The banks’ get-out clause

wet floor

‘Why are banks above the law?’

Too many of my post titles are rhetorical questions. I must curb the habit. This one, from a few months ago, is a genuine enquiry. I don’t know why banks have this special privilege.

We’re told that they’re just a retail business like any other; we should expect no more of them than we would of a supermarket or a coffee shop. Like these, a bank’s function is to make a profit. So why does it have less responsibility?

Why is it that a supermarket must warn you that a packet of peanuts contains nuts, a coffee shop must warn you that coffee is hot, yet a bank can pressure you into buying a financial product that could bankrupt you, without warning you of the risk? I have no idea. At least I didn’t until recently.

I managed to find a clue in a recent ruling by the Financial Ombudsman. Apparently, your bank has no general duty not to injure you. If there is not a specific regulation obliging a bank to behave in a particular way, then it can pretty much please itself what it does.

This comes as no surprise, when you see how banks treat their customers on a daily basis, but it’s a bit chilling to see it in black and white.

The Ombudsman’s ruling  concerns bank fraud, and the decision is this: If a bank becomes aware of a new fraud that could put its customers’ accounts at risk, it’s not thought necessary for it to warn them. It doesn’t need to change its fraud-prevention systems in any way to deal with the new threat.

It’s entirely at the discretion of the bank. Where have we heard that before?

So, if you thought that your bank would do any more than the absolute minimum to keep your money safe, you’re mistaken. After all, banks allow most fraud to go unchallenged, even when it costs them money. In cases where they’re not going to reimburse the customer, they’ll make even less effort. Passing on what they know, so that their customers can protect themselves, is far too much trouble.

We’re so used to the banks’ exalted position insulating them from all responsibility, that none of this seems strange. It should, though. What happens if any other retail business realises that simply being in contact with it could put its customers’ safety at risk? It must try to do something about it or it could be sued. This is the crux, of course. Who can afford to sue a bank?

Perhaps I’m wrong about this. Instead of expecting banks to behave like normal businesses, should we allow normal businesses to behave like banks? Should all of us no longer have a duty not to harm each other?

The current situation is this: If you go to your local greengrocers for some celeriac, slip on a pool of strawberry milkshake spilled by a previous customer, fracture your pelvis and never work again, the greengrocer is liable for every penny that the injury costs you.

This is because he or she should have been able to see that doing nothing about the spillage would put customers at risk. You would be able to sue successfully. There would be a queue of no-win-no-fee lawyers willing to take your case.

If that greengrocer had the special dispensation given to banks, you would only be able to sue if you could find a regulation specifically requiring greengrocers to clean strawberry milkshake (not chocolate or banana) from their floors. There’s no such regulation, of course, so you’d just have to put up with it.

It’s difficult to see which system would be better. What do you think?

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