Watchdog warns on packaged accounts

Paying for a bank account with travel insurance that may be useless is "money down the drain" warns FSA

The Financial Services Authority is forcing banks to stop selling often useless paid-for current accounts. The City watchdog yesterday announced new rules designed to protect people from being sold expensive extras that are of no use to them.

The FSA will introduce new restrictions from next year that will force banks to check whether their customers are actually eligible to claim under the insurance policies, which are usually included to make the accounts appear to be good value.

Marks & Spencer, for instance, is launching its first current account in the autumn but will charge customers £20 a month for the privilege.

In return, anyone who signs up will be given a range of so-called benefits, chief of which is a family travel insurance policy, which M&S claims is worth £245, a fiver more than the annual cost of the account.

But the City watchdog has warned that such deals may be worthless. Sheila Nicoll, FSA director of policy, said: "These products are often referred to as upgraded accounts but if you end up paying for an element you can't claim on, it's money down the drain."

She gave warning to banks, building societies – and retailers – which offer packaged accounts that the regulator will call them to account to ensure customers do actually get value out of the expensive accounts.

"We are closely monitoring the promotion of packaged bank accounts, and the new rules will make sure customers know what they're buying and that they can rely on the product or have the limitations explained before buying," Ms Nicoll said.

An estimated 10 million adults, about one in five, has a packaged account, paying up to £20 a month in exchange for benefits such as insurance, extra overdraft facilities or gimmicks such as music downloads or, in M&S's case, free coffee.

The new rules will be introduced from the end of March next year. The FSA will then require current-account providers to check whether a customer is eligible to claim under each policy. Staff flogging the accounts must establish whether policies are suitable for individual customers and tell them if they are not.

Even if customers take out the accounts, banks and building societies will have to provide then with a yearly eligibility statement setting out the requirements to claim for each of the benefits under each insurance policy in the package. The FSA hopes that move will prompt customers to check whether the policies are still useful.

The watchdog is also considering forcing banks to tell customers who have triggered the age limit for claiming on the travel insurance element, or warn them if they will do so before the next statement is due.

Andrew Hagger, who writes about packaged accounts in this week's Money Insider column on p57, said that they may not be good value for many.

"If you're not going to make use of the monthly benefits on offer with the fee-paying current accounts, then it's a no brainer, you should switch back to a standard bank account and save yourself up to £240 a year into the bargain," he said.

"If you asked people what they want from their bank, many will specify good customer service, low and transparent charges and a simple product on their wish list. Free drinks vouchers or music downloads are likely to be seen as more of a gimmick.

"However, rather than dismiss all packaged accounts out of hand, it's worth looking closely at the deals on offer," he added.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
News
These photographs released by the University of Maryland Medical Center show images of full face transplant recipient 37-year-old Richard Lee Norris of Hillsville, Virginia
mediaGQ front page features man who underwent full face transplant
Sport
Lionel Messi looks on at the end of the final
football
Arts and Entertainment
tv
PROMOTED VIDEO
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
News
The Swiss Re tower or 'Gherkin' was at one time the UK’s most expensive office when German bank IVG and private equity firm Evans Randall bought it
news
Sport
Moeen Ali wearing the 'Save Gaza' and 'Free Palestine' wristbands on his left arm
cricket
Arts and Entertainment
The Great British Bake Off 2014 contestants
tv
Life and Style
tech
Arts and Entertainment
filmThe Battle of the Five Armies trailer released
News
news
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    HR Business Partner (Maternity Cover 12 Months)

    £30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...

    Business Analyst - London - Banking - £400-£450

    £400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...

    Project Manager,Conduct Risk,London,£5-600pd

    £500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Fund Administrator - Edinburgh - £22 p/hr

    £20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...

    Day In a Page

    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz
    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on