Millions of savers are being penalised for letting their money sit for years indoor-paying savings accounts offered by their current account provider, the City Watchdog warned today.
After a nine month investigation into the UK's £1 trillion cash savings market the Financial Conduct Authority has concluded that banks penalised loyal customers with lower interest rates.
In response to the probe's findings Which? executive director, Richard Lloyd, said: "Consumers are losing out on billions of pounds and the banks are simply not doing enough to help customers get the best deals."
Problems grow because many consumers do not shop around. The regulator's investigation concluded that the largest personal account providers are able to attract a large proportion of easy-access deposits despite offering lower rates.
Christopher Woolard, director of policy, risk and research at the FCA, said: “Our preliminary view is that while some aspects of the cash savings market are working well competition does not appear to be working in the interest of many consumers."
The Watchdog will now investigate further before deciding whether to take action.
It will consider ways of ensuring that more consumers are aware of the rates they receive and the rates offered on other accounts.
It will particularly look at what information customers are given when rates change, especially after any short-term introductory offer ends.
It is also considering what can be done to make it easier to move savings to a new provider, particularly to the so-called challenger banks, and whether other intervention may be necessary.
“In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal. We want to look more closely at what is inhibiting the majority of consumers from getting better deals," said Mr Woolard.
The ideal situation is a market in which informed consumers are able to take advantage of the best products, with firms actively competing to win business by improving the products they offer, the FCA said.
It will make its final report in the autumn, but Which?'s Lloyd said banks should start to play fair now.
"While the regulator continues to investigate providers should scrap the savings trap and do more to help people make the most of their money. Banks should be crystal clear about interest rates, let people know when bonus rates come to an end and make it easier for people to switch," he said.Reuse content