Simon Read: Fining a bank is hopeless whenit's less than their bonuses

The City Watchdog this week fined Royal Bank of Scotland and NatWest £2.8m for cock-ups in their complaints handling. Fining banks millions of pounds when they mess up sounds like a great idea, but I wonder if it actually has any affect on improving the situation.

The Financial Services Authority said RBS and NatWest were slow in responding to complaints and simply didn't deal with them properly. Staff weren't trained to deal with complaints and upset customers weren't told about their rights, specifically that they could take their complaints further to the Financial Ombudsman Service.

That all sounds bad enough and an almost £3m fine is a lot of money, in fact the fine would have been £4m if the banks hadn't co-operated quickly with the FSA. But it's not a lot to the banks, who readily hand over such sums as bonuses to senior staff. For instance Lloyds' boss Eric Daniels, who has remained in charge throughout the banking collapse and government bailout, is in line for a bonus worth up to £2.32m when he retires at the beginning of March. (That's on top of his basic £1.035m salary, incidentally.)

So the banks can afford to pay the fines easily. To make a real difference they'd need to be in tens of millions. For that reason I'd like to see fines get progressively larger for each offence or failure to provide proper customer service. If the amounts mounted up quickly so that hundreds of failures could costs the banks millions, they would be more likely to ensure they got things right.

As it stands, the fact that banks deal with complaints badly is simply because they have realised that it's cheaper to cock-up customer service and pay the effectively paltry fines than invest into proper systems and staff to ensure that complaints are dealt with promptly and properly.

Until the fines become a real deterrent, they are almost a waste of time. Oh, and the FSA's practice of allowing financial companies money off their fines by paying promptly annoys me intensely. RBS and NatWest got a 30 per cent reduction in their fine, saving them £1.2m. It should be the other way round. If a bank or other financial institution fails to co-operate fully with an investigation and doesn't agree to settle as early as possible, they should be charged a 30 per cent penalty.

Hidden mortgage fees are rife and unnecessary. I've highlighted before in these pages the dodgy practice of some lenders of charging thousands to arrange a loan when other companies only feel the need to charge hundreds or, in the case of FirstDirect, just £99 on one mortgage deal. The situation is worsened when lenders hide the expensive charge, which can come as an expensive shock to borrowers.

The latest to play this particularly unpleasant trick is Accord Mortgages, which is owned by the Yorkshire building society. Its two-year fixed rate looks competitive at 2.99 per cent. It has a booking fee of £95, which looks great, but then comes the whammy. The lender charges a whopping £1,900 for what it calls a "completion fee". The fee sounds unnecessary and is very high.

You'll only be offered the deal if you use a mortgage broker but shame on the Yorkshire for being a party to this. The mutual should look after its customers better.

More help for people with debt woes

vulnerable people have been promised more help with their financial problems by debt charity the Consumer Credit Counselling Service. At-risk people will get extra support such as help with completing forms and undertaking welfare benefits checks, the charity promises.

"Debt problems are incredibly difficult and stressful to deal with," points out CCCS managing counsellor Maggie Kirkpatrick, who runs the service. "They are especially difficult for anyone who, for whatever reason, struggles with completing forms and making applications."

People can contact the Debt Advocacy Service through the CCCS Helpline on 0800 138 1111, 8am-8pm, Monday to Friday. Anyone identified as needing additional support will be referred to the new service.

People can also find out about what welfare benefits, grants or other financial help is available to them through www.turn2us.org.uk, a free information website run by the poverty charity Elizabeth Finn Care.

s.read@independent.co.uk