LEGAL RELATIONSHIP

Describe and Analyze How the Legal Relationship between a Bank and Its Customers Can Be Distinguished From That between Other Service Providers and Their Customers



Describe and Analyze How the Legal Relationship between a Bank and Its Customers Can Be Distinguished From That between Other Service Providers and Their Customers

Introduction

Customer relationship management (or CRM) is an emerging managerial philosophy closely aligned with the intersection of marketing and information technology. CRM suggests that the goal of a business organization should be to develop, enhance, and maintain relationships with its “best customers.” (The term customer is used here to include both end-user consumers and business-to-business customers.) Sweat (2000) mentions terms such as “strengthening the bond between customer and company,” “customer-focused strategy that drives profitability,” and “customer retention” are often associated with CRM. In this view, not all customers are created equal, and it is in the organization's interest to create long-term relationships with a strategically targeted segment of the customer population that will best contribute to the organization's success. Often success is defined in terms of profitability (for example, “the 20% of the customer base that is responsible for 80% of the revenues”), although customers may also contribute to organizational success through enhancing the organization's image, word of mouth (Sweat, 2000), or other types of influence. However success is defined, the intention is to identify, target, and nurture those customer relationships that are most critical to that goal (Sweat, 2000). This paper describes and analyzes how the legal relationship between a bank and its customers can be distinguished from that between other service providers and their customers in a concise and comprehensive way.

Discussion

The banking service plays a major role in within modern society. It is estimated that over 90% of all adults in the UK hold a bank or building society account. Therefore the proper deliver of services by banks is of significance to the majority of UK consumers. The issue of confidentiality is an essential feature of the service (Ledingham & Bruning, 1999).

In 1989, the Treasury and the Bank of England set up the first independent review on banking services law and practice within the UK. That report is known as the 'Jack Report'. The objectives of the report were to achieve four main objectives:

i) achieve fairness and transparency of dealings

ii) maintain confidence

iii) promote efficiency

iv) preserve the bankers' duty of confidentiality.

Amongst its 83 recommendations, the Report recommended that the government should not further extend the statutory exceptions to the duty of confidentiality, without taking full account of the consequences for the bank/customer relationship.

The obligations of confidentiality in relation to banking law within the UK stem from the common law. The leading case in this area was Tournier v National Provincial and Union Bank of England. The bank had released information related to the plaintiff's debt to the bank to his employers, and this subsequently led to his dismissal. The Court of Appeal confirmed that it is an implied term of the banker/customer contract that the banker has a duty of ...