CONSUMER groups yesterday warned that banks’ customers could be badly ripped off if the popular “free banking” model of current accounts is scrapped.
Incoming Barclays chairman Sir David Walker revealed he “in principle” favours charging customers for current accounts, joining FSA boss Lord Turner who believes the system prevents new banks entering the market.
Providing accounts without charges means banks must raise fees and prices elsewhere to cross-subsidise the accounts – a set-up which Walker told the Sunday Telegraph may even have led to mis-selling as banks sought greater profits on certain products.
But Which boss Richard Lloyd rejected claims that consumers would benefit from the extra charges.
“Consumers should not keep having to foot the bill when the banks have let us down so badly,” he said, adding that customers already tend to receive very little interest on current accounts.
“There must be fundamental change to the culture and practices of the banks, including greater transparency about the true cost of banking.”
LORD ADAIR TURNER FINANCIAL SERVICES AUTHORITY
One important barrier to competitive entry into UK personal sector banking is obvious – the fact that the core product, the current account, is usually given away for free, sold at below cost of production.
ANDREW BAILEY BANK OF ENGLAND
In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying.
COLIN KERSLEY M&S BANKING
There is no such thing as free banking, someone has to pay for it. If you offer free banking, how do you cope with people who aren’t going to pay for anything?