OFT announces crackdown on cash Isa transfers

29 June 2010 0:00 am | Updated: 29 June 2010 11:27 am | By Chris Salih

In addition to speeding up transfer times, the banks have also agreed that interest will start to accrue no more than two days after funds have been received from the old provider.

The rules, which come into effect from December 31, 2010, follow a super complaint made by Consumer Focus in March.

The consumer group said 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.

The British Bankers’ Association will monitor all banks to ensure they meet the new transfer timeline, with a  summary to be provided to the FSA. Banks have also committed to show interest rates on cash Isa statements from the 2012 Isa season and from July 1 this year all customers with more than £500 will receive pre-notification when a bonus or introductory interest rate ends if the bonus rate has applied for six months or more.

BBA executive director for retail banking Eric Leenders says: “This is a clear example of how the industry has been listening to the concerns of customers and consumer organisations and we broadly welcome today’s report by the OFT.  The guidelines the industry produced two years ago have helped to drive transfer times lower and these new industry commitments will bring added benefits to customers.

“We’ve also taken the opportunity to review existing practices and will monitor the banks’ performance against the new target.  We have already started to look at ways in which the process can be made even faster, including how supporting data can be transferred electronically.”

The Tax Incentivised Savings Association director general Tony Vine-Lott says: “Some providers have fully embraced the implications of the FSA’s TCF ‘Treating Customers Fairly’ requirements and in spite of considerable systems issues have made tremendous progress.  Regrettably, others though have persisted in dragging their feet. TISA fully supports and endorses the OFT’s findings on cash Isa transfers and will work closely with the BBA, BSA and FSA to help fulfil its recommendations. ”

OFT senior director for services Clive Maxwell says: “’This is an important market for the 17.5 million consumers with £143 billion of savings in cash Isas, and also for the wider economy since those savings support lending to many households and businesses. Our work over the past 90 days has revealed that, whilst there is often strong competition between providers in this market to win new savings, the transfer of cash ISAs is taking too long and there is not enough transparency over interest rates. The voluntary changes announced today will give consumers a fairer deal and drive stronger competition. We are grateful to Consumer Focus for bringing these issues to our attention.”

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