Ben Chu: Break up the banking oligopoly or expect more customer abuse


Outlook CPP. When the latest high street banking scandal broke a couple of years ago I looked at those three letters and a bell rang in my head. After some thought I remembered where I'd seen them before: on my list of direct debits.

Every year around £30 would leave my bank account and get paid to Card Protection Plan Limited. What was I paying for? I recalled that it was a debit/credit card fraud insurance scheme I'd signed up to many years ago. Having had an unpleasant experience at the hands of some fraudsters in a "Lebanese loop" cash-machine scam about a decade ago, the protection seemed worth taking out. Plus my bank – NatWest – was strongly pushing it. I trusted my bank back then.

Indeed, I'd assumed NatWest was actually overseeing the scheme. As I recall, when I received my new cash card in the post there was a sticker affixed to the card itself instructing me to ring CPP to "activate" the card. The number was on the sticker too. I followed the instructions and set up the direct debit.

But it turns out that I should have been more worried about being ripped off by my own bank than Lebanese loopers. Since I was already covered under the law for losses from card fraud I was paying for something I didn't need. NatWest knew that, but it still guided me towards CPP.

The insurance was a bad deal for me, but a good deal for CPP. And a good deal for my bank, too. It has emerged that NatWest was pocketing a commission from each customer it herded into the embrace of CPP. Millions, including me, were ripped off in this squalid way.

Now the feathered fowl are returning to roost. NatWest and a host of other banks are facing a £1.3bn compensation bill for mis-selling. We've had the personal-protection insurance racket, the interest-rate swap scandal, the Libor-rigging outrage. And now this tawdry business.

We really shouldn't be surprised, though. This is the kind of behaviour we can expect from a complacent oligopoly. If other companies behaved in such a way they would quickly lose customers. The market would apply discipline. But banks are different. Account-switching rates are very low. And I can see why.

I finally got round to switching my own account earlier this year. It involved a shed-load of paperwork. And it took more than a month in total. I had to store money in two accounts for several weeks to avoid the risk of a transferred direct debit accidentally pushing me into an overdraft. So despite banks' atrocious service and predatory attitude, most people won't bother to switch. And I can't say I blame them. Especially when all the big five high street lenders have been equally unethical in recent years.

One dimension of the solution has been pushed by the Conservative MP Andrea Leadsom. It is instant account portability. This would make switching accounts as simple as switching your phone provider. Another dimension is splitting up the retail banks to generate some serious competition. This means a wholesale restructuring of the sector – something more comprehensive than the carving off of 950 or so branches from Lloyds and the Royal Bank of Scotland, which is in train.

The banks are sorry about CPP. They're always sorry when they get caught. But that doesn't stop them from lobbying against reforms which would shake up the system. They have relentlessly opposed account portability, for instance.

Don't expect an oligopoly to abolish itself. Until we force some genuine competition in high street banking we should expect more abuse of customers and more crocodile tears.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Life and Style
food + drink
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
UK Border Control
Arts and Entertainment
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Guru Careers: Inbound Sales Executive

£18k + Uncapped Commission (£25k Y1 OTE): Guru Careers: We are seeking an Inbo...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn