The City watchdog could ban savings accounts that offer attractive teaser rates but then leave people languishing with little or no interest on their money.
The move could follow an investigation into the UK’s £1trn cash savings market launched yesterday by the Financial Conduct Authority. Its study will also examine how often people switch their savings accounts.
A Which? investigation last year discovered that savers were missing out on £12bn-worth of interest because their accounts were paying miserly rates as low as 0.1 per cent.
But many had originally topped the best buy tables when launched because of confusing introductory deals. Once these teaser deals expire, the interest paid on the accounts becomes negligible. Which? discovered some 1,300 savings accounts paying ultra-low rates.
Which? executive director Richard Lloyd said: “The FCA should look specifically at zombie accounts that lure people in with high introductory rates which then drop down to often very poor rates of interest.” Martin Wheatley, the FCA’s chief executive, said yesterday: “We will examine an area that affects most people and see if there is action we need to take.”
That was taken to mean that it would consider outlawing misleading savings rates that trick people into opening what can eventually prove almost worthless accounts.
Earlier this year Mr Wheatley accused lenders of “taking advantage of consumer inertia.” Yesterday he said: “Switching rates are low for financial services products and savings accounts are no exception, with people twice as likely to go with their existing provider than to a competitor.”
Simon Healy, savings chief at Aldermore bank, said: “For years, savers have been manipulated by financial institutions which lure them into high-paying accounts through advertisements or best buy tables only to slash the rates at a later date. If this review helps end this long-standing abuse of savers it will be a triumph.”
But money-saving expert Martin Lewis warned that banning bonus rates would be “a terrible move”, hitting savers who do search for better deals and move money.
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