Halifax, the mortgage bank arm of the HBOS group, this week blamed a too-heavy regulatory burden on its decision to discontinue its popular Extras Current Account at the end of this year. This is one of the first occasions on which the regulator has effectively forced a legitimate product to be withdrawn.
The Extras account, which was launched only last year and heavily promoted on television, pays 2 per cent interest, charges 12.9 per cent for overdrafts, offers discounts on car and home insurance and free "add ons" such as travel insurance and roadside assistance. Customers have to pay £1,000 a month into the account to qualify for the full package.
According to a Halifax statement: "In January 2005 there are a number of regulatory changes relating to the sale of any insurance-related products due to take place. As we currently offer free travel insurance as part of the Extras package, we will naturally be impacted by these changes. The account is run on very low margins and the cost of complying with all the regulatory changes required to train all our staff no longer makes it economically viable for us to offer this product for free."
So from 1 January Halifax will not open any new Extras Accounts. Existing customers will not be affected, but financial advisers say the account will no longer have such a high priority.
Stuart Glendinning, director of moneysupermarket.com, the price comparison website, said: "It is a shame the Halifax Extras account is to be withdrawn. Halifax has done a lot to assist in the shake-up of this stagnant market by offering attractive alternatives to the main propositions from the big banks. This packaged account offered an attractive deal, did not levy any fees and its withdrawal is a loss to the customer. This is another example of well-intentioned regulation having the opposite effect."
But a Halifax spokesman said: "The packaged current account market remains a prime target area for us."Reuse content