Mutual members 'short-changed'

Millions of customers of former building societies - such as Abbey National, Alliance & Leicester and Birmingham Midshires - were short-changed when their provider demutualised and converted into a bank, according to a report published by a cross-party committee of MPs yesterday.

Unveiling the results of a five-month inquiry into the value of mutual financial services companies, the committee concluded that mutuals offer better value to their customers than public companies, and have tended not to adequately compensate members when they have demutualised.

The report also concluded that former mutuals have gone on to pay their executives much higher levels of remuneration post-demutualisation, but without demonstrating any marked increase in performance. It said consumer choice has also been reduced by past conversions.

It said: "Previous demutualisations have restricted consumer choice, as the mutual sector has acted as a check on the PLCs both in terms of value and non-financial issues, such as branch closures and charges on ATM machines."

In its conclusion, the report urges the Government to legislate to protect consumers before any future demutualisations, calling for all financial mutuals to be forced to have their windfall payouts independently assessed before they convert into a PLC.

The report comes just weeks before Standard Life's proposed demutualisation and flotation, which will see 2.4 million Standard customers come in line for a payout.