Carpetbaggers must give windfalls to charity

Nationwide Building Society has gone on the offensive to stop carpetbaggers from forcing it to convert to a bank and pay out huge windfalls. Andrew Verity discovers that new customers will have to assign bonus payouts to charity.

Nationwide hopes the move will stop carpetbaggers who open accounts solely to benefit from windfalls. By insisting on the "charity clause", Nationwide will be able to drop high minimum balances on new accounts which were designed to put off opportunists.

Brian Davis, chief executive, said: "We can now concentrate on what building societies do best - delivering better rates and services to the ordinary man and woman on the street. We are ending the speculative disruption which has in the past prevented us from giving our customers the level of service they deserve."

Until yesterday, Nationwide was forced to deter new customers by insisting on high minimum balances when customers opened new accounts. This helped stem a flood of applications by carpetbaggers - people speculating that the society would convert to a bank and give out windfall shares worth hundreds of pounds for each member.

In June, Nationwide went as far as closing off all new accounts after receiving 25,000 applications every day. Speculation was heightened when five Nationwide members who favoured conversion tried to win elections to the society's board. They were resoundingly defeated in July.

But carpetbaggers have continued to disrupt Nationwide's business. High minimum balances designed to put off carpetbaggers have also put off children and others who want to save. Nationwide believes its charity clause will solve this problem. By insisting new members assign their windfall rights to charity, it has removed the incentive to open an account for the sake of a windfall.

In a bid to show that mutual building societies give better value than banks, the society is paying interest of 6.7 per cent on its instant access account. This is higher than its closest rivals Tesco and Sainsbury's with 6.5 per cent. The charity clause will only apply to new members. Members of Nationwide who opened their accounts before yesterday will keep their right to receive windfall payments.