Examination of Witnesses (Questions 340-359)
MR GERARD
LEMOS AND
MR SEYMOUR
FORTESCUE
14 MARCH 2006
Q340 Chairman: Of course. Let us
cut to the chase, you are saying this is an infringement of human
rights?
Mr Lemos: No, I am saying it is
an infringement of our rules.
Q341 Chairman: No, you said, "human
rights" to begin with.
Mr Lemos: No, I am sorry.
Q342 Chairman: You said your lawyers
advised you?
Mr Lemos: Our lawyers advised
us that our rules have to be human rights compliant.
Q343 Chairman: I want you to share
the information your lawyers gave you with us. Let me tell you,
as Chairman what I want to do is to pursue this issue to see if
we can get that information on the record so we can help people.
If you are blocking us on that then we can decide where we go
from there.
Mr Lemos: I am sorry I do not
want to be difficult about this, Chairman. It is not that we want
to block you—
Q344 Chairman: I want to see that
information to see if you are blocking us[1]18.
If you are blocking us then we will do something about it, and
if you are not blocking us we can take it further. That is what
it is.
Mr Lemos: I am very happy to correspond
on this but, in the end, the way in which you would achieve what
you wanted to achieve would be a matter for the banks agreeing
to it. You could take it up with them and I could take it up with
them.
Chairman: Okay, but we do not want nonsense
on human rights.
Q345 Angela Eagle: This is the first
I have ever heard (the fact that banks have a corporate entity
then taken further) that there is some idea banks also have human
rights as corporate entities. That is the biggest nonsense I have
heard in a long time. Most people that campaign on human rights
are thinking about individuals and their human rights to live,
privacy and all of those things, but not corporations surely,
that is absurd?
Mr Fortescue: Our legal advice
was that corporations have human rights, and the Human Rights
Act comprises them as well.
Chairman: You can share that information
with us.
Q346 Angela Eagle: I want to think
about some of the human rights of the financially excluded. From
your mystery shopping exercise you have identified that there
is a gap in the experience of people who go into branches and
the corporate pronouncements at the top of banking organisations.
The corporate view is that basic bank accounts should be available
but not only your mystery shopping exercise but also the experience
of a lot of advocacy groups who have given evidence to us is that
there is a massive gap between the published good intentions at
the top of a corporation and what actually goes on in branches.
What do you think you can do as guardians of the Code to ensure
that that gap is closed?
Mr Fortescue: As I said earlier,
the situation has improved significantly as a result, I hope,
of our four mystery shopping exercises. The compliance with the
Code is very much higher now; it is still not perfect. You ask
what we would like to see changed—I think there are four
changes we would like to see, and we have recommended that at
the next review of the Code, which is a process which happens
every two or three years involving an external reviewer. There
should be four changes: firstly, mandatory display of literature
about basic bank accounts in all branches and some banks do that
already; secondly, there should be no credit search with credit
reference agencies; it is not necessary for opening an account;
it is possible to do an identification search rather than a credit
search; thirdly, we were concerned in our last survey that it
was taking too long for many people to open accounts, so we think
the Code should incorporate a standard time to open basic bank
accounts; we have largely, I think, resolved the problem of switching
current accounts as a result of past changes to the Code, and
we think it should be possible to have a limitation on the number
of days it takes to open a basic bank account; and, fourthly,
the question of identification, which has been quite a problem
throughout—hopefully made better as a result of the new
JMLSG guidance; but we think verification of ID documents should
take place in the branch rather than having them sent to some
central point. Our independent directors will be making those
recommendations at the next Code review which starts at the beginning
of next year.
Q347 Angela Eagle: If those were
agreed, and that would be quite a process, would you expect the
Banking Code to change to reflect these four excellent points?
Mr Fortescue: That would be the
wish of our independent directors certainly.
Q348 Angela Eagle: If that were to
be agreed, which is a big process, when would that be likely to
be put in place?
Mr Fortescue: The Code review
will start at the beginning next year and the new Code will come
in at the beginning of 2008.
Q349 Angela Eagle: I understand that
there are processes involved in revising your Code and you have
to have some coherence in that as the managers of it, but as a
Committee we have visited many people who are at the bottom rung
of trying to get going in life who have not been able to access
bank accounts and, therefore, cannot have money from their jobs
paid into bank accounts and have to exist in a cash economy with
no prospect of being able to make progress. Do you think it is
acceptable, even though we know this is going on, that 2008 should
be the first opportunity when we can make these improvements to
help them? These things are always fairly easy, are they not?
Mandatory display of literature ought to take a few weeks to be
put into effect through a banking system and, as your own mystery
shopping programme showed, in some banks it is only available
behind the counter; and in many, many banks there is no presence
whatsoever in the lobby of any idea that there might be basic
bank accounts available in that area. 90% of some banks just do
not put this literature out in the lobby, it is all behind-the-counter
stuff—actively discouraging people from coming in and asking,
in my view.
Mr Lemos: That is why we want
to change that requirement. I accept that 2008 seems a long way
off, but one of the changes which has been made—
Angela Eagle: All you have to do is take
the literature from behind the counter and put it out in the front.
Q350 Mr Newmark: Did you say it is
a requirement or it is customary practice, because there is a
difference between being a requirement—
Mr Lemos: It is not a requirement.
Q351 Angela Eagle: Not at the moment
it is not, but we are talking about it potentially being a requirement?
Mr Fortescue: One bank, Barclays,
mandated that all their branches will have literature about their
basic bank account on display.
Mr Lemos: May I just finish my
point about Code review. The important thing for us is to make
sure with the way in which the Code is reviewed is that all the
stakeholders, and that includes the consumer bodies, the organisations
that represent people in financial difficulties, the financially
excluded and so on, get an opportunity to contribute to that process;
and that the process of reviewing the Code is undertaken independently
and it is not just the banks accepting or rejecting what we suggest.
