Examination of Witnesses (Questions 120
TUESDAY 5 JUNE 2007
KNIGHT CBE, MR
Q120 Mr Todd: Is there any particular
reason why customers would be told that their account had actually
been transferred or the value of their account had been transferred
to the reclaimed fund?
Mr Cornish: I think you would
want to avoid that. There is no reason why you should have to
tell them that. It would make no practical difference. They would
be able to receive their money in exactly the same way as someone
who has had an account that was not dormant.
Q121 Mr Todd: Is effectively what
is going to happen that you would maintain a shadow account but
the value of the sum in it would be transferred to the reclaim
fund and in all other senses the account would continue to exist
as it had done; so any interest earned would be accrued to the
account and you would maintain the records precisely as if it
had been a normal account?
Ms Knight: That is correct. Of
course, the reason it has been transferred is because the financial
institution cannot find the customer in the first instance, but
the records will stay. If it is a bank, they will stay with the
bank; if it is a building society, they will stay with the building
Q122 Angela Eagle: I am wondering,
Mrs Knight, about your issues on flexibility and defining dormancy.
Is it not a recipe for complete uncertainty if you have flexibility?
Is it not better to undertake a scheme such as this with a pretty
firm definition of what dormancy is?
Ms Knight: There are two choices.
You are absolutely right. You can say, "Okay, an account
will be dormant and be declared dormant if no transaction and
no transaction only has taken place in 15 years", and if
that is the case, then, as the Irish experience shows, they are
transferring money to dormancy where they, the bank, know perfectly
well who the individual was. The individual may have telephoned
them, they may have come into a branch and had a chat, but because
a transaction had not taken place, they still had to declare that
account dormant, and that is not reasonable.
Q123 Angela Eagle: Are you talking
about a more flexible definition of dormancy?
Ms Knight: Absolutely.
Q124 Angela Eagle: By that do you
mean more sophisticated rather than simple? If there is uncertainty
as to what constitutes dormancy, that is going to throw the whole
system into disarray; but if you have a more sophisticated definition
of dormancy, say 15 years plus two attempts to contact, or something,
surely that provides you with the certainty rather than this idea
that dormancy can be defined by each financial institution to
suit its own purposes?
Ms Knight: We are not looking
for something as open-ended as that. What we have said is that
a financial institution should be permitted to take into account
other forms of customer activity in determining whether an account
is truly dormant, and examples of that we gavecorrespondence,
telephone calls, e-mails and, of course, as far as the building
societies are concerned voting at an AGM. We can come up with
a list, but I think that it is quite interesting to see what it
is that some customers do; and that is that they will have an
account and they do not actually touch that account, in the form
of a transaction, for a long period of time. That does not mean
that they do not know it is there; it does not mean that the bank
does not know the name and the details of that individual.
Q125 Angela Eagle: But surely that
sort of individual would respond to your reunification process.
If I had an account that I had not touched and the bank telephoned
me or sent me a letter saying, "If you do not claim your
account, it will go into dormancy and the Government will give
the money to charity", I might do something about that.
Ms Knight: Yes, but I am exactly
fine about that. That is why we say we want that ability to have
a definition which does not just say, "You must do a transaction."
As long as there is a contact and the contact has been responded
to, we think that that is fine, but that means that the account
should not necessarily be pushed into dormancy.
Mr Coles: But we will not be writing
to customers telling them that their account is going into dormancy
and the Government will somehow get hold of that money. The essential
feature is that we will be reassuring customers that the money
is always theirs.
Mr Chisnall: But let us be clear,
the Irish legislation is very inflexible. Unless there is a transaction
on the account, at the 15-year point the money has to be transferred.
So do you end up with correspondence that says, "We need
you to come and put a pound into this ISA account, otherwise the
money will be transferred." We are trying to avoid that situation
because it is very clear that there are saving accounts that people
have, but if you are confident that the customer is at a current
address, that other accounts are being serviced from that address
(the customer might be paying a mortgage from that address) and
you have the confidence in that address that you are still sending
an annual statement on that account, then I think you can be reasonably
certain that the customer is aware of that money but, despite
the fact that you have written to them saying, "We need you
to come in and make a transaction on this account", the customer
decides: "Why should I be obliged do that?" People have
busy lives, they do not respond to correspondence in that way,
and all we are suggesting is that, if we look at the basis of
the Irish Act and want to take what we think is appropriate and
want to deal with what we think perhaps could have been done better
with the benefit of hindsight, then actually striking the legislation
on a basis that permits institutions to take account of the knowledge
that they have of their customer actually would be a sensible
thing to do.
