Unfair and aggressive: MPs' verdict on banks

• The RBS was among the banks criticised. Picture: Getty

An inquiry by MPs found that, despite receiving billions of pounds of taxpayer support, Royal Bank of Scotland and Lloyds Banking Group were using "undesirable practices" when customers went into debt.

The Scottish affairs select committee quoted examples of "silent calls" made by automated machines and heavy charges imposed for tiny amounts of debt.

One woman is said to have been charged 176 for an overdraft of 70p, while another customer was put under pressure to take out a loan to avoid a default, which would cost an extra 2,700.

The examples were in a dossier given to the committee by the Citizens Advice Bureau (CAB), and MPs demanded that the banks work with the group to resolve problems more sensitively.

MPs said they were also worried about the problem of loans to businesses, despite promises made by the bailed-out banks to help companies through the recession. They said a "significant amount" of small and medium-sized firms, which represent 99 per cent of the Scottish market, were "struggling to get loans".

The committee also raised concerns about the continuing bonus culture at the banks, which received 70 billion of taxpayers' cash – RBS is now 84 per cent state-owned, and Lloyds 41 per cent.

Last month, the government approved 1.3bn of bonuses to RBS staff, including 100 executives who each received 1 million. Both RBS chief executive Stephen Hester and his Lloyds counterpart Eric Daniels waived seven-figure bonuses, but this has failed to deflect criticism.

Members of the committee hit out at City minister Lord Myners' claim that bonuses are "a necessary evil", describing his attitude as "disappointing".

They said the bonus culture was unacceptable while "thousands" of lower-paid staff, especially on the retail side of banking, had lost or faced losing their jobs.

The committee said it was "not convinced that there has been a change in culture within banks as a result of the crisis" and was "concerned that front-line staff remain under pressure to sell potentially unsuitable products".

Its Labour chairman, Mohammad Sarwar, said: "The effects of the economic crisis in the banking sector in Scotland have been far-reaching and, for too many people, devastating. Whilst the committee recognises efforts being made by the UK and Scottish governments to provide support for individuals and businesses struggling to cope, unacceptable practices used by banks must stop.

"We recommend that our successor committee continues to monitor closely the banking sector in Scotland to ensure that banks are meeting their lending commitments and government actions work to strengthen the sector."

But there is pressure on the UK government to force the banks to behave.

Pete Wishart, an SNP member of the committee, said: "The UK government has invested millions of pounds of taxpayers' money in the banks.

"It's up to the UK ministers, as the majority shareholders, to ensure banks are putting customers first. Reports of harassment are very worrying indeed."

The report has been welcomed by the Federation of Small Businesses (FSB), whose claims of companies being turned away by banks were accepted by MPs, even though it failed to come up with hard figures to support its case.

Colin Borland, of the FSB in Scotland, said: "The committee is absolutely right to highlight the importance of transparency in small business lending decisions.

"It is through greater transparency and better communication that the trust between the big high street banks and their small business customers will be restored. We are, therefore, pleased that the report leaves banks in receipt of taxpayers' money in no doubt that they have an obligation to explain their lending decisions."

But the banks rejected much of the criticism levelled at them in the report. A spokesman for Lloyds said: "

As the country's largest financial services employer, we are acutely aware of the important role we play in Scotland's economy and the duty we have to our customers. We have a number of measures and procedures in place to make sure that the products we offer suit individual customer needs and are provided in an appropriate manner."

RBS said: "We have noted the conclusions in the report and were grateful to the committee for the opportunity to outline our strategy to rebuild the bank.

"Everyone at RBS is focused on serving our customers well and they must be at the core of our recovery. Our staff will be key to ensuring customers receive the best service and they are rewarded for ensuring that all customers remain aware of our best products and services available, but only those that are most relevant to their needs."

Overdraft of only 70p costs woman 176

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