Lloyds TSB bans staff from selling bank accounts with monthly fees 'after fears they were mis-sold to customers'
02:04 GMT, 20 December 2012
Britain’s biggest bank Lloyds TSB is to stop providing lucrative paid-for current accounts following a crackdown by the City watchdog.
Branch managers were told yesterday they would have to temporarily pull the plug on sales of packaged accounts which cost up to customers 300 a year.
These deals are a rich source of profit for banks. In exchange for paying between 9.95 and 25 a month, customers are given access to a range of perks such as travel insurance, breakdown cover and mobile phone insurance.
Banned: Its Silver, Gold, Platinum and Premier current accounts have come under scrutiny from the FSA
Bank staff have been paid handsome kickbacks for selling these accounts.
For the past year the Financial Services Authority has been investigating paid-for accounts following fears that millions had been sold benefits they could never use.
For example, pensioners who would not be covered by the travel insurance because they were too old, or households who did not have a car and so didn’t need a breakdown policy. Last week, the regulator demanded banks review the accounts they had sold – particularly for the over-65s.
Lloyds will stop offering packaged deals in branches and over the phone from January 1. Customers can still sign up on the bank’s website.
Justin Modray, founder of financial advice firm Candid Money, said: ‘Whenever banks pressure their staff to sell products it’s usually misguided. Packaged current accounts are no exception.
‘Banks need to either come up with genuinely great products or stop disguising salespeople as customer service staff, but I think the chances of either are slim.’
Lloyds banking Group, which is 39 per cent owned by the taxpayer, has an estimated three million customers who pay for one of its four different packaged accounts.
About one in seven of all bank customers pay for their current account. But industry research suggests as many as one in three of these hasn’t used the extras they’re paying for. In recent times, some banks – including Barclays – have stopped paying commissions to staff for hitting sales targets.
And last year Santander changed the travel insurance it offered on packaged accounts because it did not have the same benefits as the cover sold in branches. Earlier this year, it stopped selling these accounts altogether.
Lloyds’ most basic paid-for account, called Silver, offers free European travel insurance, AA breakdown cover and mobile phone insurance. It costs 9.95 a month. Its Gold account costs 12.95 a month, Platinum 17 a month and Premier 25 a month.
A member of Lloyds branch staff who contacted the Mail yesterday claimed the reason behind the dramatic sales U-turn was because bosses feared accounts were being ‘mis-sold’.
He also added that sales were being halted because of pressure from the regulator.
Lloyds denies these claims.
The FSA said it could not comment on Lloyds’ decision. However, last week, it told banks that from March next year they must provide customers with an annual statement setting out what perks packaged deals offer.
Lloyds said sales had been halted due to system changes and staff training.
Lloyds and its sister bank Halifax currently have two different sales processes.
Halifax salesmen give customers a list of accounts and let them choose which they want – a process known as ‘informed choice’. But Lloyds staff recommend different accounts for customers.
A Lloyds spokesman said the bank would adopt the Halifax sales process. He said: ‘We have made the decision to harmonise the way we sell packaged bank accounts across all brands within Lloyds Banking Group and align the sales process with that currently used within Halifax.
‘Embedding this change properly across our business will require us to update our systems, and amend the sales process and training we provide to colleagues.
‘We are committed to offering packaged accounts.’