Claims firms blamed as complaints soar over packaged bank accounts

Many customers complained they were switched to the accounts without their knowledge

Click to follow
The Independent Online

More than 1,000 people a week are complaining to the Financial Ombudsman Service (FOS) that they've been mis-sold a packaged bank account.

Around 25,500 customers voiced grievances with the accounts in the first half of this year – more than in the whole of 2014.

However, the FOS blamed claims management firms for encouraging bank customers to make a complaint. Claims managers take a cut of any compensation offered. The speculative nature of packaged account cases is suggested by an "uphold rate" – where the ombudsman finds in the customer's favour – of just 10 per cent. The average rate for all financial products is 57 per cent.

Packaged bank accounts are current accounts that levy a monthly fee, typically between £5 and £25, in return for a number of benefits – such as mobile phone and travel insurance, car breakdown cover, and discounts on other products.

But many customers complained they were switched to the accounts without their knowledge or that they didn't need the insurance. In some cases the accounts were sold to elderly customers who then found age restrictions stopped them claiming on the cover. Other people asked for their account to be cancelled but the bank failed to do so.

Last month, Barclays set aside £250m to compensate customers who might have been mis-sold the accounts.

Hannah Maundrell at the comparison site Money.co.uk said: "Packaged current accounts have long been the favoured springboard for banks and building societies to cross-sell customers their full portfolio of products, whether they need them or not. Pushy sales tactics have left many consumers paying a monthly bill for benefits that aren't suitable and don't give them good value for money.

"With 83 packaged accounts currently available to consumers, costing up to £204 each year, this could be an expensive choice in the long run. On average, consumers part with just under £150 a year for these accounts so compensation could be substantial."

The FOS dealt with a total of 173,994 new cases covering all types of financial product in the first half of 2015 – an overall rise of 8 per cent on the previous six-month period.

Payment protection insurance (PPI) accounted for 55 per cent of cases – with 94,091 new complaints filed – and packaged bank accounts sparked the second-highest number of grievances.

"Though the number of new PPI cases has reduced ... the decline has not been as steady or as marked as generally expected. This is as least in part due to the continued high levels of activity by claims managers in this area," said the chief ombudsman Caroline Wayman.

But Nicolas Frankcom at uSwitch.com said: "Another week and yet another potential banking scandal where hundreds of thousands of consumers could be victims of unscrupulous mis-selling tactics ... People want products they need, not just something that makes banks money."

Looking for credit card or current account deals? Search here

Comments