James Daley

By James Daley

John McFall, the Labour peer, was a formidable chair of the Treasury Select Committee - and left some big boots to fill when he stepped down at the end of the last Parliament. But his successor, the Conservative MP Andrew Tyrie, has shown that he is more than up to the task. Over the last four years, he has managed to tread the delicate line of being both pro-consumer and pro-financial services industry - launching a number of thoughtful enquiries into the banking and insurance sectors, some of which have laid the groundwork for necessary change.

Two weeks ago, when news emerged that several banks had been using similar tactics to Wonga to put pressure on their debtors to pay up - sending chase letters from subsidiary companies of solicitors and debt collectors to give the impression that the stakes had been raised - it looked as though the story may wash away in the wake of the Wonga saga, which continues to unfold. Tyrie, however, had other ideas - and today he has written to the banks asking them to either quash the story or own up and take responsibility for their actions. This could no doubt be the precursor to a full blown Treasury Select Committee inquiry.

While the banks, unlike Wonga, did at least write to their customers from firms of solicitors and debt collection agencies which existed, they did not make clear that these firms were owned by the banks who the customers owed the money to. The motive behind both the banks' and Wonga's deception was the same: to scare customers into paying their debts. While red letters from your bank asking you to pay up are clearly not that effective, a letter from a firm of solicitors ups the stakes.

Economical with the truth

Such tactics are hard to justify. The right thing to do would be to engage with these customers - using the company's true identity - and try to help them back to a place of financial stability. Naturally, that wouldn't always be possible - but where the courts need to be used, it should be a last resort, and the process should be undertaken with some sensitivity. If you've reached the point where your bank is taking you to court for unpaid debts, your life is likely to be falling apart. While the customer may be in breach of their contract, the lender has to also take some responsibility for lending the money in the first place. The responsibility for the collapse in a customer's financial health has to be shared.

If a full Treasury Select Committee investigation follows, it may be worth reaching beyond the current accusations - as this kind of economy with the truth can be found all over the financial services industry. As I've written before, the confusion of brand on top of brand in the insurance industry means that most customers have no idea who they're really dealing with. An car insurance policy which comes from a well known high street brand can be administered by a different company, underwritten by another insurer, with claims being handled by yet another company.

It's all too easy to turn your back on an insurance company after having a bad experience - only to run straight back into their arms by moving your business to a brand where your previous insurer is the engine under the bonnet.

Multi-brand deception

The line between deception and an honest multi-brand strategy can be wafer-thin. While HSBC and First Direct clearly offer very different customer experiences and levels of service - even though they are part of the same group - Royal Bank of Scotland and Natwest are carbon copies of each other. Arguably, offering two different brands that are indistinguishable in terms of their underlying offer is unhelpful.

Transparency is something that the financial services industry seems to find it very hard to adopt. I imagine there are dozens more skeletons such as these in our banks' closets. Now is the time to be bringing them out in the open - an amnesty if you like. The slow trickle of bad news stories about banks and insurers makes it impossible for the industry to rebuild trust with its customers. If Tyrie and the FCA can coax a few more skeletons out of the closet now, it might allow the industry to finally draw a line under what has been a dismal and dishonest two decades.