Thursday, 24 May 2012

Mis selling of current accounts? Let's get a Happy Meal!

Mr. Andrew Bailey, from the Bank of England claims that free in-credit banking may lead to mis selling and therefore he argues that the regulator could intervene and push banks to charge for these types of products.

There is something that really strikes me in his argumentation: can anyone explain me how, for example, the simplest of the simplest banking product, a current account, can be mis sold? Or how, and why, providing free current accounts could, in Mr. Bailey's words, "encourage" mis selling? Mr. Bailey argument that the "unclear picture" of how free banking products work may have led to mis selling of other products (like "payment protection insurance" or PPI) simply does not have any logical basis. Certainly there is some truth in the argument that some banking products are complex and hide the true costs but that is not a current account or a PPI. According to his logic, every time I'm given a free gift if I buy a Happy Meal, that could also be mis selling. In that case McDonalds has run the biggest and longest mis selling scandal ever. 

Surely, the best protection for consumers is to make sure that products are as transparent as possible, including transparency of any costs associated to them. However, if the Bank is really prepared to intervene in the sector and require banks to charge for current accounts, it will be the most ridiculous idea ever. And definitely not the one the priorities the Bank should have in mind right now. If Mr. Bailey is serious about tackling mis selling he should forget about intervention. It should not be up to a regulator to decide how banks charge their clients. The regulator’s role is simply to ensure that banks provide clear, easy to understand and transparent information about benefits and costs of the products they offer as well as to ensure benefits and costs are presented fairly and evenly to the consumer who, eventually, has the responsibility for taking the decision. Intervening in this market would not only be irresponsible, it would be a lack of respect to the intelligence of UK people. 

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