Banking Competition

Chris Evans Excerpts

Thursday 12th July 2012 Westminster Hall

[Chris Evans (Islwyn) (Lab/Co-op)]

Thank you, Mr Chope, for calling me to speak. In debates such as this, I always think of the time I spent working in a bank, in the retail sector.

Last week I sat behind Bob Diamond at the Treasury Committee, and watched as he was grilled by parliamentary colleagues. It got me thinking: this man is walking away with a £2 million bonus for doing something that is categorically wrong. It made me realise why people are so angry. The worst thing, which people do not seem to understand, is that Bob Diamond will not get the dogs’ abuse that someone working behind the counter in Newbridge or in Risca will get. They will be told that they are criminals, thieves and crooks. It is the people working on the front line who will get the abuse.

What really annoys me is the current sales culture in banks. I understand that banks are private businesses and need to make money—nobody needs to intervene on me to tell me that—but they seem to be pushing their staff to the limits. For example, when I worked in a bank, I was told to stay until 7 o’clock at night to phone people who were arriving home from work to arrange sales appointments for the following day. My contract of employment ended at 5 o’clock, yet I was expected to stay until 7 o’clock, because, I was told, my bonus would be my payment for doing so.

Another frustrating thing—this annoys me when people bash bankers about their bonuses—is that, while most people who work in a bank get a bonus and often make up their money with it, they have to look on and see those in charge who have done wrong and who have affected people’s trust in bankers walk away with big bonuses. The term “bonuses” is absolutely meaningless.

People who work in banks also have a raw deal on training. When recruits turn up at a bank, they are not told anything. Many of my colleagues when I worked at a bank did not know what a clearing house automated payments system or a bankers’ automated clearing services payment was, and did not understand mortgages, yet they were being told to sell to people. The fundamental question we have to ask ourselves on the future of banking in this country is not what do we want, but what do consumers and those working in banks want? First, when people go to a bank, they do not want to be flogged products that they do not want. When I move my money between accounts every month, I do not want to be asked, “Mr Evans, have you paid off your credit card? Do you want a loan? Do you want to buy a new car?”, when all I want to do is transfer my money.

We need to get away from a culture of high-pressure sales and of computers making decisions, and get back to a culture of bankers actually offering advice. When I first joined the bank, I naively thought that it was a profession similar to that of a lawyer, but then I was told—this was 20 years ago—that people did not bother with banking exams because they were meaningless. I find that strange. When I ask the Financial Services Authority, Lloyds TSB or HSBC what they are doing to train staff so that people know that their bank manager is giving them the best possible advice, they reply, “We have in-house training,” but is such training given across the board and is it an industry standard? On education—I hope the Minister will focus on this, because nobody ever talks about it—can we find a way of returning banking to its previous status as a profession with recognised exams at an industry standard, so that everybody knows that their bank manager is giving them the best possible advice? That would be good for the banks and for the consumer.

In March, I tabled a private Member’s Bill called the Banking (Disclosure, Responsibility and Education) Bill. It was based on the Dodd-Frank Act in America, which enables each and every bank transaction to be monitored. Perhaps we would have discovered the LIBOR scandal earlier if we had been tracking everything and had an office of financial research.

The constituency represented by my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) is not like mine—mine is a valleys seat—but we have similar problems with huge amounts of debt and illegal lenders. We have organisations such as Provident Personal Credit and Shopacheck. Cash Converter has popped up on the high street and its representatives even want to meet me to discuss their social responsibilities. Many people are unbanked and it would be a good idea, as my hon. Friend the Member for Harrow West (Mr Thomas) suggested—he is not in his place—to track people by their postcode and for the banks to release a report every year stating to whom and to which demographics they are lending money, and how they are contributing to society. That way, we could introduce a rating system so that, if people wanted to change banks, they would know whether they were moving to a bank rated A, AA, B or C. Also, there would be competition between banks and they would have to “up” their game, which is something I want to see.

I support switching and agree with the hon. Member for South Northamptonshire (Andrea Leadsom) that we need to have more portability between bank accounts, but from what I can see—I will probably be attacked for this—the services offered by banks are much of a muchness. The interest rate on loans provided by different banks is usually the same—it is very low—and the differences between individual savings accounts are small, as are the interest rates on credit cards, so people do not actually move to anything better. I want to remove the barriers to entry, which many hon. Members have mentioned, and we could achieve that by considering the role of credit unions.

I represent the Co-operative party as well as Labour, and it says that the way forward is to have community banks and to introduce regulations for more credit unions. In Wales, everybody has access to a credit union, which is fantastic. A credit union is owned by members and all its profits are pumped back into lending to people. I want to see its role expanded, so that it lends not only to people but to businesses—micro-businesses and small businesses—that cannot get money elsewhere. We need to consider that.

I want to address what was a personal bugbear of mine when I worked at a bank. I have raised this issue on numerous occasions with various Ministers from the Ministry of Justice and the Department for Work and Pensions—I am now raising it with a Treasury Minister—and I hope it will be addressed. Whenever I go into banks, members of staff tell me that they have a number of very good customers who pay their bills on time and whom they want to lend to and develop a relationship with. However, when they credit score some of those customers’ accounts, it reveals bad credit information, because they have received a county court judgment. When the bank’s staff speak to them, they discover—this happened when I worked at a bank as well—that they have a bad credit rating not because they defaulted on their mortgage or on a financial product, but because they got into a dispute with a gym or a mobile phone company, which, rather than trying to resolve the issue, went straight to a county court to get a judgment against them that completely messed up their credit record.

[Philip Davies in the Chair]

I recently read Duncan Bannatyne’s book, “Anyone Can Do It”, in which he says that if someone does not pay their final payment, even if they have cancelled their contract, he would have no hesitation in taking them to court. I hope the Minister will address that issue, because it is a real one for many customers and for banks whose good customers are being cut off. If someone is in a dispute with a mobile phone company or a gym, such organisations should not be allowed to impose a CCJ and wreck their credit rating, especially if they can show that they have been in a dispute.

On the unbanked, I still have serious concerns about the basic bank account. It has been a very good innovation that has brought more people into the banking sector, but, even though it allows people to have an electron card and a bank account, it does not credit score for any products. Therefore, if someone is put through a credit-scoring process for a classic account or a traditional bank account, the credit score agency cannot be told that they have been a basic bank account holder for five years and that things have gone really well; it can only go on the information that it has. How can we manage people from the basic bank account on to mainstream banking, which is a huge issue, especially in areas such as mine? That would break down the fear that some people have of talking to their bank manager. They think that it is easier to borrow money from the woman from Provident, or Shopacheck, who visits on a Monday night. We need to tackle those issues.

Finally, I want to see the development of a mutual sector in banking. Conventional banks used £60 billion when they were bailed out, but the mutual sector did not use any money. Bradford and Bingley was a building society for 150 years, but it lasted only 10 years as a bank. We have to do more to encourage mutuality in the banking sector, and the starting point for that is a discussion about community banks and credit unions. I hope the Minister will address some of those issues.