Mean, moody and mutual

"AVARICIOUS capitalist". That's what a colleague described me as after reading Your Money's guide to building society windfalls last week. John Wriglesworth, who writes in our new Answer Back column on page 15, might well call me worse.

Mr Wriglesworth is a senior executive at the Bradford & Bingley building society. He and his company ardently advoate the concept of mutuality - where a society's customers are also its owners. He argues that these customers have had a better deal from societies than from the high-street banks and says this is linked to their mutual status. Mr Wriglesworth believes the absence of outside shareholders demanding dividends has allowed societies to focus on maximising benefits for their member customers. He suggests that if mutual building societies became extinct, savers and borrowers might lose out.

Some, however, might note that giving better value and service than the banks is not much to brag about. And saying savers and borrowers have had a better deal from societies than banks is not the same as saying they have had as good a deal as they might have had - or might have hoped for, given societies' claim to act wholly in the interests of their members. Here are a number of examples of distinctly unmutual-like behaviour.

Not so long ago it was common among societies to operate a marketing scam with savings accounts, offering attractive rates initially then dropping them once they'd got your money.

Arguably, cash-strapped borrowers suffered more from a similar game with their interest rates. Societies offered big discounts to new mortgage borrowers but then failed to pass on the full effect of cuts in base rates to existing borrowers.

What would a borrowing member whose property was reposs- essed think of the deal offered by their society? Or someone who was mis-sold a pension? Bradford & Bingley customers in particular might have hoped this pensions mis-selling would never be an issue with their society. The B&B is the only big society to have remained committed to giving solely independent financial advice under the terms of the Financial Services Act. The idea was customers would get better-quality advice. But last year it made pounds 10m of provisions against the mis-selling of personal pensions. And who now pays this bill? The society - for which read its members.

Societies counter that they have improved their act. For example, rate reductions have been tossed to existing borrowers. Low-paying old accounts have been eliminated, and some societies, such as the Bradford & Bingley, have talked of loyalty bonuses to members.

Others, like the Yorkshire this week, have proposed distributing to members, in the form of better interest rates, a share of profits that they would otherwise retain.

Good news, yes, for mutual believers, and of benefit to savers and borrowers. But wouldn't it have been more appropriate if societies had acted more directly in those members' interests in the first place?

Building societies still have a long way to go before they'll convince savers and borrowers that they wouldn't be better off shedding their mutual status for a pounds 500 windfall.