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High street banks are in the sights of the FSA over concerns fee-based current accounts costing up to £300 a year are being mis-sold to millions of customers.
Packaged accounts are routinely sold to customers in branches, over the phone and online as an ‘upgraded' version of their ordinary current accounts, and cost from £5 to £25 a month.
Banks have been accused of mis-selling the accounts to customers who don't qualify for the benefits.
According to the Daily Mail, the FSA launched an investigation into the accounts more than a year ago after it became concerned at the way banks were targeting customers with the products.
The FSA will reveal the results of its investigation within the next few days, the paper said.
Campaigners are hoping the tougher rules will force sales staff to check customer suitability before they buy.
Most packaged accounts include extras such as travel insurance, breakdown recovery and mobile phone cover, as well as ‘perks' like commission-free travel money and free access to airport lounges.
Typically, this might be an older customer who is too old to claim on the travel insurance because it has a cut-off at 65 years of age or who has a pre-existing medical condition.
Customers have also been left worse off because parts of the packaged account have been of poorer quality than if bought separately, or they already have cover elsewhere - thus, needlessly, and expensively, doubling up on insurance.
Last year, the Independent Banking Commission estimated that almost one in five of Britain's 54 million current accounts are paid for.
Research from consumer group Which? suggests that around a third of consumers don't use the extras for which they are paying, wasting between £240m and £320m a year.
As part of its investigation, the FSA demanded evidence about the way bank branch staff explain the perks on offer, the quality of insurance cover and whether customers actually use what they pay for, according to the Mail.
Internal documents leaked to Money Mail revealed that last year, a Barclays salesman who sold a Premier Life account - charging up to £25 a month - to a student would earn a ‘conquest value' of 340 points towards his bonus target.
This compares with 25 points to sign up someone for the bank's will-writing service and 100 points for getting someone to take out a credit card.
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FSA catches banks mis-selling
As an IFA I have a fairly low regard for banks and the advice they proffer. However, surely, anyone who is shown a bank account for which they have to pay a monthly charge (as opposed to the account they have which is 'free') is capable of weighing up whether the embedded perks are of value to them personally. The trouble is that the FSA now thinks it has a duty to protect every person against every possible detriment, no matter how small. The FSA will eventually stifle to death all commercialism in financial services and the UK economy will collapse as a result. The FSA should invent a new crime - it's called MIS-BUYING also commonly known as being a plonker! Why is the FSA getting involved in this low-level stuff - the consequences for any individual are hardly life-changing. Doesn't caveat emptor apply on anything where the FSA wants to justify its own existence.
Posted by: Bill Wells
Nothing new
As Keith Jayne says this is nothing new, it has been happening since at least the mid 90's when I still worked for two different banks consecutively. One worse worse than the other. A good proportion of my staff over the last 18 years have either been ex bank or their wives. Funnily enough, they then talk to their ex colleagues, none of which trust their employer's advisers and they then often ask to meet with me. Hence no advertising budget needed.... A prime example of bank stupidity as last weeks announcement by RBS that seasonal parties were to be axed. What message does THAT send when bonuses are still being paid to senior staff! And now it's your taxes that are mismanaging the banks rather than shareholders. What a laugh. Perhaps we should be telling them the errors of their ways, but all the time they are so stupid, even with RDR, they will still not get the market share they want.
Posted by: Phil Castle
A free service?
There is another issue with the chargeable current accounts - HSBC customers are offered them "free" if they keep £50,000 on deposit or in a structured product. My elderly client is receiving 0.70%pa gross on £30,000 of her deposit and is nervous about moving the cash. Her only tangible benefit is that she goes 'upstairs' in her branch to pay off her credit card balance each month. This perk is costing her £500pa net on the £30,000 she could move away now - significantly more than paying the monthly fee.
Posted by: Joss Harwood
Bravo
Bravo Bill Wells - this was exactly the reaction and coment in our office when I read this out and before we saw your comment. Would you like to be the new Business Secretary as you seem to have a sensible approach in tune with the majority of honest hard working IFAs who are trying to "eek" out a living from what is being left for us to "eek" from.We used to joke that the "fun police" would be round if we were too happy at work; now we do not joke in case the FSA feel that we are enjoying working and not being serious enough to give a good impresson to the clients. Next RMAR may have a question about what colour shoes we wear to work. It has got that daft.
Posted by: dwinsal
A latter day Plato
Bill Wells for PM! Commentaries always pithy and full of common sense.
Posted by: harryKatz
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THE BLACK HORSE HAS BOLTED
Well, HOORAY!!! No, this is not a new revelation. Stable door, black horse bolted. The headline indicates that this issue has been caught early!! For heaven’s sake, I pointed this out back in March this year. As a reminder, a potential client was introduced to me by an existing client. This person was about to retire from Lloyds after nearly 40 years service and was taking early retirement because they were absolutely sick and tired of the pressure heaped on them by the Lloyds hierarchy who were on their back constantly about them and the staff pushing AVAs (added value accounts). My client disagreed with the concept; seeing it as the next ‘mis-selling’ issue, and now it appears they were quite right. Apparently, if an AVA was not 'bought' by an eligible customer, then apparently the staff member was required to write a report on why one was NOT sold. If you are interested (as I was) why this client came to me for advice…..THEY DIDN'T TRUST THE ADVICE of the staff (ex-colleagues of course). TCF…..doesn’t apply to banks of course.
Posted by: Keith Jayne