Second supplementary memorandum by Lloyds
TSB
BANKING CODE
STANDARDS BOARD
MYSTERY SHOPPING
EXERCISE ON
BASIC BANK
ACCOUNTS
Thank you for your letter dated 24 April 2006
requesting Lloyds TSB's consent to the Banking Code Standards
Board (BCSB) releasing the results of its 2005 mystery shopping
survey of basic bank accounts.
We take the feedback we receive from the BCSB
very seriously, whether this is received formally through reports
such as this mystery shopping survey, or informally through our
ongoing dialogue with them. We acknowledge the need to engage
with BCSB in progressing the issues raised within the Basic Bank
Account report and are keen to work with industry colleagues and
the BCSB to discuss appropriate and timely resolution.
However, we are opposed to the general principle
of the BCSB releasing performance information. It is important
that ratings are understood in their full context, and we do not
believe this will be achieved if ratings are disclosed in isolation
by the BCSB. With reference to the 2005 Mystery Shopping survey
in particular, these ratings were generated at a single point
in time and assessed only one component of our overall banking
offer to customers.
Although we will not consent to the release
of our performance information by the BCSB, we are content to
give this information to you ourselves as this enables us also
to provide you with a sufficient framework with which to assess
our performance in the provision of basic bank accounts.
Having received a green rating in the BCSB's
2004 survey of basic bank accounts, we were disappointed to receive
an amber rating in the 2005 survey. The 2005 rating reflected
that "a number of weaknesses and/or breaches have been identified
relating to the provision of the Basic Bank Account and these
require corrective action". The BCSB required an action plan
setting out what activities we intended to take to rectify the
weaknesses.
The BCSB have confirmed that our plan is acceptable,
and will test compliance with the Banking Code when they undertake
further mystery shopping later this year.
The key weaknesses identified were:
— While assessors were able to obtain
information about basic bank accounts without difficulty, a number
of assessors said they "felt pressurised to look at other
less suitable accounts". Action taken: A briefing has been
issued to remind staff of the requirement to provide a basic bank
account if this is the most suitable product for the customer.
We are also looking to rationalise our current "two product"
basic bank account offer.
— Staff were not always able consistently
and clearly to describe what searches are involved in applying
for a basic bank account and to explain the implication of any
searches carried out. Action taken: Internal procedures have been
updated to reflect credit search requirements and briefings have
been issued to staff setting out credit reference agency requirements.
— A small number of accounts (7% of
our total basic bank account portfolio) are processed centrally.
High error rates in the application forms completed by the customer
for these accounts invariably led to delays in account openings.
Action taken: A review of processes has been undertaken regarding
the central processing of the applications which has led to an
improvement in first time passes.
We are confident we have taken the necessary
action to remedy the issues identified by the BCSB and we would
therefore expect that these weaknesses will not be repeated.
Lloyds TSB is committed to the joint target
of reducing by half the number of adults in households without
access to a bank account. We believe we have made good progress,
opening 373,000 basic bank accounts which is about 20% of all
basic bank accounts opened since April 2003. This is in line with
our share of main current account stock and is above our recruitment
share of new standard current account business. We therefore do
not believe the issues identified by the BCSB have resulted in
any material reduction in the volume of applications received
and accounts opened subsequently.
We believe we are reaching the genuinely unbanked
and financially excluded: the recent independent Millward Brown
survey (November 2005) found that more than three quarters of
Lloyds TSB basic bank account customers who opened their account
in the last year had not previously held a bank account of any
kind—this is well above the national figure of 59%. Our
basic bank account customers have lower income than the average
basic bank account customer and are also more likely to be from
social groups D and E—86% of Lloyds TSB basic bank customers
are in these social groups, compared with the national figure
of 53%.
In summary, we believe we are making a significant
contribution to reducing the number of unbanked in the UK.
May 2006
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