David Prosser: Proud to be different? Not any more

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The Independent Online

Nationwide Building Society's halo is slipping. Britain's biggest society has a reputation for fair play; five years ago, it made the ground-breaking decision to stop offering new mortgage customers cheaper deals than existing borrowers. After that, it fought a worthy battle against fee-charging cash machines, and its popular "Proud to be Different" adverts, starring Mark Benton as an evil bank manager, have cemented consumer perceptions of Nationwide as one of the good guys.

However, it seems Nationwide isn't all sweetness and light. Two weeks ago, soon after First Direct said it would begin charging many customers for their current accounts, Nationwide's chief executive, Philip Williamson, refused to rule out doing the same . Then, on Monday, Nationwide unveiled a complete U-turn on its mortgage policy. Different customers are now to be offered different rates.

The society argues that it has broken no promises. People borrowing money to move home - whether they're new or existing customers - will get cheaper deals than those rearranging a mortgage they already have - either from another lender or Nationwide itself. In other words, new and existing customers will still have access to the same ranges of rates.

The argument is disingenuous. For one thing, a greater proportion of new customers than existing borrowers will be taking a mortgage in order to move home. Existing customers are much more likely to be remortgaging. This means more new customers than existing ones will get the cheaper deals.

Moreover, existing customers will be able to see new people joining the society at cheaper interest rates than they can access. This is exactly the sort of penalty for loyalty Nationwide said it was so keen to avoid five years ago.

If you've been a customer of an organisation for some time, there is little that is more galling than seeing it offer new customers something you can't get. Why should it take your business for granted while people who have never given it their custom before get preferential treatment?

Setting itself up as a consumer champion was always a risky strategy for Nationwide. It has further to fall, in reputational terms, than most financial services companies - this week's U-turn is the sort of thing that wouldn't be a surprise had it happened at another company, but the building society was supposed to be better than its rivals.

It's not just the mortgage issue that will worry customers. If Nationwide can U-turn on something as important as this, what else might it be prepared to do?

When Williamson said he couldn't rule out the society ever introducing bank charges, analysts assumed he was just being careful not to say something that could come back to haunt Nationwide in the distant future. But maybe fees for current accounts are more likely than was first thought. And maybe Nationwide isn't quite so proud to be different after all.

I'm pleased that the Office of Fair Trading is to crack down on the methods of doorstep lending, requiring its representatives to provide better information to customers about the inflated cost of their loans. But with so little competition in this market, it is difficult to see prices coming down.

Two weeks ago, after I wrote about the collapse of Farepak, several readers wrote to Save & Spend suggesting that credit unions would be a much safer way for less well-off people to save for Christmas. Quite right. This would seem to be a good time to point out that they can be a much better way for people to borrow, too, particularly for those who normally end up with expensive doorstep lenders.

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