‘Regulatory overkill’ means opening a child’s account is slow and laborious with parents forced to produce masses of documentation – and even watch videos
How long should it take to open a simple savings account? When Michelle O’Brien popped into her local Lloyds to open an Junior Isa for her son, Aiden, who is three, she assumed the whole process would take no more than 15 minutes.
She couldn’t have been more wrong. Despite having banked with Lloyds for 20 years – and bringing all the relevant identification with her – it took more than an hour to open the account.
She said: “It was ludicrous.
I had to read and sign the same form several times. The information was then repeated to me verbally, and I then had to sign a consent form, confirming I had understood this.
“I had to read another document summarising all of the above. Then – to add insult to injury – I had to watch a video that simply explained the whole thing all over again.”
She said: “I only got out in an hour by pointing out several times that I had to collect my son from nursery. If I’d let it run its natural course, I think I would have been there for another halfhour at least.”
Surprisingly, this wasn’t a case of one overzealous branch manager. Lloyds confirmed that the length of time it took to open this account was “within its normal expectations”.
A spokesman said that this didn’t apply only to Junior Isas. Customers opening other children’s savings accounts – and other accounts in general – can expect to be in their branch for a similar length of time.
Lloyds also confirmed that it was now the bank’s policy to show a short video to customers, highlighting the key features of any product they are buying.
A spokesman said: “The length of time it takes varies depending on the pace the customers wish to proceed at. There are a number of information gathering processes, and documents will be produced that customers need to understand and be comfortable with before proceeding.
“For example, once we have captured information on the child’s needs and the value of any existing savings, the differences between the key features, benefits, costs, exclusions and limitations of the eligible account will need to be discussed.”
There are concerns that this laborious sales process is an overreaction to recent mis-selling scandals. The bank, which is still partowned by UK taxpayers, is obviously keen to ensure that it has the correct documentation to show that customers understand what they are buying.
However, the furore over PPI mis-selling hasn’t stopped banks such as Lloyds trying to “up-sell” a range of other products to these captive customers.
Ms O’Brien said: “As part of this process, I was asked whether I needed life cover, insurance and so on. I politely declined.”
Other customers have complained that some banks are using statutory legislation to deter customers from getting the best savings rates.
One Halifax customer, who declined to be named, tried to switch his child’s savings account to a higherpaying alternative with the same bank. He was told that this would be possible only if he brought the child’s passport into the branch. Not surprisingly the transfer was delayed.
Government moneylaundering regulations require banks to verify a person’s identity before opening an account. For a child’s account, banks will typically require the child’s passport or birth certificate, plus the parent or grandparent’s proof of identity and address.
Not all banks require this information again when switching an account. But a spokesman for Halifax, which is part of the larger Lloyds Banking Group, said that it was normal to request this information. “Generally this would be processed as a new opening,” he said.
Fortunately, for those who don’t want to waste time in branches, there are alternatives. Barclays confirmed that customers can open a children’s savings account within five to 10 minutes, although it doesn’t currently offer a Junior Isa. A spokeswoman said that these savings accounts can only be opened in a branch, as staff need to verify relevant ID.
It’s a similar picture with HSBC. A spokeswoman said: “We’ve recently relaunched our account for young people to pay higher interest rates and at the same time have made it easier to open an account. Research showed that this is what parents wanted.
“Customers no longer need to complete a paper application if they’re opening an account for a child under 16. They just need to come into a branch with the relevant ID. The account can be opened in about 15 minutes.”
Nationwide Building Society doesn’t even require customers to go into a branch. It has one of the best-paying Junior Isas, which can be opened online. Alternatively, customers can pick up an application from a branch and post it back to the society’s head office.
Kevin Mountford, the bank expert at Moneysupermarket.com, said: “Savers can now apply for accounts online, over the phone or in a branch. Whichever option they choose, the process should be quick and simple.
“On the whole, savings providers offer a good service.