Alarmingly, despite several years of dreadful publicity, the ethics of our banks have not changed. There is still an unethical culture in the way they administer their savings accounts, and in their promotion of them. This is a particularly important issue at a time when the interest rates on all bank savings accounts don’t even reach the level of inflation. And thus all savers are guaranteed effectively to be losing money. And they are losing even more money, when you take into account that they are paying tax on those savings.
There are many ways in which the banks try to exploit unsophisticated savers, and they can’t all be discussed here; but in essence the banksters lure punters into savings accounts that appear generous, and after a while they to reduce the interest rate on that account to levels that are not ethical. The banks rely on INERTIA, so that huge numbers of customers keep their savings in accounts that have unjustifiably low rates of interest. Often customers are lured into accounts with bonuses for joining them; and then, from the banks’ point of view, sufficient customers stay with the same accounts, when the bonuses disappear, and the interest rates become very low. Some reforms for this are extremely easy:
1. I had an online account with Sainsbury’s bank. On the page of my online statement, it used to give the rate of interest that I was getting. However, when interest rates became very low, it stopped displaying the rate of interest, presumably because the bank knew that I would be horrified by the very low rate of interest.
Sainsbury’s were able to claim that the rate of interest was displayed somewhere on the website, but, in the real world, it was un-intuitive and difficult to find.
THUS A VERY SIMPLE ACT OF REFORM WOULD BE THE NECESSITY TO DISPLAY THE RATE OF INTEREST ON THE WEB PAGE OF THE CUSTOMER’S STATEMENT. AND WHERE STATEMENTS ARE SENT BY HARD COPY, THE SAME RULE WOULD APPLY. EVERY CUSTOMER SHOULD BE FULLY AWARE OF THE RATE OF INTEREST THEY ARE GETTING.
There can’t conceivable be any reason why this elementary reform could not be enacted.
2. When there is a reduction in interest rates, then an email should be sent to all those who are online with their bank. And a letter to all those offline.
When I suggested to Sainsburys Bank that I should have been sent an email when rates were lowered, they said it was not practical to send emails to all their customers. I then pointed out that they found it practical to send me emails attempting to sell me various other products of theirs
3. When I decided to withdraw my money from Sainsbury’s bank, they promptly revealed to me that they had started a new savings account that offered a better rate of interest. Of course they had not told me before
There should be a rule that all banks should tell their customers if the bank or building society is offering an account with a better rate of interest. That would be ethical
4. These abuses also extend to ISAs. Thus, at the time of writing (November 2013) there is an offering of 2% to new customers of the Nationwide; but it is only paying 1.5% to existing customers. And these existing customers are not allowed to switch to the new offers. Obviously
this should be reformed.
5. Each bank and building society should make clear in their literature whom they are owned by. They don’t. Apart from obvious reasons, this is a matter of great importance, because of the government protection against losses. (Customers are protected against the first £85,000 of losses in the event of a Building Society or Bank going bust.) Thus a customer might have savings with two institutions with different names, not realizing that they have the same owner. The government’s loss protection will treat these two institutions as one, and thus the saver may unwittingly not be covered.
I can’t see why any of these reforms could be controversial. I am also sure there are other touches on the tiller that could ensure a more ethical and transparent offer of savings accounts for the public. It is a huge issue because there are billions at stake, and it is extremely important for elderly people who are living on their savings, but cannot take the risk of investing in equities.