Select Committee on Treasury Eleventh Report


6  REUNIFYING CUSTOMERS WITH DORMANT ACCOUNTS

The proposed reunification scheme

44. The Government is proposing a reunification exercise in the 12 months preceding the introduction of the Unclaimed Asset Scheme:

The BBA explained how the reunification exercise would reactivate as many accounts as possible, reunite owners and their assets, and, as a result, minimise reclaims subsequent to the transfer to the Central Reclaim Fund, enabling that Fund to take a clearer view of the funds required to cover reclaim risk. As the BBA explained, banks and building societies would be hoping to reach the owners of small dormant accounts through the reunification publicity campaign:

      Once the greater amount of publicity comes out following the passage of the legislation, we are expecting many more people getting in touch and a much bigger ability to try and get people back together with their money.[90]

    The BBA would not forecast the proportion of funds that were likely to be reunited before the scheme was introduced, but they said it would be much lower than the 40% that occurred in the Irish scheme.[91] Mr Cornish, speaking on behalf of the Yorkshire Building Society thought that 40% to 50% might be "fairly straightforwardly" reunited.[92]

    The timing of institutions' own activities

    45. In addition to the BBA and BSA activity, we were told that that individual banks were also planning to undertake proactive searches prior to the Unclaimed Asset Scheme, in addition to their usual activity.[93] However, the Skipton Building Society told us that it was already doing all that it could to trace dormant account-holders, including using third-party agents.[94] Although it would continue to try to find their lost customers in the run up to the scheme, it was not planning any new initiatives in the months preceding the Unclaimed Asset Scheme.[95]

    46. In February 2007, HBOS launched its own series of activities to try and reunite customers with their dormant accounts, including mailings to dormant account customers, national and regional newspaper advertising, claim forms in all Halifax and Bank of Scotland branches, a dedicated website, and employing third-party search agents.[96] We asked the BBA and the BSA why only HBOS had started reunification work and why other institutions had not followed its lead. The BSA said that building societies were doing extra work, but that HBOS was the only institution which had announced what it was doing.[97] The BBA however, confirmed that HBOS was the only institution that had started to act, at least amongst the banks. Other banks would be starting their reunification schemes once "when we know when the legislation is going to be passed".[98] The BSA said that building societies were both proactive and reactive in tracing customers; the intensity of efforts depended on the size of the account in question and the period for which it had been dormant.[99]

    Advertising and press releases

    47. The Government's proposals for the reunification scheme "include the issue of quarterly press releases over a twelve month period to national and regional newspapers, lifestyle and consumer magazines and websites", but do not include any mention of advertising. The CUA argued that money needed to be spent on actual advertising, rather than leaving the scheme to the press to publicise:[100]

      I think our concern would be that [just issuing press releases is] leaving it to the press to find the message … As we have seen, there has been some variation in terms of the press response, with some scaremongering and scare stories alongside more sensible journalism. If we were to allow for press or radio advertising, both of which are reasonably cost-effective, it would mean there was a consistent message.[101]

    In written evidence, the CUA also thought that the display of posters in branches would be a cost effective way to get the message across to consumers.[102]

    Letter-writing

    48. The Government, the BBA and the BSA do not propose that letters should be sent to the last known address of dormant account holders. Despite this, in January 2007 the BSA said, "We will be contacting customers to make sure that they have not lost touch with their savings. This will involve us writing to millions of people in a way never done before."[103] In oral evidence, the BSA explained that its members would not be writing to customers where the building society has already received a response saying, "Not known at this address" or, "Gone away", partly for fraud prevention reasons, but also because "writing letters to places where you know people are not does not strike us as the most relevant [method of contact]".[104] The BBA denied that giving banks the option not to write to their customers was a hole in the scheme: "we do not think it is an omission in the legislation, we think it is a commonsense approach to the variety of different ways in which all our banks will be trying to re-contact people who had banked with them some time ago and from whom they have not heard".[105]

    49. The experience of the Balance Foundation was that letter-writing was actually quite important:

      These letters can be computer generated… so it is not a very manual exercise, it is one that can be achieved through automation, and therefore from my perspective it is not burdensome, it is one that could be easily achieved and I think that it is a significant event for an individual's deposit with a bank to be moved to a central fund away from the bank and one of which an individual ought to be notified.[106]

    The Balance Foundation admitted that there was "a very powerful argument" for saying that it did not particularly matter whether account holders are informed that their account was going to be transferred, because they would be treated in just the same way under the new situation as they were before. Yet they suggested that there was the question of trust to consider:

      I think that the problem there is not really one of substance, it is one of trust in the system, and I think it is very important for banking trust in the system and consumer trust in general that those efforts [that is, letter writing] be seen to have been made.[107]

    The CUA also believed that there were problems associated with making no attempt at communication.

