'Should big banks have an ENFORCED public service remit?' blog discussion

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Please click 'post reply' to discuss below.


  • Wow. This is an amazing idea and would certainly help those who have problems with banking or cant even get an account. Every bank has a code of conduct but I don't think this is good enough and much can be done to make a "code of conduct" broad range to cover all banks to say operate within these guidelines or else. Sounds great to me!!!
    Debt Total on 02/12/2008 - £14978
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    (Make £10 per day in april total £388.67)
  • dronid
    dronid Posts: 599
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    It's facinating that some people think that educating the comsumer makes you left wing... and far left wing at that. Indeed it rather smacks of an organisation facing competition from someone more competitive crying out that it's unfair. Challenging private companies and shopping around rather than just giving money to a monopoly is, I would've thought, at the heart of capitalism. Anyway, yes, if they're supported by the public purse the should have to provide certain garanteees. The reall biggie of which is no bonuses. Not many other public workers get them so I don't see why they should. And if they do wish to leave and go to companies which do, I think you could find people to do the job for their salary. If offered, I would. And I might not be so keen on reckless profiteering without promising me cash for it.

    I could make it better myself at home. All I need is a small aubergine...

    I moved to Liverpool for a better life.
    And goodness, it's turned out to be better and busier!
  • I think this is a really interesting idea, but defining the public service remit would be tricky. There are things banks could do that would cost them very little, but would have a massive social impact. Offering basic bank accounts is a great example.

    I think the other three policies sound great in theory, but they'd be tremendously difficult to implement in practice:
    Need to loosen up lending criteria for small businesses
    Should not use charging orders or setting off
    Must ensure fair bank charges

    First, loosening up lending criteria for small businesses. Could the Government ever really force banks to lend to businesses that they consider to be poor risks? Is that even remotely compatible with a bank's duty to its shareholders? If uk.gov wants to encourage loans to SMEs, shouldn't it use taxpayers' money rather than trying to force banks to spend their shareholders' money on risks that represent a poor investment? I'm not saying this is the ideal situation - but company law means that banks have to act in their shareholders' interests. If the UK tries too hard to get social benefits from its resident banks, they're likely to go offshore, and we'll lose all the jobs and tax revenue they bring.

    Second - charging orders and setting off. I fully agree that these suck. But it's much like the situation with Revenue and Customs, who used to rank first in any insolvency, so they knew they'd get their money before any of the other creditors. As a result, they rarely had any reason to make someone insolvent, because they knew that if there were enough assets in the business to pay just the debt that was owed to Revenue and Customs, they'd get their money. Then the Government decided that the preference was unfair and the Revenue should rank alongside everyone else. The Revenue responded by making more people and companies bankrupt, because it knows it has to get in there while there are still sufficient assets to pay the whole of the company's debts to all its creditors. So now businesses who don't pay their taxes are more likely to be made bankrupt by the Revenue. The banks would respond in the same way if you take away some of their enforcement tools. If you say they can't use set-off or charging orders, they're likely to move to using bailiffs to take personal property, and then straight on to bankruptcy if there isn't enough stuff in the property. And if they make you bankrupt, they'll get the value of your house anyway. In some ways, having a charging order over your house (as long as the bank doesn't then push for an order for sale) is much better than alternative methods of debt recovery the bank could use. Take these two options away from the banks, and they'll use other, worse methods. And if you completely remove banks' ability to enforce debts, then they'll regard unsecured UK borrowers as an unacceptable risk because there's no way to deal with people who don't pay. This policy sounds great, but it would have negative consequences in the long term.

    And third - it's hard to disagree that bank charges should be fair. But defining 'fair' (to banks, as well as consumers) would be difficult. I think if you pushed it too far, you'd end up with the end of free day-to-day banking in the UK for people who stay in credit. And maybe that's the only fair system. But I think a lot of people would like to avoid that outcome.

    On a separate note:
    One comment said to me afterwards was from the boss of Metro bank who said: “I had always thought you were to the far left of consumer groups, but actually you spoke a lot of sense.”

