Whether you believe it's a banking industry con or simply a cock-up, there is no doubt that the system of allowing customers to transfer their individual savings accounts between providers is badly in need of repair.
After years of dealing with an opaque, costly and antiquated process, the 17.5 million savers who invest the £158bn currently in cash ISAs can look forward to a better deal from banks and building societies – but not for up to two years.
New guidelines from the Office of Fair Trading state that providers should reduce the time taken to transfer money from one ISA to another to 15 working days, down from 23 by 31 December, and that there should be much greater transparency over interest rates. At the moment, only around 15 per cent of savers receive statements that include their rate, but all statements will include this information by May 2012.
The announcement comes after a 90-day OFT investigation – prompted by a "super-complaint" lodged by Consumer Focus, the independent champion for UK consumers – found that several elements of the ISA market were harmful to savers. Issuing its complaint in March, Consumer Focus said that cash ISA holders were losing up to £3bn worth of interest because of the way the market operated and demanded that interest rates become more transparent and that transfer procedures be speeded up so that consumers do not have to wait months for their cash to be in the account of their choice. And while in banking limbo, both providers have been accused of trying to evade responsibility for any interest payments, each claiming that the account was with the other.
Although welcoming the regulator's decision, Mike O'Connor, the chief executive of Consumer Focus, was disappointed by the time given to banks to mend their ways.
"We live in the age of keyboards, not quills. ISA transfers should take days, not weeks, certainly not over a month," he says. "For competition to work for consumers, they need to be able to switch simply, quickly and with the right information. The 15-day transfer guideline is welcome, but it must be a benchmark for banks to improve upon – the bare minimum and not a target."
Mr O'Connor's organisation is not the only consumer group concerned with the time taken for cash to be transferred from one provider to another, nor to be disappointed that the OFT did not insist on a tighter deadline for introducing electronic transfers.
"If transfers go wrong, they seem to go really badly wrong," says Vera Cottrell of Which? "It's not a case of just going over the 23 days by a couple of days. Either it's within the current guideline or it can take months. We have heard of cheques being lost in the post five times in one transfer. Electronic transfer is a must-have. It is not something that the banks can dismiss as just too expensive. They need to put customers first and bring transfer time down to no more than 10 days."
The British Bankers' Association says that it is setting up a study on the "feasibility of introducing electronic transfers", which could report by the end of the year. "There is a lot of paper involved in the transfer of ISAs to ensure that the correct and sufficient information is sent from one provider to another, but the direction of travel is to move to an electronic system," says Peter Tyler of the BBA. "There is not enough space in the electronic payment system for all the information needed under the ISA regime. With our members, we will be looking to find a mechanism that will work."
The Royal Bank of Scotland is one of only a handful of providers already working towards an electronic system.
The second area of the OFT's investigation concentrated on the lack of transparency over interest rates. Again, consumer groups are disappointed that banks have almost two years to rectify the problems.
"It is disappointing that the banks have set a deadline of May 2012 for putting interest rates on statements. Consumers will be right to ask if it is reasonable to wait so long for such a basic change," says Mr O'Connor.
Concern at the lack of transparency has become more pronounced since onset of the credit crunch, he says, as until then ISAs had generally offered a higher rate than other savings accounts. But that changed substantially, with the average cash ISA paying depositors just 0.41 per cent. The shift was far from transparent, however, as banks used much higher short-term introductory rates to attract savers, and then statements did not detail when those offers expired. A Downing Street petition protesting against this lack of transparency received 32,000 signatures last year. According to Consumer Focus research, Santander, Royal Bank of Scotland, Cheltenham & Gloucester and Yorkshire were among the worst offenders for offering rates of less than 0.1 per cent.
Consumer groups believe the banks and building societies are also relying on savers being too laissez-faire when it comes to switching accounts for better rates.
"Essentially, banks are relying on our apathy to make their money," says Mr O'Connor. "People set up their ISAs and only years later realise that had they switched they could have earned thousands rather than hundreds of pounds."
And you shouldn't put off a search for better rates until the new year, hoping to avoid transfer problems. Just ensure you keep details of every contact with your current provider and the new one; remind them of the 23-day limit, and if the worst comes to worst, refer your case to the Financial Services Ombudsman for a ruling and compensation if delays have cost you interest.
Kevin Mountford, the head of banking at Moneysupermarket.com, warns savers not to wait until December to transfer accounts if there are better rates out there. "My advice to consumers is to be proactive and ask your provider what rate of interest you currently receive," he says. "If you have had an ISA for more than 12 months, then it is almost certain that you would be better off shopping around for a new deal as providers routinely leave old ISA savers to languish on low rates."
Vera Cottrell, Which?
This reform is long overdue. We hear of people who fill in the forms wrong, but no one at the bank bothers to tell them. The first they hear is when they call a week later to chase the transfer and are told it's been stopped. These changes have to be just the start.