Banks 'rob customers

Britain's biggest banks are ripping off their customers by selling them uncompetitive mortgages, insurance, savings and loans which could leave an average family more than £1,000 a year worse off than if they had shopped around, according to the Consumers' Association.

A report in Which?, the association's magazine, today awards Barclays the wooden spoon for "consistent mediocrity" of its products but finds little to compliment rivals about.

The research, into how banks try to entice customers to buy more than one product, will make uncomfortable reading for them as they face scrutiny from the treasury-backed Don Cruickshank inquiry.

Mr Cruickshank is looking at the way firms "cross-sell" and bundle products to customers as well as many other topics. He has already accused the banks of refusing to cooperate with him.

The Which? report concludes that, far from rewarding customers for loyalty, banks leave them out of pocket. It says two typical families at opposite ends of the age spectrum could be wasting more than £1,000 a year by buying all of their financial service requirements from NatWest and Barclays rather than the magazine's "best buy" nominees.

Which? compared 11 financial products offered by Abbey National, Barclays, First Direct, HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide building society, which it describes as the eight biggest current account providers to its readers. It used the rates offered on June 1.

It says Nationwide offered better value than the others while Abbey National figures highly in the savings accounts category. It describes Barclays' personal loans as "nothing short of a rip-off" but admits not all products offered by the big banks are bad value. It says NatWest has reasonably competitive home insurance and a "decent" five-year fixed mortgage deal but describes its savings accounts, credit cards and personal loans as "appalling value".

Which? claims that when banks do offer enhanced deals there is a catch. For instance, Lloyds' Gold Service offers free travel insurance and special savings rates at a cost of £96 a year in fees, even when the ac count holder is in credit. A similar offering by Royal Bank of Scotland costs £48 a year, which can be beaten by shopping around.

The banks argue that they do offer their customers convenience. "Customers choose us on the overall proposition - price is only one component," Barclays said. NatWest said the research was based on "flawed and outdated" figures, while Lloyds TSB said: "We think we offer solid value for money products and often customers can get better offers if they buy more than one product from us."