is in accordance with the FSA rules and the banking code and is not as you suggest:
• Banks like to keep their customers and will only close an account when the relationship has broken down. This sometimes may include when a customer has refused to pay for a service they have received.
• Where it makes sense for customers to take out a loan to replace their unarranged overdraft, they should be recommended to do this.

Mrs Knight said banking is a people business and with 127 million accounts and seven billion transactions a year and that there may be some instances where errors occur in the handling of a customer. “However, your release was sweeping in its tone clearly intending to damage the entire industry, and without substance to back up its allegations.”

“Furthermore, when we asked your staff to let us see the report, we were supplied with just the press release, so preventing serious debate on your findings. When we asked again this morning a member of your staff said no report actually existed. They went on to inform us that, at some time in the future, you may take what cases you have on file to the FSA, the OFT, or FOS but again we were denied access to the material you have collected to underpin your arguments. This is unacceptable.”

She said a recent independent report into banking in 11 major countries clearly stated that UK banking was the most transparent and that overall customers here get a better deal. Further, UK current accounts are free to all customers the overwhelming majority who keep their accounts in credit.

“It is important in the interests of these many millions of individuals that the benefits of free banking are not overlooked. Should the actions of your organization result in changes which may prejudice them then I trust that you will ensure that you let them know this and in the same lurid style as this last weekend’s pantomime. Lastly, I strongly urge that should you wish to undertake any further research, you discuss it and both any findings with us and in advance.”

To compare and apply for the best credit card click here »

« return to news index