Banks slammed over red tape misery for heartbroken families

Banks have been accused of heaping unnecessary distress on grieving families through bureaucratic bungles and shoddy customer service, despite clear rules designed to protect the vulnerable.

A damning review by the Financial Conduct Authority (FCA) has exposed a litany of failures by banks and building societies in dealing with customers facing bereavement or attempting to register a power of attorney - a legal tool often used by those looking after elderly or unwell relatives.

In some harrowing cases, individuals were left unable to access funds to cover urgent bills or even get help during mental health crises, all because frontline staff lacked proper training or were mired in confusing procedures, it was found.

The financial watchdog said that while some banks have made notable progress under the new Consumer Duty - introduced last year to ensure fair treatment for all customers - others are woefully behind, risking serious harm to the most vulnerable in society.

Emad Aladhal, Director of Retail Banking at the FCA, warned: "Dealing with a bereavement or setting up a power of attorney can often be stressful and emotional. When banks and building societies get it right for their customers they can make a real difference at a difficult time. But when they fail to recognise and respond to customers who need more help, it adds to the stress. All firms should consider where they can make improvements."

He urged affected families and carers to speak to their bank about the support available, while encouraging firms to urgently review their policies and training.

The review, part of the FCA's wider five-year strategy to ensure better outcomes for consumers, drew on dozens of real-world examples from across the banking sector - both good and bad.

In positive instances, some firms used data smartly to identify customers likely to need extra support, guiding them through complex processes and offering tailored help. Others, however, left customers in the dark, bounced between departments, or forced them to jump through unnecessary hoops during deeply traumatic periods of their lives.

Jenny Ross, Editor of Which? Money, welcomed the FCA's findings and called on the regulator to come down hard on banks that continue to fall short.

She said: "At times of great distress, banks should be doing everything they can to make things as easy as possible for their customers, but our research has repeatedly found that all too often those who are bereaved or trying to register power of attorney face a range of obstacles, unnecessarily adding to their suffering.

"It is right that the FCA is working to address these serious deficits in customer service, and it should stand ready to take strong action against any firms found to be falling short of expectations under the Consumer Duty."

Consumer groups have long warned that financial institutions are too quick to hide behind red tape, often demanding reams of paperwork or inflexible appointments just to release funds or recognise legal authority.

Critics say this runs counter to the spirit of the Consumer Duty, which was designed to ensure financial firms put customer needs first - especially in moments of vulnerability.

The FCA introduced guidance for dealing with vulnerable consumers as far back as 2021, yet some banks still appear to have learned little.