Simon Read: It's about time banks showed more interest in our Isas
Saturday 03 July 2010
Afriend has been waiting more than two months for Santander to transfer his Isa to a rival bank. He switched to get a better rate but has spent several frustrating weeks trying to move the money. He's not alone. There are tens of thousands of people totally fed up with their banks and building societies not being able to do what should be a simple process.
It means they may be losing as much as £3bn in lost interest each year while their savings earn a pittance waiting to be transferred to a better-paying account. An Office of Fair Trading (OFT) investigation – prompted by a super-complaint from Consumer Focus – found that a quarter of Isa transfers take more than 30 days because many banks and building society are, frankly, shoddy in their approach to dealing with the paperwork.
In theory, transfers should take no more than a few days and the OFT has this week decided that enough is enough and is cracking down on the scandal. It has ordered savings institutions to cut down the transfer time to just 15 days by December.
There's no reason for banks and building societies to wait that long, of course. If they have any sense of customer service they will get their act together now, clear the backlog of transfers, and ensure that future transfers are done efficiently.
The OFT also attacked banks and building societies for not providing customers with sufficient transparency about the interest rate they get on their cash Isas. Several high-paying accounts have cut the interest rates to as little as 0.1 per cent without telling their customers. It's left many people getting practically nothing on their hard-earned savings after they have been suckered into opening the accounts by attractive rates.
It's an old and unpleasant trick, but the OFT hopes to make banks and building societies print interest rates more clearly on statements and letters in the future so that people know if they're being ripped off by being paid a low interest rate.
In the meantime, if you have any money in a cash Isa, I suggest you check what interest rate you're being paid. If you're one of millions left languishing with a pathetic rate, transfer your Isa now. And if your bank or building society messes up and delays the transfer, demand compensation.
Talking about jiggery and pokery in financial services reminds me of the controversy surrounding mortgage fees. Just what is a charge of £1,000 – or more – supposed to be for? Some lenders call it a product fee, others a booking fee or an arrangement fee. The truth? It's a rip-off fee.
So, I was pleased to see that First Direct has slashed its mortgage fee to just £99. The offer is only for a few weeks during its so-called "summer sale" but it's the level that the fee should be at. I'd like to see other lenders follow First Direct's lead. With many lenders charging around £1,000 for the privilege of taking out a mortgage with them, it's impossible to easily work out which is the best deal as the fee can add up to a massive part of the cost.
If fees were reduced to a reasonable level then borrowers wouldn't feel so ripped off by them and would be better able to work out which was the best rate. In short, I'd like lenders to put their customers first, ahead of their profits. Is that likely to happen? There's more chance of me being appointed the next England football manager.
Roshni Patel is a 15-year-old student at Stoke Park School and Community College in Coventry. This week she learnt something new: the difference between secured and personal loans, and what a credit rating is. No, she hasn't been forced to get into debt, she was one of thousands of children who have taken part in My Money Week, a scheme run by the Personal Finance Education Group to improve financial education for children in primary and secondary schools across the country.
"I now feel more confident about managing my money," Roshni said after her session, which was run by staff from the Coventry Building Society. Having given talks on money matters to sixth formers at a school in Wimbledon, I know how keen kids are to get more knowledge about finances.
Let's face it, it's essential that they do. Knowing how to manage money is a life-skill that I wish I'd learnt more about when I was a teenager. Giving today's children such knowledge could help them avoid getting into debt worries in the future.
Help for families
Three out of five parents could spiral into debt because of the expense of school holidays, according to poverty charity Elizabeth Finn Care. Yet some £16bn-worth of welfare benefits – as well as thousands of charity grants – is left unclaimed each year.
Families can find out if they're missing out at www.turn2us.org.uk.
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