Big banks are ‘flouting rules’ by paying savers less if they open accounts in branch

Experts warn that the worse treatment of customers at branches is another cynical attempt by banks to move their customers online.

Big banks and building societies are breaking new consumer protection rules by denying their best savings rates to customers who prefer to manage their accounts in branches, warn lawyers and consumer experts.

Savings providers including NatWest, Virgin Money and Coventry Building Society reserve some of their best interest rates for customers who operate their accounts online or on their smartphone.

The practice could cost savers at branches thousands of pounds in lost interest. In some cases, customers who bank in person are offered rates three times lower than savers who bank online.

Among the worst offenders is NatWest, which pays 6.17 percent on its regular digital savings account, but only 1.75 percent on its equivalent branch account, called flexible savings.

The Post Office pays 4.4 percent interest for its easily accessible online Isa, but only 3.1 percent for its branch equivalent.

With a balance of £25,000, an online saver would earn £1122 in interest and the offline saver £786, a difference of £336.

Experts warn that the worse treatment of customers at branches is another cynical attempt by banks to move their customers online and justify more branch closures. Since the beginning of last year, more than 1,100 bank branches have been closed or placed on alert.

New rules introduced last month by the financial regulator require all banks to “deliver good results” to their customers.

But experts caution that there is no world in which offering a customer who banked in a branch a lower rate than if they were connected to the Internet would mean getting a “good result.”

New rules called consumer obligations introduced by the Financial Conduct Authority (FCA) also require companies to ensure they “avoid causing harm to groups of their customers, including those with vulnerable characteristics.”

Once again, experts argue that denying in-person banking customers (who are more likely to be older and more vulnerable) the best rates is hurting them and is therefore a clear violation of the rules. . According to Age UK, only 60 per cent of people over the age of 65 bank online.

Reserving the best rates for digital customers is against these new rules, says Dean Dunham, a consumer lawyer for Money Mail.

“Businesses should not try to exploit or neglect customers with lack of knowledge or vulnerability characteristics and should ensure they have adequate plans in place that allow them to offer a level playing field to all customers,” it says.

“Those who cannot access online banking are clearly disadvantaged by being penalized with lower rates and this, in my opinion, is contrary to the standard of care set out in the consumer duty rules.”

All companies regulated by the FCA must comply with the new rules. To date, the FCA has yet to penalize a company found to have breached them. Gary Rycroft of the law firm Joseph A Jones & Co hopes the FCA will take action.

He says it’s “shocking” that customers who want to stay offline or can’t get online are treated worse than those who can. This is especially the case because many people choose not to bank online for fear of scams.

Gulf: NatWest pays 6.17% on its regular digital savings account, but only 1.75% on its equivalent branch account, called flexible savings

“To me, this is an unfair result and a clear breach of duty to the consumer,” he says. ‘I hope the FCA will speak up and take action against banks that favor online customers over offline customers. It is unfair and a slap in the face to the FCA’s efforts to protect consumers.’

The best savings rates are often offered exclusively by online savings providers that do not have bank branches. These companies say their lower overheads mean they can afford to pay savers more.

To compete against online rivals, major banks offer online-only deals that typically pay better rates than savers can get at branches.

Andrew Hagger of personal finance website Moneycomms explains that this is in the interest of the banks themselves, but not their customers. “Offering the most competitive savings products online is a low-cost option for banks, since overhead is a fraction of the cost of running a branch,” he says.

For example, online banks don’t have to pay rent, heat, or the staff needed to keep a branch open. “This is no comfort to people who don’t have internet access or are afraid to go online because of scams,” she adds.

Liberal Democrat MP Richard Foord says banks that do not offer all customers – whether online or in branches – a fair deal should face crackdowns.

‘In rural communities, the decline in physical banking has had a real impact on people’s lives. People need to know that when they do manage to find a bank branch, they will be treated fairly, not as second-class citizens compared to those who bank online,” he says.

“Everyone should be able to get a fair deal, regardless of whether they bank in person or online, and any bank that violates this principle should be held accountable to ministers.”

An FCA spokesperson says: ‘We have asked companies that offer the lowest savings rates to show us that they offer their customers fair value. Under consumer duty rules, companies must also ensure that they act in good faith and avoid causing harm to different groups of their customers, including those with vulnerable characteristics.’

Experts warn that the worse treatment of customers at branches is another cynical attempt by banks to move their customers online and justify more branch closures.

In addition to paying more than three times more interest on your regular digital savings account than on its branch equivalent, NatWest’s full range of time savings accounts are only available to customers with an email address and number. mobile phone.

These best buy accounts offer online savers a rate of up to 5.55 percent.

NatWest has several accounts, including Cash Isas, which can be managed at a branch or over the phone.

But to open these accounts, savers must bring their own digital device to the local bank branch, where staff will help them open the account.

Anna Bowes, co-founder of rate checker Savings Champion, says that by doing this, NatWest is still excluding customers who would rather not manage their money online.

‘Many people who want to open and manage a branch account don’t have the necessary devices or skills.

This policy seems like a clear indication that NatWest will continue to close branches and therefore is trying to get its customers online.’

NatWest declined to comment. Virgin Money offers a one-year online fixed-rate cash Isa, which pays 5.61 percent. It also has a one-year fixed-rate bond at 5.01 percent. However, there is no equivalent in the branch.

Savers can open any of the accounts in the store, but only if they are prepared to manage it online. Virgin Money said: “Our current range of savings options includes features that meet the needs of different savings customers.”

Nationwide Building Society offers the same rates online and in-branch for its fixed-rate savings accounts.

However, it still offers preferential rates to online savers on its easily accessible accounts.

A saver who deposits £1,000 into the bank’s flexible instant savings account, available only online and paying 3.25 per cent, would earn £32.50 in interest after one year. To open this account you must have an email address and be able to manage the account online.

But putting the same amount into Nationwide’s instant access savings, which can be managed in the branch, would earn 2.15 per cent and return £21.50 on £1,000 over the same period.

Nationwide said: ‘We offer a range of savings products to cater to both those who like to open accounts in branches and online.

“We have online-focused variable rate accounts, but they can also be opened at a branch if the member is unable to open and operate their account online.”

Over a third of savings accounts offered by Coventry. Building Society is available only online, including its limited access Isa, which rewards savers who withdraw money less than six times in 12 months with a rate of 4.35 percent, for which there is no equivalent in the branch.

Coventry offers 3.4 percent interest on its easily accessible online Isa and 3.1 percent on its branch version.

Coventry says: “We continue to support our members, not only by offering competitive rates but also by being clear and open in our communication and giving members the option to interact with us through our branches, phone and digital channels.”

The Post Office offers an easily accessible online Isa, which pays 4.4 percent interest. Its equivalent at the branch pays interest of 3.1 percent.

A spokesman said: ‘We take consumer duty very seriously. We constantly review our rates on all of our savings products to ensure they remain competitive and have increased the returns provided to savers several times this year.

‘We have competitive savings products available both at the branch and online that are available to everyone. ‘

a.cooke@dailymail.co.uk