BBC Working Lunch – Your banking queries answered
Andrew Hagger, Head of News & Press at Moneyfacts.co.uk, appeared on BBC Two’s Working Lunch programme on 23/03/07 as their guest expert answering questions about bank charges, direct debits, interest rates and much more. Working Lunch is BBC Two’s award-winning daily business, personal finance and consumer news programme.
See below for the questions and answers raised on BBC Two’s Working Lunch programme:
- We were unable to open a Halifax current account due to low credit scores
- My 88 year old mother was unable to access her savings because Barclays had made the account dormant
- Why does it take 3 working days to transfer money?
- The Bank of England base rate went up, but why hasn’t Bradford & Bingley’s e-savings rate moved up as well?
- Interest rates - spare a thought for savers for a change
- Why do Alliance & Leicester discriminate against loyal customers?
- Barclays sent me someone else’s bank statement
- Why did RBS charge me £12 when they already had my money?
- How can Banks justify charging for bank accounts?
- Why do Alliance & Leicester insist I have to be on the electoral role for 5 years before I can open an account?
We were unable to open a Halifax current account due to low credit scores
We have recently tried to open a high interest current account with The Halifax. We were refused on the grounds of our “low credit scores”. The letter from Halifax referred to other accounts held with them. At present we hold no accounts with them. We had a mortgage with The Leeds Permanent Building Society, which transferred to The Halifax on merger; also we had a Liquid Gold savings account, which similarly transferred to them. We were shareholders after de-mutualisation and held those shares for two years. None of these accounts ever fell into arrears or default. We have maintained a current account with NatWest since May 1979. This account has never been even one penny overdrawn. We pay off our credit card fully every month. In this 21st century when everything is supposed to be known about everyone we think there is more to this. They have discontinued a £100 sweetener early so it may be that they have had more applications than they want?
In this situation, the customers should approach the Halifax to establish which credit reference agency they checked as part of the credit scoring process. It could be that there is information registered against the customers’ name that may be incorrect and that may have influenced the decision in this case. By sending a nominal fee of £2 to the credit reference agency concerned, probably either Equifax or Experian, you can obtain a copy of your credit report to check that all the information recorded is accurate and up to date.
My 88-year-old mother was unable to access her savings because Barclays had made the account dormant
My 88-year-old mother visited our branch to close her savings account but could not access the funds (less than £100) because Barclays had made the account dormant. No correspondence regarding this was received. The bank could not say where the money was, or when she can obtain it! She now has to complete an application form to obtain her own money and to provide proof of identity as she did when the account was opened.
Barclays claim that a letter was sent and because there was no reply they automatically make an account dormant. In view of the track record of the Royal Mail I find their procedure flawed in principle. Should they not send such a letter by recorded delivery?
This is an explanation from the Barclays press office
If an account is not used for a long period of time (at least two years) and the customer has no other accounts, mortgages or so on with us then we will move the account into dormancy. Before we make an account dormant, a letter is always sent to the most recent address we held for the customer. This will provide the customer with instructions on how to keep the account active. If the customer does not respond then we would move the account into dormancy, however the money and account remains the customer's for eternity regardless of how long the account has been dormant - if they die it moves into their estate.
A customer can access the funds in their account at any time by completing a short claims form (available in all of our branches) and providing two pieces of appropriate identification. We ask for this requirement for security reasons to prevent fraud and ensure that only the customer can access their funds
Why does it take 3 working days to transfer money?
Why does it take 3 working days to send money via a direct debit from one bank to another? The money leaves the sender's account on a nominated date and doesn't arrive in the recipient's account until 3 or more days later. Who is receiving any interest accrued in that time delay?
With a direct debit your account is actually debited on the same day as the beneficiary is credited. However the system that operates behind the scenes means that a payment file has to be lodged three days in advance, to allow the funds to be claimed by one bank from the other in accordance with the direct debit mandate that you have authorised.