Q126 Angela Eagle: What benefits
are there to banks as institutions and other financial institutions
which collect savings deposits to having dormant accounts? They
just use the money and make profits on it without really incurring
any costs. Is that the case?
Mr Cornish: We are a building
society, so any profit that we make is ultimately to the benefit
of our existing members. But, I think, getting that in some sort
of context, we have a £17 billion balance sheet. We are talking
about a maximum of £12 million of dormant money. We make,
at the very most, 1% on that, so we are not making huge amounts
of profits for our money on anything which is currently defined
Q127 Angela Eagle: And for non-mutual
Ms Knight: The amounts are, in
effect, immaterial in the scheme of things, the numbers of the
banks, but perhaps there is a point worth making that, of course,
one of the reasons why we have been looking at some aspects of
this legislation is because there does need to be a legal release
from the accounting standards for this money. So, that is one
of the reasons why we do need some sort of legal change to the
banking standard which makes banks show what the amount of money
is and is a separate identifiable pot to be transferred across,
but in terms of the totality it is actually a very small amount.
Q128 Angela Eagle: What percentage
in general of the commercial banks' profits or turnover are these
sums likely to be?
Mr Chisnall: Very, very small.
Q129 Angela Eagle: One, two?
Ms Knight: No, much less than
Q130 Chairman: It would be quite
handy for a rainy day though.
Ms Knight: It would be quite handy
for a rainy day no doubt for those who are receiving the money
in terms of good causes, but, indeed, particularly for the individuals
who find their lost account, Chairman.
Q131 Chairman: Mr Cornish, you say
you are looking at 1%. That is not a very good deal, is it, a
1% return on your 12 million? It is not a very good investment,
Mr Cornish: That would be the
maximum amount of profit we would make. The amount of interest
paid to the customers concerned would be higher than that.
Q132 Chairman: Have you been doing
anything for that 1% profit up to now?
Mr Cornish: Essentially, the nature
of a building society or the nature of any mutual is that any
profits that are made are, in some shape or form, returned to
the membership, either in the form of better interest rates or
Q133 John Thurso: Have you any idea
of the average size of the account that we might be talking about,
or is that a meaningless figure?
Mr Coles: The National Consumer
Council Commission on Unclaimed Assets market research that was
in their evidence suggests that over half of all lost accounts
or inactive accounts have less than £10 in them and a further
quarter have £49 or less, and that seems to corroborate the
sort of information that building societies are giving us.
Mr Cornish: Our own figures are
75% of accounts have less than £10 and 95% have less than
Ms Knight: We do not have the
specific answer, we just know that the overwhelming majority are
likely to be less than £100.
Q134 John Thurso: So what we are
Ms Knight: Large numbers of small.
Q135 John Thurso: In the totality
of the big number we are actually talking about a vast number
of very small accounts?
Ms Knight: Correct.
Mr Coles: And a very small number
of larger accounts.
Q136 John Thurso: Thank you.
Ms Knight: Intuitively, of course,
that is correct, that it is small amounts of money which people
say, "Oh well", they will walk away from.
Q137 John Thurso: I have got one
Ms Knight: I think we are all
Mr Mudie: That explains the 12 million
Chairman: You have not declared an interest
Q138 John Thurso: In January 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."
Can you confirm that that is in fact taking place and that your
members intend to write to all local customers prior to their
accounts being transferred?
Mr Coles: It depends whether or
not the building society has already received a response, any
sort of communication, saying, "Not known at this address"
or, "Gone away", and for fraud prevention reasons you
would not keep sending confidential information about accounts
to those sorts of addresses. Then, on those that do not come into
that category, you take different approaches. For accounts with
less than £10 in you do not try as hard as you would with
an account with, say, £25,000 in. It is not always universally
welcomed when you do contact people. We have had an example with
one building society recently. They were delighted to have found
a customer with whom they had had no contact for many, many years
who had £27,000 in the account. When the secretary of the
society rang the individual up she was extremely annoyed that
the building society had used a private detective to track her
down and could not understand why the building society needed
to know where she was. She knew where the building society was
and that was all that was important. So, it is not universally
welcomed, the tracking activity that building societies undertake,
but we will be doing our best to get into contact with every lost
account holder, even if it causes annoyance to some customers.
Q139 John Thurso: I am slightly taken
aback by the idea that somebody does not want to know where their
Mr Coles: They knew where it was.
The building society did not know where she was. Their efforts
to track her down caused considerable annoyance to her.