Bungling banks are slow to obey code

The Big Four are still failing the customer-friendly tests, says Tom Tickell. That's why people are taking their accounts to the new players

Nearly a month ago, the new banking code came in to effect. It was supposed to improve the deal for customers, making it easier for complaints to be resolved and accounts to be switched, but bad practices in high street banks are taking a long time to change.

Ian Pearce, a north London builder, has had endless problems with HSBC since the middle of last year. He discovered later that a bank robbery at his branch in Hackney, had sent the administration haywire, and he says if the bank had told him about it, he would have been far more sympathetic.

"The trouble started when I looked through my credit card statement in July to find the bank had not paid my cheque to settle the bill," he says. "I rang the branch, to find staff mentioning 'a problem' the day I paid it in, though they would not say what it was. They promised to sort out the credit card bill, which was with HSBC anyway. They did, but there was still a charge because the card payment had been late."

"In fact, I had paid six or seven other cheques at the same time, but I was told I would have to cancel them, and start again. The branch told me they were too busy to do it."

That meant more hassle for Mr Pearce, but the bank offered him only £100 in compensation when he complained, and they demanded to know whether he would accept it within seven days. He wrote back, suggesting £250, and got it.

Drama, part two, started at Christmas. This time, HSBC claimed Mr Pearce owed them £600. The branch had set up a special account of its own after the robbery. It had paid £600 from it to settle a bill he had paid already, then took money from his two accounts to settle up.

Discovering what had happened was not easy. Eventually three explanations were made, and it took a while to find which was true. "No one has apologised, which doesn't surprise me," he says. "I would love to believe that only HSBC makes muddles of this kind. But two years ago, I had to fill in three mortgage acceptance forms with the Nationwide, because the branch lost the first two, and blamed me both times. Eventually, I accepted £50, and a less than humble apology."

Mr Pearce is leaving HSBC, but wonders gloomily about the potential foul-ups that any new bank may bring to his affairs.

Banks used to claim their customers were so loyal they were more likely to get divorced than to move their accounts. But that has changed, with real competition. Building societies have turned banks, and internet banks, which offer more than a token interest rate on current accounts, have taken UK banking by storm.

Switching accounts is simpler than people expect, and will become easier still. The British Bankers' Association has a code of practice all members must accept. The latest change insists that if people change banks, the one they are leaving must send details of all direct debits and standing orders to the new bank within five working days. That will fall to three working days in August. After the new bank has formally accepted your account, it must be up and running within 10 working days.

Rules on savings accounts will also be tougher. Traditionally, banks have lured people into high-interest accounts with a good starting rate, only to cut returns after customers are safely inside. From now, banks will have to write to customers stating rate changes, unless the alterations reflect a general shift in base rates.

A recent Which? survey showed one in four people had moved to a new bank in the past five years. The new, smaller banks such as Smile and First Direct were top of the satisfaction ratings and the Big Four were at the bottom. Whatever the bank, cases of muddle and confusion can arise, and each group has a complaints procedure, though patterns are very similar. Step one is to take up the issue with the branch manager. If that fails, anyone with an HSBC account moves on the head of customer relations. The bank claims it will send a letter within two working days, giving the name of the person considering the complaint and how long it should take to resolve.

Banks will often offer £50 or even £100 "as a gesture of goodwill". Putting in a higher counter-bid based on the time you have spent putting things straight is one option.

The Financial Services Ombudsman is the final court of appeal. But it comes into play only after you have been through the bank's appeal process, and still feel unhappy about attitudes or the compensation on offer. The scheme covers most financial business, except for credit cards. Mis-selling claims on pensions and endowments have really kept the ombudsman busy in the last couple of years

"We look at details of each case individually," Iris Baker, from the ombudsman's office, says. "Assume you are unhappy with what a bank has offered after some administrative disaster. We will assess how much you have lost and how much stress and inconvenience you have suffered in putting things right. But we can also look what the trouble has done to your reputation, quite a point if you have had cheques bounce. We aim to settle almost half the cases within three months and three-quarters of them within six months."

The banks have to accept the findings, however much they dislike them, and the service is free. Even mentioning an ombudsman reference early on can make banks take complaints far more seriously than they would otherwise.