    I can't see that anyone who'd ever read Martin's blog (or any part of the editorial on this site, rather than the forums) would class him as being on the 'far left.' It's clear he's using his knowledge of economics and the banking, energy and other markets to get a better deal for the consumer. And by being credible and reasonable, hopefully he can get his foot in the door at the Treasury and with banks, and persuade them to adopt consumer-friendly policies. If you look too much like a nutter, nobody with the power to change things will take you seriously.
  • MSE_Martin
    MSE_Martin Posts: 8,273
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    Money Saving Expert
    I think the other three policies sound great in theory, but they'd be tremendously difficult to implement in practice:

    I won't argue this :)

    I was using them as examples to demonstrate the merit of creating an obligation rather than well thought through suggestions. Merely trying to show that there are things banks don't do that they should do - that this would mean they had to do!
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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  • Rafter
    Rafter Posts: 3,850
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    This sounds like the simplest form of regulation - and good for it. Very difficult for banks to wiggle out of it and very difficult even for those not included to charge more.

    I think including business in there is a read herring as long as companies too aren't denied access to the payments system by draconian profit motivated rules. Banks shouldn't be forced to lend to anyone (individual or company), just like telephone companies or utilities offer prepayment facilities to those who cannot get credit.

    I believe everyone should have access to a basic bank account with a £100 'buffer' charging no more than 1% interest a month.

    Anyone who uses the buffer would receive a message from the bank advising about where to go for free budgeting or debt advice.

    The maximum charge for a failed direct debit or other problem should be £12, just like credit cards with a maximum charge of £24 in a month.

    Most importantly, in return for receiving no or little interest, the account must be free to operate with at least a debit card, online, text message or ATM statements and ability to pay money in on every high street (ie post office plus bank of issue). ATM withdrawals should also be free.

    And while we are at it, make it compulsory to accept debit cards or cash without charging any fees by retailers - including airlines!

    I like it too - sometimes the simplest ideas are the best!

    Smile :), it makes people wonder what you have been up to.
  • I also agree that the suggestions SHOULD be taken up. I also think that financial planning should be included in the school curriculum. I certainly think it would be a good idea for teenagers to be taught budgeting. My only "budgeting education" is the memory of squatting down behind the sofa with Mum when we were hiding from the rent man! :O)
  • Alpine_Star
    Alpine_Star Posts: 1,354
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    edited 14 December 2010 at 5:14PM
    I just read about this in the FT

    FT.com / UK / Business - Lenders want to charge for accounts

    It does sound like a very good idea to me.

    In the 21st century the inescapable conclusion is that personal banking is a utility and should be regulated as such. And I would imagine that more people use a bank account than use mains gas.

    In requiring banks to adopt measures that other utilities are obliged to provides a reasonable middle ground between free commerce and public service.

  • WhiteHorse
    WhiteHorse Posts: 2,492 Forumite
    Given that the public supposedly owns the banks these days, it would seem appropriate.
    "Never underestimate the mindless force of a government bureaucracy
    seeking to expand its power, dominion and budget"
    Jay Stanley, American Civil Liberties Union.
  • Old_Wrinkly
    Old_Wrinkly Posts: 5,182 Forumite
    One comment said to me afterwards was from the boss of Metro bank who said: “I had always thought you were to the far left of consumer groups, but actually you spoke a lot of sense.” Not quite sure where he got that impression from

    Oh, don't be too hard on yourself, Martin ... ;)
  • WhiteHorse wrote: »
    Given that the public supposedly owns the banks these days, it would seem appropriate.
    Not all of them... HSBC, Barclays, Santander etc. were not "bailed out" so they're still entirely independent.

    It's Lloyds Banking Group, Northern Rock and RBS that are publically owned.

    But back to Martin's blog post, the setting off works both ways. For example, if you have two accounts and one is in credit the other is overdrawn, the bank may charge you a fee for being overdrawn. Alternatively, it could move some money from the account that's in credit to the overdrawn account and not charge a fee.

    I know which I'd rather happen - and my bank has done it for me a couple of times, which I'm more than happy about.
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