'Packaged account' rules proposed
Thursday 27 October 2011
The Financial Services Authority (FSA) proposed new rules today to stop banks and building societies selling customers insurance cover along with a bank account that turns out to be "useless".
The proposals relate to the selling of "packaged accounts" - current accounts which are bundled up to include extras like insurance policies and products such as ticket discounts.
The FSA, which regulates the financial services industry, said it was concerned that it was "too easy" for customers to be sold something which they do not need.
It estimates that a fifth of adults in the UK hold such an account - and while some customers get value from the package, others may not.
Sheila Nicoll, FSA director of policy said: "For some people, packaged accounts represent good value and convenience.
"But in other cases customers may find that the insurance cover they have paid for is useless.
"We are concerned that it may be too easy at the moment for firms to sell customers something they do not understand or need.
"We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them."
The FSA's consultation document proposes that banks and building societies selling insurance as part of a packaged account will have to check whether the customer is eligible to claim under each policy and share that information with them.
They should also provide customers with an annual eligibility statement prompting them to check whether their circumstances have changed and whether the policies continue to meet their needs.
The FSA's proposals also said that if the sales adviser is recommending a packaged account they must establish whether each policy is suitable for the customer and alert them if some are not.
The body is also asking for more feedback on how to improve price transparency of packaged accounts.
Firms buy insurance policies wholesale and offer them at discounted rates in the overall package, making it hard for customers to compare costs with standalone insurance products or other bank accounts.
A statement from the British Bankers' Association said: "Packaged accounts can be a good deal for many customers as the services which you get would cost more bought individually.
"However, as with any product, customers should shop around for the deal which suits their own needs best.
"All account details are openly available on bank websites or on request.
"Customers should also remember that no one needs to pay for a current account and there is no need to switch if you are happy with the account you have.
"Our members will now be considering the consultation paper carefully and will respond fully in due course."
Financial research company Defaqto said the number of packaged current accounts available to consumers has increased by 109% since 2006.
Defaqto found that five years ago there were 33 packaged current accounts on the market - a figure which now stands at 69 - and since November 2009 there have been more packaged accounts available than free in-credit accounts.
The average monthly fee for a packaged account has increased over the same period - from £11.59 in 2006 to £15.44 currently, with monthly fees now ranging from £6.50 to £40.
David Black, Defaqto's insight analyst for banking, said: "If someone is considering opening a packaged current account, they should look at each of the incentives on offer and decide whether they need the benefit and, if so, whether what it provides is suitable for their circumstances - and ultimately represents good value against the monthly fee.
"The three high-value incentives currently offered by most packaged current accounts are travel insurance, motor breakdown cover and mobile phone insurance.
"For each benefit, it is important for people to look at the type and level of cover that is actually being offered and to compare these against other accounts and also standalone alternatives.
"In addition, people need to be mindful of duplicating cover they may already have in place, for example as part of workplace benefits.
"Essentially, everyone's needs are different so people should look to ensure that any account they choose matches those needs - and key to this is looking at the features of the account and comparing different options on this basis."
The Financial Ombudsman Service said it receives around 100 to 150 complaints about packaged accounts each year.
Typical complaints include people not realising they had a packaged account, not fully understanding how much the account would cost, and problems with the additional extras not being applicable or useful for the consumer's needs.
A spokesman for the ombudsman said: "In addition, we also see complaints about the specific product attached to the bank account, such as breakdown assistance, mobile phone and travel insurance.
"These complaints often arise when the consumer attempts to use the products, only to find that they aren't covered or have more limited cover than they realised."
Which? executive director Richard Lloyd said: "Which? has found that a third of people don't use any of the benefits offered with packaged current accounts.
"This means that they're wasting between £240 million and £320 million in bank fees each year.
"We're pleased that the FSA has investigated this and is proposing further action.
"People should only have a packaged account if they're absolutely certain that it will be cheaper for them and they'll use all of the separate benefits offered.
"Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare."
Mike Regnier, director of current accounts for Lloyds Banking Group, said: "We welcome the publication today of the FSA consultation paper on packaged accounts.
"In particular, we are pleased that they have recognised that these accounts can provide good value to customers.
"Our packaged accounts are designed to be simple whilst offering comprehensive levels of cover for the things that customers really need, and compare favourably to other stand-alone policies. Furthermore, our sales process is designed to identify and match customer needs.
"The FSA has put forward sensible suggestions into ways into which this market can further be improved.
"Along this line, our existing policies and sales processes already deliver many of the recommendations put forward in today's consultation paper."
Money roundup video: It's getting harder to sort out a mortgage
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Five Questions On: GB Energy's new tariff
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
How to start your own internet business
- 2 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 4 Amy Schumer: 'I'm 160lbs and can catch a d**k any time I want'
- 5 Isis executes three gay men by dangling them from top of 100ft building and letting go
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
Day In a Page
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away