Banks: Vulnerable Customers

Baroness Hayter of Kentish Town Excerpts

Monday 21st December 2015 Lords Chamber

Asked by

[Baroness Hayter of Kentish Town]

To ask Her Majesty’s Government whether they have any plans to ensure that retail banks treat their vulnerable customers fairly.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the story begins with a letter, out of the blue, to a 93 year-old woman, just two days out of hospital, from her bank, giving her, after 60 years with it, “formal notice” that her account,

“will be closed and our contact with you ended”—

allegedly a decision “not taken lightly” though, in fact, it was made after no attempt to contact her, no problem with the account and no reason for any such action, all of which the bank later admitted. Furthermore, the unsigned, computer-generated letter went on to say that, once the account was closed,

“no further standing order will be paid”,

and,

“any cheques presented ... will be rejected with the response ‘account closed’”,

and—the story does not end there—

“should we receive any request for a status report about you … we will reply that we are unable to express an opinion. Lastly, we will not be prepared to offer you any new banking services”.

So an active account, held over a lifetime, was to be closed, and the customer rendered unbankable.

A flurry of exchanges followed, sadly demonstrating a lack of truthfulness by the bank which said that it did not know of any vulnerability about her or her husband. The latter was in a home with Alzheimer’s, the fees were paid through the same account, and the bank held a power of attorney for him and was aware of the lady’s age. All of this the bank later admitted, including that no contact had been made prior to the letter. The bank rectified this case with a bouquet of flowers and with compensation of £750 being given to Alzheimer’s and stroke charities. I fear that it was the intervention of a Member of your Lordships’ House that may have made the difference.

But this is not an isolated story. We have read of Daniel Head with Barclays, the Langleys with HSBC and Barclays again with power of attorney problems, and I have heard of many other examples around this House and elsewhere—so my follow-up is about the wider issue, not this specific case, though the bank remained unhelpful, refusing to say how many such letters were sent, why they went direct from a computer with no personal signature and no senior sign-off despite the gravity of the letter, or whether this happens for an active account held for 60 years.

We have a systemic problem which breaches the legal duty of care under which banks must ensure that they put the interests of their customers first. Indeed, with the support of the Financial Services Consumer Panel, we on this side of the House tabled amendments to require the FCA to make rules on the duty of care which the Government rejected. Will the Minister now revisit this decision?

The Consumer Panel has also identified problems over forced bank account closures and wants banks to be more transparent about them. It is claimed that they are about suspicions of money laundering, but they have dire consequences for customers, leaving them with no current account and no ability to open an account elsewhere as they are effectively blacklisted.

The Financial Conduct Authority’s recent paper on vulnerable consumers rightly says:

“Vulnerability can come in a range of guises, and can be temporary, sporadic or permanent in nature”.

However, many banks use a very narrow definition of “vulnerable”. For example, the BBA focuses mainly on mental health, a tiny part of the picture. Vulnerable customers are not a fixed group. Life events like job loss, bereavement, divorce and illness can render any of us temporarily vulnerable. My own view is that while vulnerable consumers are those especially susceptible to detriment, such detriment actually arises, as the FCA admits,

“when a firm is not acting with appropriate levels of care”.

As the FCA wrote:

“Most problems relate to poor interactions ... systems that don’t flex to meet needs … failure of internal systems … where firms fail to communicate … internally … plus … over-zealous implementation of rules”.

So systems are the problem, not the client.

The FCA says:

“Fair treatment of all customers is central to core conduct”—

and this is the lesson I want to draw. Banks must sort out the problems. It should not be for consumers to tell a bank that they are vulnerable. Banks should be treating all customers fairly. Some banks and regulators seem to think that all we need is “full competition”, in the words of the TSB, for,

“consumers … to see a change in an industry that’s been stacked against them for far too long”.

But I do not accept that customers should have to wait for that competition before they get a fair deal.

Contrary to the CMA’s view, customers should not have to switch banks in order to drive up standards. Regrettably, despite evidence of poor customer care, the CMA fell back on the hoary old “competition” let-out: if only there were competition and consumers switched, banks would have to improve. That will not do. Banking is virtually an essential service and customers should not have to put up with poor service, let alone be threatened with the forced closure of accounts.

The Financial Conduct Authority must act to clean up banks’ poor service. If it does not, the Government must tell them to. This is for all clients, not just the vulnerable. Indeed, in the case with which I started, although my aunt—for it was she—is in her 90s, she has every marble and more and is not in debt. However, she had just had a stroke, and did not need her blood pressure raised by finding her bank account closed and being rendered unbankable, possibly even without even access to her funds that the bank held. So for her, and for others, I ask the Government whether they have any plans to ensure that retail banks treat their vulnerable customers—indeed, all their customers—fairly.