We wanted to open that up a bit, and that was on the recommendation
of DeAnne Julius and the committee which looked into this. While
that does mean it takes a bit longer than perhaps it otherwise
would, the effect is that it means the Citizens' Advice Bureau,
the Consumers' Association and so on can all participate in that
process.
Q352 Angela Eagle: The things you
have correctly identified—the credit search, which is a
nonsense when the basic bank account does not offer credit—and
the problems with ID that we have come across at every hearing,
and burdening people with asking for ID that they cannot possibly
have because they have not got it, but they have other forms of
ID which are not accepted, the idea that it is taking too long
to open basic bank accounts these are all very sensible, simple
changes which would not take that long to put into effect. I understand
with a major review of your Code you might want to take a lot
longer to work it through a system, but some of these are basically
quite quick changes which would make an enormous difference to
people who are constantly struggling. Can we not have a fast-track
for these obvious changes? Literally one of them, taking the literature
from under the counter and putting it out in the front lobby,
you are not telling me it takes two years to get through a process
of agreement that would make that happen. If a government department
did that they would be slammed for being too bureaucratic and
it would be on the front page of the Sun as another example
of over-bureaucratic government. Surely you can do something about
something so simple?
Mr Fortescue: Chairman, I think
if it is the strong wish of this Committee that those four things
should be done more quickly then I am sure that the banking industry
and ourselves will try and expedite the matter.
Mr Lemos: There are ways in which
we could do that. Maybe you do not want to go into them now but
there are ways.
Q353 Mr Gauke: Could I just return
to the issue of ID requirements and so on. It would be interesting
to know in your mystery shopper exercise what were the specific
problems that emerged with regard to ID verification; and, in
particular, were problems caused by guidance from the banks centrally,
the compliance department, or were problems caused by counter
staff being inflexible? Where is the difficulty? What is particularly
causing a problem in this area?
Mr Fortescue: Clearly many people
who are opening basic bank accounts do not have passports and
driving licences, so it is necessary to look at the second level
forms of identification. I think you have to see this in the context
of it being a criminal offence to open a bank account for somebody
without adequate ID and the very substantial fines which the FSA
has made on certain organisations which have not got it right.
There is a risk-averse culture in most banks. We found that in
65% of our mystery shops there was a list of documents available
in the branch. In other cases the documents had to be sent to
some central point—not very satisfactory if it is somebody's
housing benefit book, for instance, or indeed their passport if
they have one. We hope very much that the more flexible arrangements
which the JMLSG has now proposed will reduce this problem. We
would certainly like to see the decision-making made in the branch
rather than things sent to a central point.
Mr Lemos: I think that is the
key to it that the ID is verified in the branch and things are
not sent away, because that then also leads to a delay in opening
the account.
Q354 Mr Gauke: The Banking Code requires
banks to tell the customer what information the bank needs to
prove the customer's identity. How does this work? You have mentioned
that in 62% of cases there is a list of documents that would work
and satisfy the requirement, but that is not a specific requirement,
is it, as far as the Banking Code is concerned?
Mr Fortescue: There is a list
of acceptable documents, but there is some flexibility built into
that; and the flexibility very often resides in the head office
rather than the branch.
Q355 Mr Gauke: There is no requirement
to provide a list to potential customers, for example, for a basic
bank account saying "This is the list of documents you can
use"? That does not happen?
Mr Fortescue: No. I am sure it
would be helpful if these things were explicit but I am not sure
it would be helpful if all discretion was removed from the front
line and all flexibility; I think that would make the situation
potentially worse and slower than it is now.
Q356 Mr Gauke: You mentioned the
JMLSG guidance—to what extent are you satisfied that this
will actually address the problem fundamentally?
Mr Fortescue: The main changes
are that it is risk-related—that somebody who is most unlikely
to be involved in money laundering is going to have to provide
less onerous ID verification; that there is going to be less reliance
on utility bills, which are easily forged; there is going to be
more reliance on electronic identification checks. I think all
those should reduce the problems compared with the present situation.
Mr Lemos: The other thing is that
the JMLSG has now allowed local authority housing letters to be
used as identification, and for a great number of basic bank account
customers that should be very helpful.
Q357 Mr Gauke: You also mentioned
earlier the point about sending documents away. Is there a need
to amend the Banking Code at all to address this problem? Is the
Banking Code sufficient in your view on that specific point?
Mr Fortescue: I think that is
probably not something which would go in the Code itself. There
is a much longer document called the Guidance which is principally
for its interpretation for banks and building societies. It is
in the public domain and I think the changes are something which
could go in the Guidance rather than the Code.
Mr Lemos: I think the way we see
the Code and I think the way the banks see it (but we are very
committed to this as independents) is that the Code speaks directly
from the bank to the customer; it is not the test of compliance—that
is the Guidance. We do want the Code to be in plain English, to
be user-friendly and to be an accessible document for customers.
Q358 Mr Gauke: As a matter of practice
as things stand at the moment, is it generally the case that original
documents are being sent away to head office to be reviewed there
rather than done at a branch level?
Mr Fortescue: No, universal practice.
I think in three or four banks they are sent centrally and for
the remainder they are done in the branch.
Q359 Mr Todd: The speed with which
people are able to open a basic bank account, many of these individuals
are very dependent on getting their money rapidly if they are
receiving benefits, and your own submission draws attention to
the criticality of that. We have had evidence that in some cases
there have been delays of up to 10 weeks or so to open a basic
bank account, does that concern you?
Mr Fortescue: Yes, it does. The
longest period of time that we encountered was seven weeks, which
is clearly far too long. We think the whole process should be
possible within, say, 10 days.
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