Crackdown warning over mis-selling

London's financial districtBritain's banks are facing a major clampdown on the commission payments that have been blamed for fuelling recent mis-selling scandals.

The Financial Services Authority (FSA) said it will look to introduce new rules if the sector does not address the use of incentive schemes, which it said were driving staff to mis-sell products to receive a bonus.%VIRTUAL-SkimlinksPromo%
With the industry already paying out £9 billion in redress to customers mis-sold payment protection insurance (PPI), the regulator said a review of incentive schemes at 22 banks, building societies, insurers and investment firms had uncovered a range of serious failings.
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One firm has been referred to the FSA's enforcement arm for further action while others have begun checking past sales to see if mis-selling has occurred and if they need to pay compensation.

The regulator said practices included a "first past the post" system where the first 21 sales staff to reach a target could earn a "super bonus" of £10,000.

And it found that basic salaries for sales staff at one firm could move up or down by more than £10,000 per year, depending on how much they sold.

Another firm excessively incentivised one product over another - despite claiming to offer impartial advice - meaning there was a clear risk that its advisers would sell the product that earned them more money.

FSA managing director Martin Wheatley, who will become chief of the Financial Conduct Authority when it takes control of financial regulation next year, said: "What we found is not pretty. Most of the incentive schemes we looked at were likely to drive people to mis-sell in order to meet targets and receive a bonus, and these risks were not being properly managed."

In a speech to senior bankers, compliance officers and trade groups, Mr Wheatley said cultural change was needed and chief executives were ultimately accountable for the way their staff are incentivised.

He said: "We, as the regulator, intend to change this culture of viewing customers simply as sales targets and I am going to be personally involved in getting this right."

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Crackdown warning over mis-selling

More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.

The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!

(Pictured: Martin Lewis after the PPI payout ruling)

Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.

Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.

While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.

You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.

Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.

A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!

While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.

Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.

If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.

The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.

Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.

In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.

"Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."

The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.

When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.

When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.

Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!

The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.

About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.

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