The Financial Services Authority (FSA) yesterday launched a consultation to help formulate a crackdown on banks and building societies that offer fee-paying current accounts. Sheila Nicoll (right), an FSA director, explains why it wants change and how you can help create the new rules.
We are concerned that packaged accounts may be sold to customers who don't properly understand the benefits or wouldn't be able to claim on key insurance policies.
Packaged current accounts include a range of add-ons – such as insurance policies, better deals on savings accounts or loans, and other perks such as ticket discounts – and can cost £25 or more a month.
The proportion of people with a packaged account has soared to 20%, with many finding them a convenient and cheap way to bundle several products.
We want to introduce new rules so banks and building societies offering packaged accounts will have to:
- Check the customer is eligible to claim under each policy and share that information with them.
- Provide customers with an eligibility statement each year, which encourages them to consider whether their circumstances have changed and, if so, whether the policies still meet their needs.
- Ensure sales advisers who recommend packaged accounts firstly establish whether each insurance policy in the package is suitable and alert customers if some are not.
This will help customers make an informed decision about whether the packaged account is right for their circumstances.
Have your say
Whether you have a packaged account or are considering opening one, we want to know how you think banks and building societies can make the benefits and their costs clearer.
You can also tell us if you know whether you're getting a fair deal, whether you want a breakdown of the benefits and their costs, and what you would need to shop around and compare prices for each of the products and benefits you might use.
For example, have you looked at a packaged account to see whether you are eligible to claim on the insurance policies if something happens to you while travelling outside of Europe, if your car is damaged or your mobile phone is stolen?
Let us know what you think so we can improve the way packaged accounts are promoted and sold to you (see the FSA's consultation document for how to respond).
Five steps to packaged protection
Several consumer groups, such as MoneySavingExpert.com, have suggested people aren't getting value from packaged accounts because it's difficult to compare the price for each of the benefits with the overall cost of the account.
But there are steps you can take before you sign up to a packaged account to see whether it suits your circumstances.
- Step 1. Consider whether you will use each of the benefits included in the package account or already have them elsewhere.
- Step 2. Check with your bank or building society to ensure you'll be eligible to claim on any insurance policies that are part of the account.
- Step 3. Compare the yearly cost of a packaged account against the price you would pay to individually buy each of the benefits you expect to use.
- Step 4. Make sure you are aware whether you need to activate benefits or register your details before the cover kicks in.
- Step 5. Consider whether your circumstances have changed in case you'll no longer be eligible to claim on an insurance policy included in the packaged account.
Views expressed aren't necessarily those of MoneySavingExpert.com.