The system for standing orders and internet banking is slightly different with your account being debited on day one, during day two the funds are transferred between the two banks and on day three the beneficiary receives the funds in their account – each of the banks involved will benefit from having these funds for a day and a half each. However, standing orders, phone and internet payments will be processed on the same day following the introduction of the new faster payments system in November 2007.
The Bank of England base rate went up, but why hasn’t Bradford & Bingley’s e-savings rate moved up as well?
With the Bradford and Bingley ‘e’ savings the interest rate is guaranteed to at least match the Bank of England Base Rate +0.25% until 30th June 2007. The base rate went up a week ago but their rate hasn’t moved. Is this typical of this type of account? Are they in breach of their agreement?
There is often some confusion with ‘rate guarantees’, especially when the product is launched with an interest rate is at a level that is in excess of the guaranteed rate. To illustrate this point, the latest version of the Bradford and Bingley e-savings account is paying 5.60% with a guarantee that it will be at least equal to base rate. With base rate currently at 5.25%, the rate could be cut by 0.35% tomorrow but still remain within the terms of the guarantee.
Interest rates - spare a thought for savers for a change
It is good to see the banks coming under criticism for their treatment of their customers. However, sympathy seems always to be with borrowers, but what about savers who in recent years have got a very poor deal and are completely at the mercy of the banks as to how much interest rates increase - often not by the full amount of base rate increases - in the name of so-called competition? In the English language doesn't the word Base mean the Bottom? So why should we feel pleased to be told that rates wont be less than a certain percentage below, repeat BELOW base rate just because the word Guarantee is used?
Whilst I agree that borrowers have dominated the headlines recently with the issue of bank charges, the newspapers also regularly fly the flag on behalf of the savers who receive a poor deal. To some extent, banks and building societies rely upon customer inertia and historically people have tended not to switch accounts even if their interest rate is well below the top rates available. However in the last couple of years, consumers have become more rate conscious and by with the emergence of websites such as Moneyfacts.co.uk - the money search engine, they can easily find the best deals and apply online.
If people start to vote with their feet, or their mouse in the case of online accounts, then perhaps banks and building societies will review their strategy and maintain interest rates in order to retain savings business.
Why do Alliance & Leicester discriminate against loyal customers?
A viewer wrote in September complaining about Alliance & Leicester who were advertising their regular savings account: “This gives a lovely 10% interest on regular savings, and as I'm a good little regular saver I thought this is the one for me - especially as I am a loyal current account holder already - and have been for years. But, oooooooooh no. I don’t qualify as I am not opening a new account, I already have one. Why? Am I being unreasonable to think that loyal customers are sidelined and discriminated against for new customers, who may have no loyalty, and may shut down the accounts once the rewards are reaped? I will open a regular savings account elsewhere but that is not the point, why am I discriminated against just because I am a loyal customer. Well, I am at the moment, but I'm not sure for how long.
This is often a hot topic, because quite rightly you would expect to perhaps be treated more favourably as an existing customer, not in fact as in some cases where new customers have exclusive access to attractive new accounts. Probably the reason behind the Alliance and Leicester approach was that they were offering the headline grabbing regular saver as a carrot to tempt customers of other banks to switch their current account as part of the deal.
This isn’t always the case with every new deal offered, as the likes of Barclays, Abbey, Lloyds TSB and HSBC have also launched regular savings accounts with attractive rates, but they have been available to both new and existing customers.
Barclays sent me someone else’s bank statement
My mum received her Barclay's statement today and to her surprise when she opened it not only did she receive her statement but someone else's statement as well. All the details of some one else's statement is there to be abused by someone scrupulous. My mum wants to know what should she do?
This type of error will undoubtedly cause concern in today’s world where we are constantly being warned to take sensible precautions to protect ourselves from identity fraud. The best cause of action is to lodge a complaint at your local branch of Barclays. There is a structured complaints procedure within Barclays that means that a central unit will review all customer complaints to check for trends in order that similar issues may be eliminated.
