Large banks ‘flipped their boots’ by paying savers less when they open accounts in a branch

Experts warn that the poorer treatment of customers in the branches is another cynical attempt by banks to move their customers online.

Major banks and building societies are breaking new consumer protection rules by denying their best savings rates to customers who prefer to manage their accounts in a branch, lawyers and consumer experts warn.

Savings providers including NatWest, Virgin Money and Coventry Building Society reserve some of their best interest rates for customers who manage their accounts online or on their smartphone.

This practice could cost industry savers thousands of dollars in lost interest. In some cases, customers who bank in person are offered a three times lower rate than savers who bank online.

One of the worst offenders is NatWest, which pays 6.17 percent into its digital regular savings account, but only 1.75 percent into its equivalent branch account, the so-called flexible saver.

The Post Office pays 4.4 percent interest on its easily accessible Isa online, but only 3.1 percent on its in-office equivalent.

On a balance of £25,000, an online saver would earn £1,122 in interest and the offline saver £786 – a difference of £336.

Experts warn that the poorer treatment of customers in branches is another cynical attempt by banks to move their customers online and justify further branch closures. Since the beginning of last year, more than 1,100 bank branches have been closed or closed.

New rules introduced last month by the financial regulator require all banks to deliver “good results” for their clients.

But experts warn that there’s no world in which giving a customer banking in a bank branch a lower rate than if he or she went online would yield a “good outcome.”

The new so-called Consumer Duty rules introduced by the Financial Conduct Authority (FCA) also require companies to ensure they “do no harm to groups of their customers, including those with characteristics of vulnerability.”

Experts again argue that denying the best rates to personal banking customers – who are likely to be older and more vulnerable – harms them and is clearly against the rules. According to Age UK, only 60 percent of people over 65 bank online.

Reserving the best rates for digital customers “goes against” these new rules, says Dean Dunham, Money Mail’s consumer advocate.

“Companies should not try to exploit or neglect customers with a lack of knowledge or vulnerabilities and should ensure they have appropriate plans in place to provide a level playing field for all customers,” he says.

“Those who do not have access to internet banking are clearly disadvantaged by being penalized with lower rates, and this, in my opinion, violates the standard of due diligence laid down in the Consumer Duty rules.”

The new rules must be adhered to by all companies covered by the FCA. To date, the FCA has not imposed a fine on a company that violated these rules. Gary Rycroft, of law firm Joseph A Jones & Co, hopes the FCA will take action.

He calls it “shocking” that customers who want to stay offline or can’t go online are treated worse than those who can. This is especially the case as many people choose not to bank online due to the fear of being scammed.

“To me, this is an unfair outcome and a clear breach of consumer duty,” he says. “I hope the FCA will speak up and take action against banks that favor online customers over offline customers. It’s unfair and a slap in the face to the FCA’s efforts to protect consumers.”

The best savings rates are often offered by online savings providers that do not have bank branches. These companies say their lower overhead costs mean they can afford to pay savers more.

To compete with online rivals, High Street banks only offer online deals that typically pay better rates than depositors can get in a branch.

Andrew Hagger, of personal finance website Moneycomms, explains that this is in the banks’ best interest, but not their customers’. “Offering the most competitive savings products online is a cheap option for banks because the overhead costs are a fraction of the cost of running a branch,” he says.

For example, online banks don’t have to pay for rent, heating, and staff needed to keep a branch open. “This is of no comfort to people who don’t have access to the internet or are afraid to go online because of scams,” he adds.

Liberal Democrat MP Richard Foord says banks that don’t give all customers – online or in a branch – a fair deal should be cracked down on.

“In rural communities, the decline of physical banking has had a real impact on people’s lives. People need to know that if they manage to find a bank branch, they will be treated fairly and not as second-class citizens compared to those who bank online,” he says.

“Everyone should be able to get a fair deal, whether banking in person or online, and any bank flouting this principle should be held accountable by ministers.”

An FCA spokesman said: “We have asked companies that offer the lowest interest rates on savings to prove to us that they are offering their customers a fair price. Under consumer law rules, companies must also ensure that they act in good faith and avoid harming different groups of their customers, including customers with characteristics of vulnerability.”

In addition to NatWest paying more than three times more interest on its digital regular savings account than its branch equivalent, NatWest’s full range of fixed-term savings accounts is only available to customers with an email address and a mobile number.

These best-buy accounts offer online savers a rate of up to 5.55 percent.

NatWest has several accounts, including cash Isas, that can be managed in a branch or by phone.

But to open these accounts, savers must bring their own digital device to their local bank branch, where employees will help them open the account.

Anna Bowes, co-founder of interest rate checker Savings Champion, says this is still excluding customers who prefer not to manage their money online.

“Many people who want to open and manage an account in a branch don’t have the necessary devices or skills.

This policy seems to be a clear indication that NatWest will continue to close branches and therefore try to get its customers online.”

NatWest declined to comment. Virgin Money offers online Isa a one-year fixed rate, paying 5.61 percent. It also has a one-year fixed rate bond of 5.01 percent. However, there is no equivalent in the industry.

Savers can open both accounts in store, but only if they are willing to manage them online. Virgin Money said: ‘Our current savings offering includes features that cater to the needs of different savings customers.’

Nationwide Building Society offers the same rates online and in the office for its fixed rate savings accounts.

However, it still offers preferential rates to online savers on its easily accessible accounts.

A saver who deposits £1,000 into the bank’s online flex instant savings account, which pays out at 3.25 per cent, would earn £32.50 in interest after one year. To open this account, you must have an email address and be able to manage the account online.

But putting the same amount into Nationwide’s instant access piggy bank, which can be managed in a branch, would yield 2.15 per cent and give a return of £21.50 on £1,000 over the same period.

Nationwide said: ‘We offer a range of savings products for both those who like to open accounts in an office and online.

“We have online-focused floating rate accounts, but these can also be opened in a branch if the member is unable to open and manage their account online.”

Over a third of the savings accounts offered by Coventry. Building Society is online-only, including the limited access Isa, which rewards savers who withdraw less than six times in 12 months at a rate of 4.35 percent, for which there is no industry equivalent.

Coventry offers 3.4 percent interest on its online, easy-to-access Isa and 3.1 percent on its branch version.

Coventry says: ‘We continue to support our members, not only by offering competitive rates, but also by being clear and open in our communications and offering members the choice to get in touch with us through our office, telephone – and digital channels.’

The post office offers an easily accessible Isa online, which pays 4.4 percent interest. The industry equivalent pays 3.1 percent interest.

A spokesperson said: ‘We take consumer duty very seriously. We are constantly reviewing our rates for our savings products to ensure they remain competitive. We have increased the return offered to savers a number of times this year.

‘We have competitive savings products available both in the store and online that are accessible to everyone. ‘

a.cooke@dailymail.co.uk