Personal Finance: Banks improve - official

GOOD news on banks - they are getting better, according to the Banking Ombudsman. Even better news - the Ombudsman has no intention of going soft on them.

I have always been a fan of the financial ombudsmen - free schemes for arbitration on complaints that you cannot resolve with your bank, insurer orbuilding society. As well as not charging consumers for (hopefully) getting satisfaction, the ombudsmen have also proved useful in improving customer service generally by publishing their opinions and the thrust of their rulings every year.

Last week, the Banking Ombudsman reported a fall in complaints year on year to his office. However, the fall could also reflect that the banks are improving their own handling of gripes, rather than there simply being fewer complaints overall. There were still nearly written 7,000 complaints that ended up with the Ombudsman.

Mortgage gripes topped the league, replacing those about cashpoints (phantom withdrawals et al).

Some of the latest outrages involve Mortgage Indemnity Guarantee (MIG) policies - the policies that, bizarrely, we pay for to protect lenders against any shortfall on a forced sale should they decide to repossess. Insurers have been pursuing repossessed borrowers for money paid out to banks under these policies. The Ombudsman says once these policies have been triggered that should be the end of it, and he believes the courts would back his view.

Elsewhere, banks have miscalculated mortgage repayments, leaving borrowers with a shortfall at the end of their scheduled repayments, while others have failed to set up endowment policies. Unfortunately, you still owe the banks money, says the Ombudsman, but substantial compensation may well reduce the amount significantly.

My one real complaint about ombudsmen is that they won't publish league tables of offenders. What better incentive for financial organisations to improve their act? (The Banking Ombudsman is on 0171 404 9944).

ALLIANCE & Leicester building society is getting there - getting closer to becoming a bank I mean. Last week, it removed membership status from new instant access accounts and upped the minimum opening balance on other qualifying accounts. Accounts carrying membership - which confers the right to vote on any takeover or conversion into a bank - are the ones most likely to qualify for windfall gains if a change of status occurs. The society says it wants to discourage speculative savers.

New savers now need pounds 5,000 (pounds 1,000 if they open a Tessa), to become society members. But for those with the money, placing your stake with the A&L may well still be worthwhile. It remains a top tip to convert.