The Bad Banks League Table!
As the FSA floats the idea of publishing the devilish details about banks' customer service, Laura Starkey considers how useful a bad banks league table could be...
You probably read the latest film reviews before heading out to the cinema. And it's unlikely that you'd send your child to a school without looking at its policies, performance and position in local league tables.
But wouldn't it be great if we could check out the reputations of financial institutions before depositing our hard-earned money with them?
We Need More Than Numbers
While looking at credit interest and overdraft rates is a great way of deciding whether or not your bank is giving you a good deal, I think many Fools would agree that numbers can only tell us half the story.
As my colleague Jane Baker recently reported, 57% of people have already switched banks at least once -- and customer service is as important an issue as interest rates.
Moreover, it isn't only customers who are concerned about the quality of the service on offer from financial institutions.
The Financial Services Authority (FSA) announced last week that it is considering publishing information about the complaints banks receive, and how well they handle them -- effectively creating a league table of `bad' banks.
While the British Bankers' Association (somewhat predictably) claim that the plans could take information dangerously `out of context', the National Consumer Council (NCC) has welcomed the idea.
So, what are the pros and cons of a bad banks league table?
Why It Could Work
One good reason for publishing a list of banks' customer service statistics is that increased transparency means more information for customers.
By forcing financial institutions to be open about service standards, the FSA could help the public to make more informed choices, and simultaneously encourage banks to improve the quality of their customer care.
At the moment, the only objective way we can compare institutions is to look at the statistical information they give us about interest rates and products.
However, with a league table in place, banks would be forced to compete for business on the grounds of quality as well as cost. Potentially, this could improve levels of service throughout the whole banking sector.
At the same time, the introduction of a league table would prevent customers from being preyed upon by banks' PR machines.
Currently, banks are able to make virtually unprovable implications about the quality of their customer service -- and, in some cases, use these to detract attention from the fact that their products aren't competitive.
The publication of a bad banks league table, however, would force banks who sell their products on this kind of basis to prove that the experience of their customers is good enough to justify receiving less -- or paying more -- interest.
Finally, I think it's pretty easy to argue there's a need for banks to be pushed into treating customers more fairly -- as they don't show much independent interest in doing so!
As Neil Faulker explained last week, complaints by customers to the Financial Ombudsman Service increased by 30% last year. This might imply that customers are getting bolshier, but it also suggests banks aren't getting any better at dealing with them.
Is It Fool-Proof?
While the idea of the league table might appeal to those of us who'd love to see our least favourite banks humiliated, it's important to point out that it won't necessarily help everyone decide where to put their money.
Some Fools will always simply want to stick with the best rates when it comes to choosing a current account, so they might consider a bad banks league table irrelevant to their needs.
What's more, advances in internet and telephone banking mean that, for some customers, trips to their local branch and even conversations with bank staff are increasingly rare.
Arguably, a traditional focus on customer service is less important these days than getting a good deal on a current account that can be managed remotely.
Some people might also argue that providing banks with the `excuse' of developing their customer care could have adverse effects on the cost of services. Would banks justify reducing the rates they pay on balances by `investing' in better training for tellers?
There are even claims that a bad banks league table could affect how investors view banks. Shares in some institutions could be devalued if their reputations suffered -- which might have serious implications.
The Truth Shall Set You Free?
In my opinion, publishing information about banks' customer service scores could arm us with more, much-needed ammunition in the fight for better service.
Despite potential draw-backs, I think that people have the right to know how well their bank treats its customers -- and to make choices about where to put their money informed by that knowledge.
In the light of the ongoing fight over bank charges, the publication of a bad banks league table could represent another move forward for customers, towards a fairer, more transparent system.
However, until the FSA makes its final decision on this issue (and until we see any table produced) it remains to be seen whether this is a Fool's, or just a fool's, hope.
In the meantime, I'd love to know what Fool.co.uk readers think. Would you like to see a bad banks league table? And where do you think your bank would feature in the list?
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