Alliance Turning Towards the Financial Dark Side
Following in the footsteps of many of
its high street competitors, Alliance and Leicester
has announced that it will no longer accept new customers
onto its Online Saver and Direct ISA accounts. The
interest rate for the Online Savers account is also
being cut from 5.35% to a straight 5%.
Richard Brown of the financial comparison
website Moneynet
believes that Alliance and Leicester (A&L), in common
with its high street competitors, has seen its costs
rise as a result of recent rule changes covering things
like the way mortgages and general insurance are policed.
He added, Unfortunately its the consumer who shoulders
much of this additional burden
It seems to many of their loyal customers
that A&L is indeed determined to make their customers
pay in an effort to purge costs and boost their profits.
These cuts are only the latest of a series of changes
that A&L have made during recent months. First to
go was the cashback scheme on their Moneyback credit
card. The Moneyfacts
financial data website pointed out in February, that
A&L had increased the APR on their credit cards for
all purchases up to 16.9%; as well as increasing penalty
fees, and introducing punitive new clauses to current
accounts. Other charges have been introduced to their
mortgage products, balance transfer fees on credit
cards, reductions in childrens savings accounts, whilst
The Guard ian has revealed some suspect changes
that have been implemented to their systems to increase
the number of customers who breach their overdraft
agreements, triggering penalty charges.
A&L has said that there is no hidden
agenda, and that it still leads the way compared with
its banking rivals.
A&L however, are not the only financial
group to be feeling the pinch. Barclays, HBOS and
Royal Bank of Scotland have all warned about credit
arrears. An announcement concerning job losses at
Scottish Widows, came alongside admissions from their
owners LLOYDS TSB that there was, An increase in the
number of customers experiencing repayment difficulties
with their credit card debts and unsecured personal
loans. According to Lloyds' Chief Executive, Eric
Daniels, we are currently experiencing, "a slowing
consumer environment".
Recent announcements by the Treasury
delivered the worst monthly public borrowing figures
since records began in 1993, re-igniting fears over
a possible rise in taxes.
Consumers are reducing the amount they
borrow on credit cards and analysts predict mortgage
lending in the UK will plummet by 10 per cent over
the next three years, as the out of control growth
in house prices finally stalls.
Independent market analyst Datamonitor
claims, lenders who have been enjoying a boom in recent
years, will struggle to maintain the momentum and
be forced to work harder to secure market share.
Investor Connections, a group of independent
financial advisers, has called for an accurate assessment
of the UK's current economic position, after statistics
showed the three main asset classes, shares, bonds
and property are all experiencing downward trends.
This downturn should spell good news
for borrowers and homeowners, as the mortgage and
credit industries fight for customers and sharpen
up on their competitiveness; however the evidence
of Lloyds TSBs actions seems to belie this. With HBOS
forced to criticise the other credit card companies
for failing to provide customers with adequate product
information, despite repeated requests to do so from
consumer lobby groups and watchdogs on the Treasury
Select Committee, it looks like the majority of finance
companies are currently out to protect themselves
and their share-holders, with little regard for their
customers.
At a time when UK consumers are proportionately
saving less than half of what they were 25 years ago,
you might be forgiven for thinking that competition
in the banking world would be becoming increasingly
cut-throat in order to gain customers business, but
it seems that the big institutions are instead looking
to go down the route of cost reduction to protect
their profits. There are savings are out there to
be made, but they are savings in costs to be made
by the finance companies, at the expense of the consumer,
rather than beneficial savings for the customer.
Richard works in Edinburgh for a media
company, occasionally writing for the personal finance
blog Cashzilla,
and drinking too much coffee.
