Brokerbility leads challenge against banks’ sales tactics

Independent broker group Brokerbility is to challenge the FSA following claims that banks are breaching regulations by putting clients under pressure to buy insurance products.

Brokerbility chief executive Stuart Randall claims that some bank bosses are insisting clients meet with the bank’s insurer partners, in what is seen as “conditional selling”.

The revelation comes as Biba chief executive Eric Galbraith revealed he has met with banking chiefs after the trade body received a number of complaints from brokers who accused banks of strong-arming their customers into buying insurance products, as reported in Insurance Times in April.

Randall said there are a number of examples where bank bosses have accompanied insurance representatives to meetings with SME clients who have facilities such as loan agreements with the bank.

“From the client’s point of view they feel under duress from the bank manager that, unless they do the insurance deal with the bank, they won’t get their facilities renewed,” Randall said. “This obviously gives us cause for concern.”

Randall added that there is an increasing trend among banks to sell services where other firms carry risks, such as insurance, rather than lend money in the current financial crisis.

“We will be talking to the FSA to question whether this is legal and legitimate,” he added.

There is a code of practice, under the Banking Code, which states: “We will not insist that you buy an insurance product from us when we agree to provide a lending product.”

Enforcement is dealt with by the Banking Code Standards Board, but responsibility will be handed over to the FSA in November.

Meanwhile, Biba has dealt with similar broker complaints by speaking to banking bosses, although it will not be asking the FSA to investigate.

A spokesman said: “We have dealt with the matters raised by members and have spoken to the banks. There was no documentary evidence of any breach of the Banking Code, although it would seem, from members’ comments, that certain areas of the country encountered a high level of apparent undue pressure/competition from banks. We hope this has now been resolved following our discussions with the banks concerned. We have had no further complaints from members."

An FSA spokesman said the regulator would not comment at the present time.