The Financial Services has announced a crack down on the sale of package bank accounts, where customers pay a monthly fee for their account in return for various services and freebies such as travel insurance or breakdown cover.
The FSA says that these accounts, which have become a big money spinner for banks recently, have often resulted in consumers ‘throwing their money down the drain’. The fees for these perks can be up to £300 annually, and the FSA is concerned that many of them are not actually suitable for customers in many situations.
New rules have now been published by the regulator, requiring banks to conduct proper checks into whether customers are actually eligible for insurance sold as part of package and that other products are also suitable for them.
Sheila Nicoll, FSA’s policy director stated: “If you end up paying for an element which cannot actually claim on or use, it’s money down the drain. We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure that customers know what they are buying and have any limitations to the product explained beforehand.”
The number of people with a pre-packaged bank account has doubled over the past five years, as well as the number of different ones on sale. All banks said that they were taking steps to ensure that they were only sold to suitable customers and had fully cooperated with the FSA’s investigation.
Speaking to the Telegraph, personal finance expert Mike Ossei, of uSwitch.com said “This is good news for consumers as it brings much needed clarity to the market for paid current accounts. Banks have been signing up customers for too long with little evidence that they actually need or can even make use of the products they are being sold”..