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Banks in Europe hoodwinking customers

Published on 23/09/2009

Brussels – A majority of high street banks in the EU deliberately hoodwink retail customers with hidden fees, dodgy advice and obstructive tactics, the European Commission said on Tuesday.

They throw "gobbledegook" at confused consumers, according to one official involved in drawing up the report, and resort to "legal jargon" — often only confirming fees orally, refusing to send them by email or fax.

In a detailed report into charges for current accounts across the 27 European Union member states, the commission said two thirds of all its banks were guilty of failing consumers.

Publishing account fees and charges in such a confusing way that even the commission’s experts had to chase clarifications. EU Consumer Commissioner Meglena Kuneva said basic consumer principles are routinely "violated".

However, British banks fighting off court claims for refunds of up to EUR 1 billion in abusive charges for unauthorised overdrafts were effectively exonerated as commission officials disagreed on the scope of the report’s findings.

The report issued only recommendations, and no prospect of legislative action. Apart from a threat to report offending financial institutions to national authorities, Brussels’ recommendations rested on action to "stimulate" banks to improve the presentation of fees on their websites.

Average annual fees for normal usage of a current account ranged from EUR 27 in Bulgaria or EUR 46 in the Netherlands at one extreme, to EUR 253 in Italy or EUR 154 in France at the other, the report said.

Problems were also identified in how banks publicise contractual small print and what advice they give.

The low rate of consumers switching between providers — just nine percent, against 24 percent for auto insurance — was seen as a further sign of weak pan-European competition in the banking market.

Kuneva outlined her concerns in excerpts from a speech she was to give to a conference of European Savings Banks in Brussels.

Citing a loss of consumer trust since the economic crisis took root, her speech pointed to people losing their homes all across Europe as proof of the damage caused by hidden small print.

Her office wants banks to publish their fees structure in the same format across EU borders, and target bonus payments for staff in bank branches that create "temptation" to sell harmful products.

However, the commission can only urge national authorities to check that EU consumer directives are being properly implemented.

Monique Goyens, head of the European Consumers Association, said the report would "turn out to be of no use" without a stick being applied at European level.

However, Malcolm Harbour MEP, Chairman of the European Parliament’s consumer protection committee, said "draconian EU legislation" should be avoided, and banks left to police themselves.

The report covered 224 banks across the 27 EU countries, which together account for 81 percent of the EU market.

British banks’ overdraft charges amount to a different issue, according to one official.

"What we are looking into (in Brussels) is the way information is presented," he said. "What (Britain’s Office for Fair Trading) is looking at is the amount banks charge, and whether that is abusive."

But a spokesperson for Kuneva said that position would cut little ice with millions of Britons awaiting a ruling.

"Of course it’s the same issue," the spokesperson said. "Even Ryanair, for all its faults, has moved up information on penalties on its website… Why can’t British banks do the same?"

Britain’s Halifax, part of the bailed-out HBOS which underwent a state-sponsored merger with Lloyds Banking Group last year, this week announced it is cutting fees for customers who go beyond authorised current account overdraft limits.

A ruling is due in October on the OFT test case involving eight lenders.

Britain’s banks paid out half a million pounds in refunds to hundreds of thousands of complainants before freezing payouts awaiting the judgement.

AFP / Expatica