BY EDDY WEATHERILL

HOWARD DAVIES, head of the Financial Services Authority, recently told bankers that they were about to pay the price for their "exceptional" profits over recent years. He said big banks earned almost 30 per cent return on equity in 1998, three times the 1992 level and well above European rivals.

This comment confirms the truth behind The Express’s recent campaign. We’ve all been ripped off. Over the past decade the banks have increased their profits while the consumer has been forced to accept a poorer service at a much greater price.

Consumer confidence in banking is now at an all-time low. Not only have banks been selling poor or incorrect products to the customer, as the mortgage and pensions miss-selling issues show, but they have also added charge on top of charge, penalty on penalty, wherever possible.

There seems no end to what the banks will inflict on customers so long as share holders get maximum return. The banking industry has proved conclusively that it cannot regulate itself. Greed by banks, plus under-resourced consumer agencies, has meant inadequate consumer protection.

The poorest consumer generally gets the worst treatment and the highest penalty. But, for truly unacceptable behavior, the issue of dormant accounts takes the biscuit. If you find an old account passbook, or uncover a relative’s old account and then ask the bank for the balance shown, the usual response is: ‘Hard luck, we can’t find the account, and therefore it doesn’t exist, If it did it would be in our dormant account register" (they rarely are) and even when it is found in the register, there is often nothing that matches the account details in the book.

Banks often say that the money has been transferred into a different account, but what sort of system is it that cannot explain why this passbook in your possession — which clearly states that any withdrawal must be marked into the book — shows a credit balance outstanding? Would any bank transfer money to a new account, or pay out cash, without first canceling the passbook?

Banks compound interest when they lend money so how much interest should have accrued during the dormant years? While these questions may well cross your mind, don’t hold your breath for the answers. In most cases there won’t be any more explanation beyond "We can’t find it."

This effectively means you’re not going to get the money from this account. Why not? Nobody knows the full value of dormant accounts as there is no system which requires the banks to report their number and value. We do know that no one who has approached the Independent Banking Advisory Service (IBAS) over the past eight years has been able to claim any money from such accounts. The unpalatable fact is that dormant accounts provide extra cheap working capital for the banks to make more money.

Banks have no moral right to maintain secrecy on these issues. The matter of dormant accounts needs a solution. There is no system at present and no information available. Nobody really knows the volume of the problem, or whether the banks actually ever give money back on such accounts.

The Bank of England, The Treasury, British Bankers’ Association and the Banking Ombudsman are all unable to provide information about the size of this problem but for a £250 balance in 1970, an account would be worth at least £33,000 to the bank in interest charged and compounded over the past 29 years. So this particular cash mountain is well worth concealing.

Those trying to claim a balance on an old account are told that conversion to computers "would have meant" their relatives were "advised at the time" and must have taken the money out, or transferred the balance to another account. These are not satisfactory explanations.

The time has come for banks to be fully accountable. IBAS has recommended reforms to the Treasury Banking Review Team: they should produce a regular return showing the total number of dormant accounts and the true value held on such accounts to the FSA, for notification to the Treasury. If a bank is unable to identify an account holder after a specified period of time and the funds remain unclaimed, then the proceeds of the dormant account should pass to the Treasury. The funds should not remain with the bank. This would also mean that if you need to claim a dormant account balance in the future, the bank would be more inclined to pay you, rather than (pay) the Treasury.