Consumer Focus group issues super-complaint to OFT over cash Isa market
Share
The Consumer Focus group has issued a super-complaint to the Office of Fair Trading about the poor state of the UK cash Isa market.
The consumer group says that 15 million cash Isa holders could be losing out on interest worth as much as £3bn a year because of the way the market operates, pointing to a lack of transparency and delays when transferring accounts.
A super-complaint is made under the terms of the Enterprise Act 2002 and means the OFT has to respond within 90 days on what actions it intends to take.
An investigation carried out by the group found that on average cash Isa holders are getting 0.5 per cent less in interest rates despite the rates being offered, which are currently over 3 per cent. These rates tend to drop after the first year, while the Consumer Group also says that savers looking to transfer are facing a number of unfair obstacles in transferring, with a third of people taking longer than five weeks and only one in 10 transferred in less than two weeks.
Other problems include a lack of communication making it difficult to compare accounts; confusion around which account a saver has and arbitrary rules imposed by providers forbidding transfers into some of the most attractive accounts as some of the best paying accounts do not accept transfers from allowances from previous Isa seasons.
Consumer Focus was created by bringing together the National Consumer Council (including the Welsh and Scottish Consumer Councils), Postwatch and energywatch.
Consumer Focus chief executive Mike O’Connor says: “’At less than half of one per cent interest the average Isa saver is getting a poor deal. Of course, people could vote with their feet and switch to the three per cent 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.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
Readers' comments (6)
Andrew Moore | 31 Mar 2010 9:38 am
All business conducted with banks should come with a health warning much as a cigarette packet.
Unsuitable or offensive? Report this comment
Evan Owen | 31 Mar 2010 9:49 am
If any advisers believe their current clients, and potential customers, will lose out because of the RDR they should encourage them to write to http://www.consumerfocus.org.uk/
It is a government quango so don't expect an unbiased response.
I'll be submitting my own thoughts, please take up the lead.
Also write to the OFT explaning how you think the banks are being allowed to carry on as usual which confirms what the OFT said in its letter to the FSA.
While you are at it write to the EU Competition Commission.
And don't waste any money on legal fees without asking me for a second opinion on the merits of success.
Unsuitable or offensive? Report this comment
Saran Allott-Davey | 31 Mar 2010 9:51 am
Great that this major issue is being taken seriously at last. The Times ran a case study a couple of weeks ago regarding a client of mine with a HSBC cash ISA paying less than 1% who wanted to transfer this and take out new one this year into a decent rate on offer for new ISA business. they would only allow the transfer if client signed up to an expensive monthly fee for an upgraded current account offering benefits of no relevance to the client. Where does this sit with Treating Customers Fairly? ISAs are supposed to be simple but are made complicated by the banks to boost their profits at the expense of those often with little in the way of savings.
Unsuitable or offensive? Report this comment
Peter Elliott | 31 Mar 2010 12:26 pm
This whole issue of ISA's has been the subject of neglect for far too long. We,the loyal consumer, once again find ourselves shut out of all the best deals on ISA's. The idea was to encourage saving. Unfortunately,the idea was passed over to the greedy Banks and Building Societies who have done little to provide good rates over the long term and have provided insurmountable obstacles in the transparency and portability of these very simple financial instruments. Vote with your feet and you might just cling onto a realistic rate for almost six months.
Unsuitable or offensive? Report this comment
Greg Power | 31 Mar 2010 12:52 pm
The OFT & the FSA should stipulate to the Banks that Cash ISA's have to offer their clients a rate always be equal to if not better than their best paying deposit account.
In respect of a comment made earlier about HSBC. Do they not state that their ISA's are stakeholder in design? If so the information your client is getting is incorrect...
Unsuitable or offensive? Report this comment
R Hollingsworth. | 19 Apr 2010 1:14 am
My variable rate ISA's produced a reasonable return over the last 3 years but suddenly without explanation or warning they went down to 0.5% Now I know what they mean by getting a little extra
help from the halifax, now its gone down to o.1% I suppose that 's what they mean by a variable rate. I have used my feet appropriately. R.H.
Unsuitable or offensive? Report this comment