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FCA moots enforcing basic rate for cash savings

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpgThe FCA has kick-started a discussion as to whether a “basic savings rate” should be introduced on cash products.

In a paper this morning, the regulator notes that on easy access cash savings products, longstanding customers are receiving worse interest rates than those shopping around.

Among a range of potential options to address this price discrimination, the FCA has mooted the introduction of a basic savings rate, that would place a floor on the interest providers would be allowed to pay to cash customers across all accounts.

The basic savings rate would be up to individual providers to set and vary as they see fit, but would mean that a single rate would have to be charged regardless of how long the account has been open.

Once they have been open for a set amount of time, for example a year, the basic rate would kick in across all easy access cash accounts and easy access cash Isas, but providers could still offer different rate for accounts opened less than a year ago.

The basic savings rate is currently described as the FCA’s “preferred option” on the supply side.

FCA strategy and competition director Christopher Woolard says: “Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers. While many customers have valid reasons for not shopping around, providers must still treat them fairly, while maintaining competitive rates for those who do.

“Efforts to encourage customers to switch have had limited impact and we remain concerned about the way firms are treating customers. This is why we are considering the introduction of a basic savings rate for older accounts, which would promote competition and help get customers a better rate of interest.”

The regulator first tried to promote switching in 2016 with trial disclosures such as a switching box, but found these to be insufficiently effective.

Firms have until 25 October to provide feedback to the FCA on its latest discussion ideas.



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There are 15 comments at the moment, we would love to hear your opinion too.

  1. All that will happen is that banks will start pulling products.

    What happened to the good old Caveat Emptor rule?

  2. Nicholas Pleasure 25th July 2018 at 9:28 am

    “In a paper this morning, the regulator notes that on easy access cash savings products, longstanding customers are receiving worse interest rates than those shopping around”.

    People who shop around can usually buy potatoes cheaper than those that go to the nearest shop. What are you going to do about that FCA? Call yourselves a consumer champion!

  3. There’s a bit of a theme here. Platforms, Cash Savings, Closet Trackers, Asset Management. Competition is not working because people are lazy. You can’t regulate laziness. Leave it alone for goodness sake, let individual’s take responsibility for their own money, or encourage them to appoint an adviser to help!

  4. So competition doesn’t actually work in this market. Financial services are not baked beans and it’s madness to think that the same things that work for consumer products work in the financial services market. It’s surprising that the solution to this market failure is to fix the price. For a regulator that boasted it wasn’t a price regulator, it looks as if that is exactly what it is becoming, or indeed , has become.

  5. So removing competition…

    Leaving savers with one rate and one rate only

    Remind me again the regulators statutory duties ?

  6. It’s official,they have nothing better to do and are now pretending to be the Bank of England.
    I can’t believe the nonsense emanating from Canary Wharf without objection. Surely, they dont just agree on everything that’s spewed out!

    • Not Canary Wharf any more – looks like they’ve moved: Strategy & Competition Division Financial Conduct Authority
      12 Endeavour Square
      London E20 1JN

  7. Have they really got nothing else to do all day. They are really scratching around to find things to change, amend, alter or generally b*******r up.. Just leave things alone for goodness sake.. 0/1% here or 0.5% there.. does it really male that much difference?

  8. As even the BBC comments

    ” The danger is- if this ever happens – their new weapon could explode in their faces , if banks then react by setting the lowest Basic Savings rate they can get away with”

  9. Julian Stevens 25th July 2018 at 5:42 pm

    On the news this evening I heard that some banks on some accounts pay rates as low as 0.01% p.a. which, by any standard, is not TCF. The FCA is right to seek ways to address this.

  10. They need to stop re-arranging the deckchairs as whilst they may need it, they’d be betetr sorting out the iceburg/UCIS/FSCS GET YOUR PRIORITIES RIGHT YOU IDIOTS.

  11. Game Keeper Turned Poacher 26th July 2018 at 8:02 am

    I can’t believe none of you have spotted the rather ironic name of the reporter.

    @ Sean – caveat emptor was never good and has been slowly replaced through the law over many decades, it allowed information asymmetry to reign supreme in any consumer transaction and is what now gives you the rights you have as a consumer when you buy a product in a shop……unless your happy with being told by the shop that you purchased your £1000 TV, that, when it breaks a week later, its ‘tough….you should have been aware the deal was too good to be true and got your engineer friend out to check it over’ Its the same principle that seeks to redress the balance being applied (to late in my view) to financial services.

    Advisers need to stop bemoaning the caveat emptor principle, its principle has been diminished and anyway, regardless of your view, its here to stay.

    • Julian Stevens 26th July 2018 at 9:27 am

      I tend to agree. Consumers take (regulated) advice because they’re not equipped to marshal and assess for themselves all the relevant information and the factors necessary to make their own decision as to the best course of action. If the adviser recommends a particular strategy then s/he is responsible for the outcome ~ subject, of course, to the usual raft of risk warnings.

      The only situation in which caveat emptor might apply is EO or IC but, even then, if the adviser believes that what the client wants to do is unsuitable, he has a responsibility to make this very clear. If, in spite of this, he facilitates an unsuitable transaction, he can still be held accountable. Hence, I won’t consider IC business and, with only very rare exceptions, I won’t entertain EO business either.

    • There’s me thinking that current accounts weren’t regulated and as the information is readily available to savers caveat emptor would still apply. Where it doesn’t apply is when the buyer isn’t aware or would be expected to be aware of a potential fault etc. like when you (as layman) buy a complex products from a professional such as a car salesman as opposed to a private car sale.

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