Sam Dunn: It's time lenders did what it says on the tin

Consumers have more faith in high-street retail brands than in financial institutions

I'm sure you've fallen victim to those tantalising chocolate bars and sweets stacked close to supermarket tills.

I'm sure you've fallen victim to those tantalising chocolate bars and sweets stacked close to supermarket tills.

As we shuffle forward in interminable queues, the confectionery is a clever distraction to tempt us to part with just a little more cash.

And at the same time, you can expect your wandering eye to land on other brightly coloured inducements: glossy leaflets for credit cards, pet insurance, life cover and so on.

There is surely no better place to market to a captive audience; many shoppers won't think twice about putting a credit card offer into their basket. Of course, as savvy consumers, we can pick and choose what we buy - so good luck to the leaflet marketers; they'll need it.

Supermarket advertising is a sign that the financial services industry has cottoned on to the importance of how consumers view the products. Our perception of a credit card as a simple purchase rather than a complex financial instrument is as critical as the product itself.

During a recent off-the-record industry dinner, a senior banking executive bluntly made this very point. He had discovered a universal truth, he said - that there are no new financial products under the sun.

It made no difference whether a new current account had all sorts of bells and whistles, or a credit card came equipped with generous cashback - it was a case of reinventing the wheel.

"It's all about perception," the executive stressed.

His candour gave a useful insight into the relationship between lenders and their customers. In the highly competitive world of financial services, where banks regularly take a short-term hit (such as offering a bonus savings rate) to win market share, it seems that branding and trust really are everything. And unfortunately, trust is in short supply.

Earlier this year, the influential Treasury Select Committee grilled insurers, banks and lenders about their practices, and concluded that consumers now have more faith in high-street retail brands than in financial institutions. This sorry state of affairs is the result of a string of mis-selling scandals, including endowment and personal pensions.

But there is at least the possibility of a brighter future. The latest Banking Code update had its final review last week. When it comes into force next March, lenders will have to provide summary boxes highlighting charges on all credit card statements and promotional literature.

There must also be a "health warning", making it clear that repaying just the minimum amount on outstanding credit card balances won't help you shake off your debt. Other measures in the updated code, such as greater promotion of basic bank accounts without overdraft facilities, were also welcomed by the National Consumer Council.

Yet the new Banking Code, which remains a voluntary agreement, has worrying flaws. For example, it makes no recommendation to standardise interest calculations on annual percentage rates (APRs), which means consumers are still prevented from carrying out proper comparisons between cards. And lenders can still send out unsolicited credit cheques to encourage their customers to borrow more.

Which?, the consumer body, calls much of the Banking Code review little more than "improved signposting". The transparency it promotes is no panacea, Which? says.

With that industry dinner conversation in mind, we should all be taking more care than ever over the terms of any loan, bank account, savings rate and credit agreement that we take out. As such products become staples in supermarkets, do the same as you would for other purchases: always read the label.

Private banking

As our back-page report shows, fraudsters are hell-bent on raiding our bank accounts.

Last week provided further evidence of their ruthlessness: the City regulator warned that criminals could take jobs in financial services companies to get closer to people's cash.

It might look over-cautious to cup your hands to obscure the keypad at an ATM, but don't feel shy about asking people to stand back and give you privacy.

Better brazen now than a bruised bank account later.

s.dunn@independent.co.uk