It's looking more and more like paid-for current accounts could be the next mis-selling scandal

Banks are running scared.

The headlines are pretty stark. Paid-for currents accounts could become the next bank mis-selling scandal, according to almost identical headlines in the Daily Mail and the Telegraph. The source for this gloomy prognosis is the annual report from the Financial Ombudsman Service (FOS). According to the FOS, it has received a record number of complaints from customers unhappy with their paid for current accounts or packaged accounts.

So just how many people did complain about their packaged current account  - or added value account (AVA) as banks prefer to call them - in the past 12 months? The answer is the grand total of 1,629. Not good, but hardly on the scale of PPI claims. In the last year, the FOS received a staggering 379,000 complaints about PPI. To date, UK banks have required to set aside more than £12bn (and counting) relating to PPI claims that now exceed 700,000 complaints. To put the AVA figure in context, taking into account multiple and joint current accounts in the UK, the total number of current accounts is about 60m. Of these, somewhere around 17 per cent are AVA’s.

In calculating how much these accounts are worth to the banks, the figures do start to get interesting. Research from the consultants Defaqto shows that since 2008, the average monthly fee for an AVA has shot up to £15.11 from £12 four years ago. With 10.2m packaged accounts costing an average of £181 a year to run, this product is worth around £1.85bn to the banks in fees. These are fees that UK banks can scarcely afford to put at risk by another bout of mis-selling They would surely not be so daft as to put this revenue stream at risk Or so one would hope.

Since November 2009 there have been more packaged accounts available than standard, free in-credit current accounts. By April this year, there was 68 different AVA’s on offer on the UK market compared to 63 free-if-in-credit current accounts. But in the past few months, a number of UK banks have been keen to distance themselves from AVA’s. The new kid on the UK banking block, Metro Bank, ditched its £12.50 per month packaged account offering called Metro Bank Plus last December.

Meantime, market leader Lloyds Banking Group – it has a market share of around 1 in 3 AVA’s - pulled its AVA accounts from sale in its branches and over the phone from the start of the year. At the time, Lloyds said that sales suspension would be for what it called a "short period". Almost six months later, to the glee of the more excitable tabloid press (in particular the Mail), sales of the product remains suspended in-branch.

One might reasonably ask: how long does the bank require to re-train its branch staff not to run the risk of mis-selling a packaged account? Elsewhere, Santander launched what comes as close you will get to a genuinely innovative new bank product, the Santander 123 current account. It charges customers £3 per month to run and offers a bundle of benefits, such as cash-back on certain purchases.

Do not however dare to suggest to Santander that the 123 account is an AVA. The party line from Santander is that it does not now offer packaged accounts. The FOS has certainly stirred things up suggesting that some bank staff have switched current account customers to AVA’s without their knowledge, with many only becoming aware of the switch when they check their current account statement. It is also claimed that AVA’s have been sold to customers for whom such a product is not appropriate.

A number of banks have also been running scared when asked to discuss their strategy towards selling packaged accounts: Barclays being a notable exception.

In summary, it is far too early to be rushing out headlines suggesting that AVA’s are the next major banking scandal. The regulator, the Financial Conduct Authority, is already on the case and now requires banks to send AVA customers a yearly statement so that folks can see if they are benefitting from such accounts. If any banks are dumb enough to dare to mis-sell AVA’s in the future, they will be hung out to dry – and will have nobody but themselves to blame.

Meantime, just in case you are tempted to ‘upgrade’ your ‘free’ current account to any product containing any word such as Gold, Platinum, Select, Privilege, Ultimate etc: do your sums carefully before you sign up. And read the small print - just in case it is not for you.

 

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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Building peace in a dangerous world needs resources, not just goodwill

Conflict resolution is only the first step.

Thursday 21 September is the UN-designated International Day of Peace. At noon on this day, which has been celebrated for the last 25 years, the UN general secretary will ring the Peace Bell on the UN headquarters in New York and people of good will around the world will take part in events to mark the occasion. At the same time, spending on every conceivable type of weaponry will continue at record levels.

The first couple of decades after the end of the Cold War saw a steady reduction in conflict, but lately that trend seems to have been reversed. There are currently around 40 active armed conflicts around the world with violence and suffering at record levels. According to the 2017 Global Peace Index worldwide military spending last year amounted to a staggering $1.7 trillion and a further trillion dollars worth of economic growth was lost as a result. This compares with around 10 billion dollars spent on long term peace building.

To mark World Peace Day, International Alert, a London-based non-government agency which specialises in peace building, is this week publishing Redressing the Balance, a report contrasting the trivial amounts spent on reconciliation and the avoidance of war with the enormous and ever growing global military expenditure.  Using data from the Institute for Economics and Peace, the report’s author, Phil Vernon, argues that money spent on avoiding and mitigating the consequences of conflict is not only morally right, but cost-effective – "every dollar invested in peace building reduces the cost of conflict".

According to Vernon, "the international community has a tendency to focus on peacemaking and peacekeeping at the expense of long term peace building."  There are currently 100,000 soldiers, police and other observers serving 16 UN operations on four continents. He says what’s needed instead of just peace keeping is a much greater sustained investment, involving individuals and agencies at all levels, to address the causes of violence and to give all parties a stake in the future. Above all, although funding and expertise can come from outside, constructing a durable peace will only work if there is local ownership of the process.

The picture is not wholly depressing. Even in the direst conflicts there are examples where the international community has help to fund and train local agencies with the result that local disputes can often be settled without escalating into full blown conflicts. In countries as diverse as East Timor, Sierra Leone, Rwanda and Nepal long term commitment by the international community working with local people has helped build durable institutions in the wake of vicious civil wars. Nearer to home, there has long been recognition that peace in Ireland can only be sustained by addressing long-standing grievances, building resilient institutions and ensuring that all communities have a stake in the outcome.

At a micro level, too, there is evidence that funding and training local agencies can contribute to longer term stability. In the eastern Congo, for example, various non-government organisations have worked with local leaders, men and women from different ethnic groups to settle disputes over land ownership which have helped fuel 40 years of mayhem. In the Central African Republic training and support to local Muslim and Christian leaders has helped reduce tensions. In north east Nigeria several agencies are helping to reintegrate the hundreds of traumatised girls and young women who have escaped the clutches of Boko Haram only to find themselves rejected by their communities.

Peace building, says Vernon, is the poor cousin of other approaches to conflict resolution. In future, he concludes, it must become a core component of future international interventions. "This means a major re-think by donor governments and multilateral organisations of how they measure success… with a greater focus placed on anticipation, prevention and the long term." Or, to quote the young Pakistani winner of the Nobel Peace Prize, Malala Yousufzai: "If you want to avoid war, then instead of sending guns, send books. Instead of tanks, send pens. Instead of soldiers, send teachers."

Redressing the Balance by Phil Vernon is published on September 21.   Chris Mullin is the chairman of International Alert.