The 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.