“ The most profitable customers are those that are perhaps the most vulnerable ”
Speaking exclusively to the BBC, this whistleblower is a key decision-maker involved in retail banking with one of the main High Street banks.
Her past experience in every department – from strategy to planning and sales – has given her an extensive understanding of how the banks do their business.
“In all my years of experience in the banking industry, I would say that consumers should be very, very wary of their banks.
“They put profits before the customer at every given opportunity,” the whistleblower said.
At every level – from the branch to head office – the insider reveals an industry driven by ambitious targets to sell borrowing to customers.
“Every branch of any bank, and every individual who works in a bank, has very ambitious sales targets to sell you more products – effectively to make you borrow money and to get you further into debt.”
“And they will have targets on every banking retail product that is available through the branch. And they will have commissions and bonuses on every product.”
“It is a very very, sophisticated, tailored, tested marketing strategy and sales pitch to a public that have very little knowledge of what is going on.”
The insider lifts the lid on the world of credit cards, showing the various ways the banks try to get customers to borrow more on their cards – and carry debt over from month to month.
It is a world where customers are given names like “revolvers” and “transactors” depending on their spending behaviour.
Credit card transactions are carefully monitored by the banks. And they target their marketing according to how much customers are borrowing. It is all designed to maximise profits for the banks.
One of the favoured tools the banks use to increase borrowing on the cards is to raise customers’ credit limits.
The whistleblower explains how in many cases credit limits are “automatically increased” – and how limits can “literally double” in the space of two years.
“The higher the credit limit, the more the customer is likely to spend.”
“It is generally felt in the industry that by increasing the customer’s credit limit, by upgrading their card to gold or platinum, you are increasing customer loyalty, and hitting those marketing targets of retaining profitable customers.”
Robert Jenkins had the credit limit on his Lloyds TSB platinum credit card raised from £6,000 to over £11,000 in under two years – on an annual salary of £18,000. His wife Evelyn was lent £4,500 on her Lloyds TSB platinum card on an annual salary of £5,500.
Mr Jenkins believes he was targeted by his bank to borrow and then lent more than he could afford to repay.
Commenting on Mr Jenkins case, Lloyds TSB told the BBC: “These limits and subsequent increases were offered after reviewing their joint income, their ability to repay and their external credit record.”
“Financial health check”
Another tool the banks use is the “financial health-check”. Customers are invited into the bank to look at their finances, but often, in reality, it is an opportunity for the bank to cross-sell lending products.
“When you are conducting a health check, you will look at areas where that person doesn’t have perhaps one of the banks’ products: they don’t have a credit card, they don’t have a loan.
“And in most cases, they probably do not need it. But, if they do not have it, you are going to try and sell it to them,” the whistleblower explains.
The insider reveals how the banks profit from those in financial difficulty.
“The most profitable customers are those that are perhaps the most vulnerable.”
No one knows this better than Marion McDonald. Her world stopped in January 2005 when her husband Mark’s body was found on a railway line.
There was no suicide note but his back pack was stuffed full of bank statements relating a tale of massive loans.
He was one of eight people who have killed themselves in the past two years when their debt spiralled out of control.
Mrs Macdonald did not know how much debt Mark owed until he died.
She has now uncovered the full extent of lending that Mark McDonald’s bank, the Royal Bank of Scotland (RBS), were prepared to make.
He had loans, two credit cards and a re-mortgage with the bank. When he died his total indebtedness to RBS was £120,000.
RBS told the BBC: “Throughout Mr McDonald’s time with RBS we dealt with him in a responsive and professional manner.
“He had a regular dialogue with his personal banking manager and the lending decisions on his account were consistently based on strict lending criteria.
“At no point did Mr McDonald express to the bank that he was struggling with his finances. He managed his current account and maintained regular payments to both of his credit card accounts.
” He kept his credit card accounts in order and did not exceed his credit limit.”
Insurance policies meant that RBS recovered almost £90,000 of the money Mark McDonald owed.
Initially the bank demanded that the remaining £27,000 of Mark’s debt be repaid in full.
Then, after 15 months, they settled for 17% of the remaining debt.
When responding to the BBC’s request for a statement they then said that a letter offering a settlement sent to Marianne McDonald’s solicitor was never received.
It got lost in the post. Now RBS has decided to waive all of the debt.
Commenting on the case, the insider said “RBS was grossly irresponsible.”
“These tragic cases where people have taken their own lives are the cost that is paid for irresponsible lending practices. This is exactly why the banks need to be curbed.”
“The banks are basically neglecting their duty of care. They are putting profits before human life almost.”
“In circumstances like Mark McDonald’s, where there has been clear irresponsible lending, it is my opinion there should be laws introduced where criminal charges can be brought against the banks.
“This is how serious I believe this is.”
The consequences of Britain’s borrowing crisis are so serious that they are now hitting the banks themselves. They are facing a mountain of bad personal debt.
So four of the High Street banks, including Lloyds TSB and RBS, have launched a new initiative to identify customers in trouble.
They will now share information on clients’ income as well as their credit history to inform their lending decisions.
But the whistleblower is unconvinced: “It is certainly a step in the right direction, but I do remain very sceptical.
“I really believe the banks have had all along the information they needed to make decisions about whether individuals were at risk of falling into dangerous debt levels. This comes too late.
“Can the banks really change a habit of a lifetime of irresponsible lending? At the end of the day that’s what has made them their profits,” the whistleblower said.
At a time when the governor of the Bank of England is warning of the serious social consequences of over-indebtedness, the whistleblower gives a real insight into a culture of lend, lend, lend in Britain’s banks and helps to explain why Britain has racked up record levels of personal debt.
The Whistleblower. First broadcast on Monday 5 June 2006, at 0915 on BBC One and here online, the first of five programmes on Britain’s Streets of Debt.