Treasury committee criticises Lloyds TSB and RBS for failing to improve financial inclusion by limiting access to machines
MPs have urged RBS and Lloyds TSB to allow customers with basic bank accounts to use their cards in rivals’ cash machines, saying that limiting withdrawals could lead to a decrease in the number of free ATMs.
In a report published on Friday today, the Treasury committee criticises the banks for limiting access to cash machines. Basic account holders are limited on the grounds of cost as each time they use a rival ATM the bank incurs a charge.
The report said the cost savings – about £10 per account for RBS and £12 for Lloyds – were small and “have potentially disproportionate effects”. It adds: “Their [RBS and Lloyds] actions also sit uncomfortably with their stated commitment to basic bank accounts.”
The committee suggested the ban, introduced by Lloyds TSB in 2006 and RBS in 2011, could cut access to free cash machines if copied by other basic bank account providers.
“The main purpose behind the development of the basic bank account initiative was to improve financial inclusion. It is particularly regrettable that this ‘beggar my neighbour’ approach may therefore lead to the closure or, in the case of cash machines not operated by banks, change to charging at existing free to use cash machines,” the committee said.
Basic bank accounts tend to be used by people who cannot meet banks’ minimum criteria to open a personal current account. By limiting access to all cash machines, consumer groups argue that customers who do not live or work near an RBS or Lloyds cash machine can incur extra travelling costs to withdraw their cash.
The Treasury Committee launched an investigation after RBS wrote to customers with basic bank accounts in August 2011 to say they would no longer be able to use cash machines run by other banks or independent third parties.
The chairman of the Treasury Select Committee, Andrew Tyrie, said: “The Committee understands the need for banks to control costs, particularly in these difficult times. In this instance, the financial benefits to Lloyds and RBS appear relatively small but those affected would be amongst the most vulnerable people in society.
“In the longer run, both the way services are offered to customers and the charges they pay need reform to secure greater banking competition.”
In a letter to the Treasury Committee, Brian Hartzer, chief executive of UK retail banking at RBS, said: “We currently pay a charge on every transaction, every time someone checks their balance or makes a withdrawal at an ATM run by another company. As a consequence, we are running our basic accounts at a loss to the bank which we need to reduce.
“If we continue to make losses we will not be able to innovate and invest in our business, ultimately to the detriment to all of our customers.”
An RBS spokesman added: “RBS will look closely at the committee’s report. We remain committed to offering a free basic account for people who may otherwise struggle to access banking services. Our basic account customers have free access to one of the largest cash machine networks in the country, including RBS, NatWest and Tesco ATMs, and can withdraw cash from more than 11,000 post offices across the UK.”
A spokeswoman for Lloyds TSB said: “Our basic bank account customers also have access to all Halifax and Bank of Scotland, one of the largest network of ATMs in the country, as well as post offices across the UK. They also have access to our Money Manager internet banking service.”
Barclays, HSBC and Santander all said they will continue to provide basic bank holders with unrestricted access to cash machines.