Consumer Focus, the official consumer champion, has today issued a super complaint to the Office of Fair Trading about Cash ISAs.
It estimates that 15 million Cash ISA holders could be losing out up to £3 billion in interest a year because of the way the market works (see the Cash ISA guide).
The complaint was partly inspired by a meeting with MoneySavingExpert.com, two months ago, to review the consumer manifesto, which includes ISA transfers and the savers rights petition, which attracted 31,000 signatures on the Number 10 website.
Philip Cullum, Deputy Chief Executive of Consumer Focus, says: "Evidence shows there are profound issues with Cash ISAs and that action is needed. We value MoneySavingExpert.com's experience and expertise.
"We owe a huge thank you to everyone there and to the consumers who have helped us make what, we think, is a pretty convincing case."
The Super Complaint
A super complaint is a legal right given to a few consumer organisations to ask a regulator - in this case the Office of Fair Trading - to look into an issue it feels is significantly harming the interests of consumers.
The core content of this complaint is as follows:
- Slow transfers: savers experience unnecessary and costly delays when transferring ISAs.
- 'Bait pricing': providing new customers with bonus rates which leave a poor rate of interest upon expiry.
- Hidden interest rates: Lack of clarity makes it difficult for consumers to find out their interest rate, especially on older accounts.
- Confusing product names: The similarity in product names means many consumers don't know what account they have.
- Transfer rules: Some of the best paying accounts do not allow transfers in from previous years' ISAs.
Mike O’Connor CBE, Chief Executive of Consumer Focus, said: "At less than half of one percent interest, the average ISA saver is getting a poor deal. Of course, people could vote with their feet and switch to the 3% deals currently on offer but we are concerned that the cumbersome transfer process and poor information provided by the banks inhibits doing this.
"There is evidence that very few people do actually switch their accounts. It beggars belief that in 21st century Britain it takes a month to transfer information and funds from one bank to another.
"Cash ISAs are designed to encourage long-term saving, but many people find their rates slashed to next to nothing after a relatively short time. Providers are using consumer inertia and confusion to drop ISA rates faster than on other accounts. The way providers inform customers about their accounts makes it difficult to get the best deal."
Martin Lewis, MoneySavingExpert.com creator, says: "Historically low interest rates mean the millions who rely on savings for income now earn derisory amounts.
"That's why we desperately need action against companies who profit by keeping savers in the dark; they deliberately avoid printing the interest rate on paper and online statements to stymie competition, and launch many similarly named accounts so even looking up the rate is an exercise in confusion.
"Over 30,000 signed our petition objecting to this practice.
"Even if you do get through that miss-mash, the process of transferring to increase rates, especially in the Cash ISA market, is a nightmare. It's a delight that Consumer Focus has decided enough is enough and are going to tackle this head on."
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