Most local banks are failing to give new customers information about the early repayment of loans or account fees, a mystery shopper exercise has indicated.

The Malta Financial Services Authority and European Banking Authority carried out a mystery shopper exercise to assess how banks and other credit instititions are treating customers seeking loans or payment accounts, what information they are providing them and what they are failing to disclose.

People posing as prospective clients were sent to financial institutions with instructions to request a personal loan or account and to track responses and information given.

In 50 interactions made regarding personal loans, key information was not disclosed at the initial inquiry stage, costs were not clearly explained and shoppers told to check bank websites instead of being given direct answers.

In 62 per cent of cases, mystery shoppers were not given information about conditions related to early repayments of loans.

More positively, practically all (96 per cent) of institutions reviewed did not try to increase the credit requested by the mystery shopper by for example automatically adding a payable fee to the loan amount. Furthermore, client-facing staff did not actively try to cross-sell other bank products.

Mystery shoppers were also tasked with asking about opening a new account in 50 separate interactions with bank staff. In just 11 per cent of cases were they given details about the full range of payment options available. In 75 per cent of cases, staff, did not discuss optional services associated with these accounts.

And in 63 per cent of cases, banks did not give prospective clients a document detailing account fees. These documents were only given to customers when they asked for them, and were often hard to locate on institutions’ websites.

The documents themselves were generally in line with standards required by regulations.

"While certain positive practices were observed, the findings highlight areas where institutions need to improve,” said MFSA head of conduct supervision Sarah Pulis.  “Information on costs and rights should be readily available and presented clearly to consumers, across all channels, as early as at enquiry stage. The MFSA also expects bank staff to be regularly trained on product knowledge, professional conduct, and accurate information provision.” Pulis said financial institutions seemed to be very willing to take the feedback onboard and improve their processes.

Christopher P. Buttigieg, MFSA’s chief officer supervision, added: "Ensuring that the interests of consumers are properly safeguarded is one of the MFSA’s primary objectives. Our supervision also focuses on the business conduct of financial service entities, to make sure they always act in the best interest of consumers. This mystery shopping exercise continues to underline the importance that we give to consumer protection."

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