Jeff Salway: All talk and very little action on banks

IF YOU claim that you’re going to “reset the banking system”, you really need to back it up with more than a climbdown and a relaunch.

The Chancellor has preposterously been accused of “banker-bashing” after warning that banks failing to observe the ring-fence between retail and investment operations will be broken up, a part-reversal of his previous stance.

George Osborne – out of his depth, incompetent and misguided – also talked of turning public anger at the banks into “a force for change: change that will give us a banking system that will work for all of us”.

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As always, however, it’s a case of talking tough and acting soft.

With so little substance to back up his bold words, Osborne was forced to resort to trumpeting apparently new current account switching rules that had in fact been recommended by the Independent Commission on Banking in 2011.

The measures are more than welcome, although they’re not the panacea that some seem to believe. The process isn’t the main problem – although the new requirement for transfers to be completed within seven working days will improve confidence in switching – as it’s already fairly straightforward.

Changes put in place in recent years mean the consumer simply leaves the new bank to do the spadework. The banks involved must also take responsibility if there are problems with the switch that may lead to a regular payment being missed or a charge incurred.

The Chancellor also claimed that from September, bank customers will be able to switch easily. “All they will have to do is sign up to a new bank – and the rest will follow. All the direct debits, the standing orders, everything will be switched for you with no hassle.”

Erm, George, that’s how it works now, and has done for some time.

But changes to the switching process are largely cosmetic, in the context of getting customers moving around.

Competition is the main problem: three in four current accounts are with the big four (Royal Bank of Scotland, Lloyds, HSBC and Barclays). That will change as the likes of Virgin and The Co-operative boost their high-street presence and retailers launch more high-street branches.

What will spark more moving around is an improved perception of the choice available. Those fed up with their existing bank tend to believe the others are all as bad, which is why even generous switching incentives tend to have little real impact.

And that’s the single biggest factor letting the banks off the hook. But the time for complaining about your bank and doing nothing is over. Even now, there are options outside the big four. Put your money where your mouth is – you’ll feel better for it.

Rip-off after rip-off

CLAIMS management companies (CMCs) continue to pocket massive chunks of the compensation being paid out to mis-selling victims.

Since 2008, almost £136 million has been paid out by the Financial Services Compensation Scheme to consumers claiming payment protection insurance redress from failed firms, of which a staggering £89m has gone through CMCs.

They take a slice of up to 30 per cent of the money going back to claimants, who have therefore lost out on more than £22m of their compensation for being mis-sold when they could have secured redress for free.

There’s absolutely no evidence that using a CMC can boost your chances of a successful claim. Yet little is being done to protect consumers from these vulture CMCs, which are rapidly compounding the misery of the original mis-selling.

The Ministry of Justice is tightening the rules south of the Border, but the Scottish Government has done virtually nothing to protect consumers north of the Border from one of the biggest rip-offs around.