Time for banks to play fair
MORTGAGE SOLUTIONS - 19TH MARCH 2007
Banks have come out as the bad guys again, but given their behaviour in the past, Simon Burgess is struggling to find any sympathy for them and their reputation.
Whatever it was the banks did in a previous life, it must have been horrendous. In the present climate, they are being held to account for each and every one of their sins and have taken quite a thrashing, both financially and reputationally. Indeed, for the banks’ board members and PR machines, every day must feel a bit like the end of Butch Cassidy and the Sundance Kid, where the pair come out to face a hail of bullets. In the silver screen version, the film freezes and we can only assume our action heroes are gunned down in a blaze of glory.
In relation to the current embroilment over banking charges, they are being shot at for being overly punitive and demanding fees that do not relate to the costs they have incurred. The banks may argue that in offering the vast majority of their clients free banking when they are in credit, and setting out clear guidelines as to what clients can and cannot do, they are perfectly entitled to introduce their own penalty structure for those breaking the contract into which they have entered. After all, no-one tells them how they should price their products, so why should they do so over fees. If clients want to avoid paying fees then they should honour the agreement they have made and operate within the financial parameters they have created with their bank.
However, the truth is that banks, and indeed building societies, have taken advantage of their position and used the fees generated to bolster revenues and help them keep things as competitive as possible at the front end.
We have seen this time and time again, and one needs look no further than the mortgage market and the swing in exit fees to see a clear manifestation of the current trend. Front-end headline rates are kept at rock bottom, while everywhere else along the line, providers are looking to add in costs that make up for it. Everywhere we look in today’s society it is happening, and so perhaps the banking fraternity can count itself as unlucky to be held so fervently to account.
What is most amazing is that everyone thinks they are pulling the wool over consumers’ eyes. Savers are already aware that the nest hike in interest rates is unlikely to see the whole rise passed on to them, while borrowers know they will be hit full in the face immediately.
Necessary evil
The atmosphere created is one of mistrust. Dealing with the bank is a necessary evil, as are taking out mortgages and having to arrange credit. Banks, insurers and mortgage providers should be among some of our best-loved and most respected brands. They provide an incredible range of services, make our lives easier and facilitate some of the biggest and most important purchases we make.
And yet, there is that feeling of being taken for a ride in so many of the dealings we have with the financial fraternity. The fact that these institutions are generating huge profits only adds to our disquiet. No, they should not be charities, but equally, they have no need to inflate charges and be aggressively punitive in their strategies.
It is no wonder that compensation firms are lining the banks up in their sights and going after the riches in their deep pockets – a more genuine approach from the off might have prevented much of the fervour that has built up. However, with on claims company securing its first sizable payout for payment protection insurance mis-selling complaint, it seems this is going to be the nest wave of attack against the banks.
Unfortunately, they have done nothing to win the same kind of affection we have the Butch Cassidy and the Sundance Kind, and so we shall sit back and enjoy seeing the banks gunned down again.