The process of issuing statements is predominantly an automated process, however by reporting the incident, at least you are bringing it to the attention of the bank that will hopefully investigate and look to take action to prevent further occurrences.
Why did RBS charge me £12 when they already had my money?
I recently paid my RBS credit card bill with my RBS debit card, with plenty of funds to cover. I did this on the final day payment was due, and told that I was subject to not only interest for the debt, but also a £12 late payment charge, as I must allow 3 working days to clear. Surely when a debit card is used payment is completed? My real gripe is that in my case the RBS had my money anyway, it was simply in another department, so where do the penalty (admin) charges come from? I made a complaint, having only once incurred interest in 15 years, had the charges removed, but told quite forcefully that this would always be enforced in the future. How are banks allowed to charge for monies they already possess?
It is important to remember that even though your current account and credit card may be with the same banking group, it is normally the case that they operate on separate computer systems rather than being fully integrated as many people may assume. This is the reason that the payment needs to be made 3 working days before the final payment due date, and having spoken to RBS, they confirm that payment timescales are clearly indicated on your monthly credit card statement.
How can Banks justify charging for bank accounts?
Many of the high street banks are indicating that free banking may be coming to an end and I have to admit that I'm a bit confused by this. I thought that once you made a deposit to a bank you were in a sense "lending" your money to them. The bank then puts this money to good use, by investing it or lending it to other customers, and part of the return they get on the money is given back to you as interest. If this is the case then shouldn't the returns they get on your money cover the costs of providing the bank account? Isn't that kind of the whole point? I accept that banks have to pay their costs, for ATMs, branches etc, and can even understand being charged for bouncing cheques or exceeding your overdraft. But how can they justify charging a monthly fee for providing a bank account, especially if you stay in the black?
There is no doubt that banks do make money from customers who leave large credit balances sitting on current accounts that may be paying as little as 0.1% interest. However it has never been the case that because such low rates of interest are being paid on current accounts that banking services would remain free of charge. Whilst the banks are making huge profits, the majority of this is made from investment and offshore operations.
When it comes to retail banking; this is a far less profitable area. It is always going to prove difficult to introduce a charge for a service that was previously free. However if the consumer is going to be charged for their banking, they will expect attractive accounts with decent interest rates and a good level of customer service in return.
Why do Alliance & Leicester insist I have to be on the electoral role for 5 years before I can open an account?
A colleague has passed on this correspondence from a viewer and Alliance and Leicester. Dmitri Miroshnychenko wanted to open a Premium account but was refused because he hadn't been registered on the electoral role for five years or more.
It turned out that he was able to open a standard account, and that these were simply the terms for the Premium account and we didn't end up using the story. It also looks to me to be fairly similar to question 3) that I've already sent you. The difference with this one, and the reason I'm sending it to you, is that we have a video clip of Dmitri describing what is written in the letter I've attached, and that makes nice viewing. In his clip Dmitri explains that he applied for a regular savings account and a current account but was refused. He appealed and they told him that the grounds for his refusal were that he had to have been on the electoral role for 5 years in order to qualify for a current account, and 3 years in order to qualify for an electronic account.
A credit reference search will be carried out as part of the overall credit scoring process and part of that search involves checking that you have been listed on the electoral register or voters roll at the address stated in your account application. Each bank will have its own requirement for proof of the number of years you have been at that address, usually this is a minimum of 3 years but perhaps somewhat unusual for a longer period of address confirmation to be used for different products.
Usually once the address has been verified you would expect factors such as length of employment, disposable income, previous financial history, other products held to be the factors that decide if you are eligible for credit facilities, however the risk strategy and requirements can vary from bank to bank. I understand that due to being unable to meet these electoral role requirements that the customer was able to open an online savings account, but not the regular saver and current account that he was seeking.
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