      A letter should be sent out [unless there was a] response saying that [the customer] had genuinely moved on from that address. One of the reasons for that, as experienced in Ireland, was that where, for example, someone has died and their family was unaware of a rainy day account put away by that person, the letter arriving actually allowed them to be reunited with that asset. There was no way that those people would have arrived without that letter having been sent.[108]

    50. The Government proposes that a customer whose dormant account has been transferred to the Central Reclaim Fund would suffer no additional inconvenience as a result of this transfer if they eventually came to reclaim their account. Indeed, they may well never know that their account had been transferred. With that in mind, there would appear to be little requirement to write to the customer for that customer's sake. Rather, the purpose of letter-writing would be to reunite the maximum number of dormant accounts and prevent accounts from being incorrectly treated as "dormant". Minimising such incorrect transfers is in the interests of the financial institutions rather than customers. However, as Mr Thomas from the Balance Foundation pointed out, these institutions do incur a cost in sending a letter:

      Generally speaking, retail banking, if you stay in credit, is free, and therefore for the retail bank to write to a customer is an expense for that bank—a very small expense but an expense.[109]

    Banks and building societies want to be permitted to form their own judgement on whether and when to write a letter, weighing up the costs of writing and sending the letter, versus the potential costs of administering an inappropriately transferred account, and in light of the chance of actually getting any kind of response to the letter. The BSA mentioned that building societies would not try as hard to trace accounts with less than £10 as they would with an account containing, say, £25,000.[110] The CUA proposed defining a threshold of £49 above which it would be worthwhile for banks to write a letter.[111]

    Third-party search agents

    51. Certain commercial organisations provide tracing services to financial institutions that search publicly available information and try to identify new contact details of dormant customers. We received evidence from one of these services, the Unclaimed Asset Register (UAR) which was set up by Experian in 2000. The UAR claimed that its electronic tracing facility had a 60% to 70% success rate in finding people (perhaps from an out-of-date address).[112] The BSA said that individual building societies were "upping their effort" to use tracing agents in the case of large accounts.[113] The CUA argued that there were some "reasonably cheap and scaleable solutions" that could be used by the banks and building societies in tracing customers. These might not be worthwhile in the cases of the smallest accounts, but the CUA argued that "more active processes can and should be investigated by banks and building societies".[114]

    Conclusions

    52. We welcome the plans of the banks and building societies for a reunification exercise prior to the advent of the Unclaimed Asset Scheme. The decision to use third-party search agents will necessarily be taken with a view to balancing the cost of these activities with the value of the dormant account and the probability of successful reunification. We accept that an important component of the efforts towards reuniting smaller accounts with their customers should be the proposed publicity scheme but we are not convinced that quarterly press releases will generate sufficient awareness of dormant accounts. We urge the industry to consider a more comprehensive campaign across various forms of media. Financial institutions should also write to their customers, notifying them of their dormant account's impending transfer to the Central Reclaim Fund, unless that institution has been advised that the account-holder is no longer at that address. We urge all banks and building societies to use every opportunity they can to employ these and other techniques in reuniting accounts before they are transferred to the Central Reclaim Fund.



    89   A UK Unclaimed Asset Scheme: a consultation, para 2.10 Back

    90   Q 144 Back

    91   Q 116 Back

    92   Q 109 Back

    93   Ev 90 Back

    94   Q 70 Back

    95   Qq 68, 69 Back

    96   Halifax press notice, 'Halifax leads search for forgotten accounts', 19 February 2007, www.hbosplc.com Back

    97   Q 169 Back

    98   Q 171 Back

    99   Q 143 Back

    100   Q 220 Back

    101   Q 219 Back

    102   Ev 104 Back

    103   The Sunday Telegraph, 'Wake up and smell the money', 28 January 2007 Back

    104   Q 140 Back

    105   Q 141 Back

    106   Q 44 Back

    107   Q 45 Back

    108   Q 210 Back

    109   Q 44 Back

    110   Q 138 Back

    111   Ev 104 Back

    112   Ev 52  Back

    113   Q 142 Back

    114   Q 221 Back


     
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    Prepared 6 August 2007