Barclays: Banks Behaving Badly

I got a note today regarding the fact that the Head of Barclays Global Retail Division, Antony Jenkins, appeared on BBC Radio’s Today program this morning saying that the level of consumer complaints to banks in general, and to Barclays specifically, is “not acceptable”. The Financial Ombudsman Service said it received and upheld more complaints about Barclays than about any other bank last year, and Mr. Jenkins said Barclays are committed to reducing the numbers of complaints.

On the same day Eric Daniels, Chief Executive of Lloyds Banking Group, is quoted in today's Daily Wail as saying that the bank is “punching below its weight given our market shares” with regard to complaints.  

As a result, it prompted me to revisit the FSA’s and the Financial Ombudsman’s figures. In so doing, I stumbled across some interesting anomalies.

First, the FSA’s complaints report. Here’s the key highlights for the first half of 2010 (H1-2010): 

First, the figures for 2009 were excessive because banks had been waiting to process many overcharging complaints whilst a court decision was being taken. This decision was taken in November 2009, and resulted in a mass backlog of complaints being registered and processed. As a result of that anomaly, complaints about banking in H1-2010 decreased by 50% to 999,196; complaints about current accounts decreased by 63% to 599,249; and complaints about ‘terms and disputed sums or charges’ decreased by 63% to 575,348.

The number of complaints about payment protection insurance increased by 53% to 265,949.

The number of complaints relating to ‘advising selling and arranging’ increased by 22% to 364,891. 281,994 of these complaints were about general insurance and pure protection, and many of these were related to payment protection insurance.

The number of complaints relating to ‘general administration /customer service’ was the lowest since the second half of 2006 at 596,606.

The number of closed complaints increased by 76% to 2,819,678, as many of the bank charge complaints were reported as closed. The number of closed banking complaints increased by 126% to 2,166,304, with 84% closed within 8 weeks.

Total redress paid in 2010 H1 increased by 43% to £406 million. The largest amount of redress by product was for general insurance and pure protection which increased by 92% to £276 million. This may reflect the large number of complaints relating to payment protection insurance.

As can be seen, many of the complaints concern payment protection insurance. Eric Daniels says that he is not surprised they have risen astronomically because “more column inches have been given to [the issue] than the impending Royal Wedding”.

I can see where he’s coming from on this, as I was recently talking to one of Lloyds retail heads, who told me that the astronomical rise in PPI (Payments Protection Insurance) was a real processing headache, especially as “one in four PPI complaints are from people who don’t even have an account with the bank”!

Ludicrous.

Now then, going back to that comment about Lloyds “punching below its weight”. Among the major banks, the list of banking complaints noted by the FSA has Lloyds at the top of the list, which received 288,717 complaints in the first six months of 2010, closely followed by Barclays with 259,266 and Santander with 244,978.

So if Lloyds has the most complaints, how can it be “punching below its weight”. Oh yes, there was the other part of that comment: “given our market shares”.

There were 288,717 complaints against Lloyds Banking Group, more than any other institution, but this represents less than 1% - about 0.96% - of its 30 million customer base.

Compare this with Barclays who had 250,667 complaints, representing approximately 1.19% of its 21 million UK customers.

Second worst was government-backed Royal Bank of Scotland, as roughly 1.07% (166,172) of its 15.5 million UK customers made a complaint, although these figures do include its insurance subsidiaries, Churchill and Direct Line.

Santander was next up with approximately 1.02% (256,823) of its 25 million UK customers registering an official protest in that period, whilst HSBC performed best of the major banks with just 0.5% (81,271) of its 16 million customers making a complaint.

Interestingly, the proportion of complaints dealt with within eight weeks are also an indicator as to how well these banks are working, with Lloyds securing a completion rate of 97% for customers within eight weeks; Barclays dealt with 91% of cases within the period; whilst Santander closed only 46% of complaints within eight weeks.

This looks bad for Santander, but you then need to look at the Financial Ombudsman’s figures too.

The Ombudsman upheld a whopping 61% of complaints about Barclays, which was the worst performer. 50% of complaints were upheld against Royal Bank of Scotland and 45% against Lloyds TSB, compared to an industry average of 44%. It only supported a fifth of consumers against Santander, the best performing bank in this category despite the high numbers of complaints it attracts and the slow processing of them.

With regard to total complaints, and bearing in mind that Barclays had the most upheld, these figures are also of note:

Firm                      Number of new banking complaints recorded

Barclays Bank                          4,797

Lloyds TSB Bank                      4,051

Bank of Scotland                     3,876

Santander                               3,214

HSBC Bank                              1,718

NatWest Bank                         1,617

MBNA Bank                             1,184

Capital One Bank                       819

Clydesdale FS                            701

Royal Bank of Scotland               618

Nationwide BS                          594

Egg                                          594

Citi                                          528

Alliance & Leicester                  430

Clydesdale Bank                        419

Only 5% of customers rejected by their bank take their gripe to the Ombudsman, despite a better than average chance of success.

What that means, is that Barclays with 21 million accountholders had around 100,000 serious customer disputes, of which almost 5,000 went to the Ombudsman and 3,000 were upheld.  Lloyds with 30 million customers had more like 80,000 disputes, with 4,000 going to the Ombudsman and 1,800 upheld.

So Barclays have double the number of disputes passed in the customer's favour over Lloyds with a third less customer base.

That's quite telling.

A good example of the sort of bad behaviour can be found in this blog: Barclays: not a great home for my savings.  Their video is worth a viewing if you want to know the alleged misdemeanour:

In a world of social media, Jane's story (for it is hers) spreads fast, so it's not just the Ombudsman and the FSA that banks should fear these days ... but also the customer.

All in all, this little bit of analysis provided an interesting landscape of issues and performance by our banks in dealing with them.

Finally, given the headline: “Lloyds gets the most complaints” the above shows that, digging beneath the surface, this is entirely misleading.

Mr. Jenkins of Barclays gets it more right when he says that the level of consumer complaints to banks in general, and to Barclays specifically, is “not acceptable”.

Agreed.