Bank account closures criticised

By Bob Howard
BBC Radio 4's Money Box

A&L has agreed to pay the customer concerned £125 compensation

Banks which close the accounts of customers who take them to court to reclaim their bank charges have been criticised by the Financial Ombudsman.

In an adjudication it said the Alliance and Leicester's closure of one such customer's account was neither fair nor reasonable.

It recommended the bank pay Warren Miles from Swindon £125.

The ombudsman said the bank should not have closed the account simply because Mr Miles had taken them to court.

"I do not consider that it was either fair or reasonable for Alliance & Leicester to use the closure of an account as a way of deterring or punishing this customer for complaining," the adjudication said.

Tony Boorman, principal ombudsman for the service, restated the same point to BBC Radio 4's Money Box: "We strongly believe that customers have a right to complain," he said.

"I'd be concerned about any financial institution which stood in the way of this and took action to actively discourage people from complaining."

Mr Miles did not receive notice of his account closure because the Alliance & Leicester had not updated its records and had sent the letters to an old address.

He said he only learnt of the closure when he went to the bank's website.

"I was just an individual who felt he'd been wronged and wanted to pursue it as far as I could," he told the programme.

'Broken down'

Alliance & Leicester told Money Box it had agreed to pay Mr Miles the £125 recommended by the ombudsman but the adjudication would not change its position.

It said customers had a right to complain and accounts are only closed after their relationship with the bank had irrevocably broken down.

Nationwide also closes the accounts of customers who take them to court to reclaim their bank charges.

When someone takes us to court, we would consider that the relationship has broken down Stuart Bernau, Nationwide

It estimates it has closed fewer than 500 accounts.

Executive director Stuart Bernau said it will continue to do so in some circumstances: "When someone takes us to court, we would consider that the relationship has broken down.

"We would not close an account in retaliation, only if we believed the relationship had broken down over a long period of time."

The Financial Ombudsman can only adjudicate on individual cases but the the Office of Fair Trading is expected to make a ruling on of default charges on current accounts soon.

Until it reports, Angela Knight, chief executive designate at the British Bankers' Association, said it is wrong for the Financial Ombudsman Service to even be talking about charges in public: "I think discussions shouldn't really take place in the public domain.

"We have a lot of regulators crawling over this area. I do hope that with their comments they don't actually have the adverse affect of changing the situation for the majority of people who have free banking."

BBC Radio 4's Money Box was broadcast on Saturday, 10 February 2006 and will be repeated on Sunday 11 February at 2103 GMT.