Further memorandum submitted by Lloyds
I was interested to hear that the Committee
is to take evidence from Ian Harley, Steve Targett and James Crosby
on Tuesday 18 June as part of its inquiry into Banking.
In light of the Committee's interest, I thought
that you might appreciate further information on Lloyds TSB's
view of the Consumers' Association Switch with Which? campaign.
I would also like to elaborate on a point made by Peter Ellwood,
Group Chief Executive of Lloyds TSB, in his evidence to the Committee
on 14 May.
At that Committee session, Mr Ruffley referred
to the Which? campaign which claims that the difference between
the interest paid on current accounts by the "big four"
and other providers such as Abbey National and Halifax represents
a "£500 million rip-off" by the "big four".
In his evidence, Mr Ellwood made the point that this campaign
seeks to compare 'apples and pears' in contrasting current accounts
paying 0.1 per cent interest on credit balances with accounts
paying between 2 to 3 per cent. There are two important facts
that we believe underpin our view.
Accounts paying between 2 and 3 per
cent are available to a small percentage Customers:- they impose
strict eligibility criteria and insist on a minimum monthly income
of £1,000 per month in order to qualify for these rates of
Not all current account products
have the same level of functionality and/or service.
Over 72 per cent of the adult population would
be excluded by the income restrictions of Abbey National and Halifax's
"interest on current account" products. They are simply
"cherrypicking". If Lloyds TSB were similarly to introduce
a £1,000 monthly minimum income restriction, over 59 per
cent of our existing customers and 84 per cent of new customers
would not qualify.
The "internet only" banks pay interest
on current accounts, because they do not have, and therefore do
not provide their customers with access to large branch networks.
As Smile explains on its internet site ". . . we don't pay
the same overheads."
In contrast, Lloyds TSB offers its customers
free access to 2,200 branches, 4,400 ATMs, internet banking, telephone
banking, 17,500 Post Offices and 35,000 trained frontline staff.
Nearly three times more customers
tell us they value convenience compared with credit interest when
opening an account.
Abbey National Customers have, on
average, to travel more than twice as far to reach a branch compared
with a Lloyds TSB customer. Over 64 per cent of consumers can
drive to one of our branches in five minutes compared with only
37 per cent for the Abbey National and 57 per cent for the Halifax
and, of course, "Internet only" customers have no access
Following a series of initiatives, switching
is now easier than ever before, and even Which? acknowledges
that a large majority of customers experience no difficulties
in changing accounts. The consumer therefore benefits from real
choice. They receive a product, which is free of charge. They
can choose who they want to bank with, decide the most convenient
delivery mechanism and the most appropriate account for their
circumstances. In making that choice, the consumer can elect for
a service based on "anywhere, anytime banking" accessible
to "everyone" which is Lloyds TSB's strategy, or a narrower
Over 75 per cent of our customers never go overdrawn.
The Which? campaign only quotes our highest rate of 17.3
per cent on the "switchwithwhich" internet site; the
reality, however, is that 56 per cent of our customers' borrowing
is at a rate of 14.8 per cent or less. This is in contrast to
those Halifax customers who pay in less than £1,000 per month,
who pay 18.9 per cent on overdrafts.
The Committee may also be interested to know
that Abbey National extends its minimum monthly income requirement
to basic bank account customers. The Abbey National Instant Plus
account, targeted at the financially excluded, requires a minimum
monthly deposit of £250. The Halifax Cardcash basic bank
account also only allows cash withdrawals of over £300 at
any branch counter.
There has been considerable public comment over
recent weeks regarding Alliance & Leicester's plans to charge
£1.25 to customers of other banks to withdraw money from
remote ATMs. Abbey National has also said recently that it is
considering whether to dispose of 100 of its machines in remote
I would like to assure the Committee that, at
Lloyds TSB, expanding our ATM coverage and upgrading our existing
machines to provide a better service to our customers, remains
at the heart of our business philosophy. In remote areas, our
customers are served by a comprehensive range of distribution
channels including ATMs, even though they are often uneconomic
by sheer virtue of low usage and higher maintenance costs. In
March 2000, Lloyds TSB was the first bank to introduce an ATM
code of conduct which remains and we have no plans to introduce
fees for ATMs.
I hope these thoughts may be helpful ones to
you and to the Committee. Please do not hesitate to get in touch
with me if you would like us to clarify or expand on any of these
14 June 2002