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FSA unveils packaged bank account crackdown

Banks and building societies will be required to check whether customers are eligible to claim on insurance policies sold as part of packaged accounts under new FSA rules.

One in five consumers holds a packaged bank account, where a current account is bundled up with insurance and other features such as overdraft facilities or music downloads.

From 31 March next year, banks and building societies will have to check whether customers being sold packaged accounts are able to claim on insurance sold as part of the package.

Sales staff recommending the policies must establish whether each policy is suitable for the customer and inform them if the policies are unsuitable.

Banks and building societies will also be required to give customers an annual eligibility statement setting out the claim requirements for the policies under the package. The FSA hopes this requirement will prompt customers to check whether their circumstances have changed and whether policies continue to meet their needs.

In addition to the new rules, the FSA is consulting on whether annual eligibility statements should be sent as a separate mailing to customers to highlight their importance.

The regulator is also considering forcing banks and building societies to inform customers who have triggered the age limit for claiming on travel insurance sold as part of a packaged account, or warn customers if they will go over the age limit before the next statement is due.

The FSA says it plans to monitor the promotion of packaged accounts where monthly costs are advertised alongside yearly benefits.

FSA director of conduct policy Sheila Nicoll (pictured) says: “These products are often referred to as upgraded accounts but if you end up paying for an element you cannot claim on, it is money down the drain.

“We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure customers know what they are buying and that they can rely on the product or have the limitations explained before buying.”

Roxburgh Financial Management branch manager Garry Webb says: “Protection needs to be based on advice, it should not be sold as part of packaged deal with a monthly cost. The inference is the client has cover in place irrespective of their personal circumstances, which is wholly incorrect.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. As the good ship Profit Margin sales into the sunset ……..

  2. Call me old fashioned, but should they not have been doing this already – and if not why not?

    When will any senior bank staff be held accountable?

  3. PPI, unsuitable loans, packaged bank accounts; I was brought up to believe that the first item in ANY advice is “knowing your client”.
    The banks and some advisers seem determined to sell rather than advice what is best for the client.

    Surely any sale should be able to demonstrate a fact find. I was with a network until 2 years ago which insisted that every mortgage illustration MUST be accompanied by a life illustration irrespective of need.

    Surely no fact find no sale & review of all of that product type sold.
    Quick visit by FSA, Advisers to review all PPI, loan hedging, bank account & life policy cases.

  4. @ Derek & Chris

    Good points and the answer lies with the FSA rules up until now. in effect tge current account being sold doesn’t require suitability as its not a designated investment so no captured.

    It’s still peculiar that structured deposits can be sold by counter staff with no requirement for a suitability report, factfind or ATR assessment. Although I must say most banks do gold plate this…..but the point is the rules create the gap.

  5. Paul S, Cardiff 30th July 2012 at 10:58 am

    Will the next steps be compensation for those ‘mis-sold’ packaged bank accounts?

    I am fed up with people who were too lazy to check the details or to engage their brains receiving large amounts of compensation. How I wish I hadn’t insisted on PPI being removed from credit card accounts when added without discussion in the early days and refusing it when offered subsequently.

    I’ve always refused bundled products of almost any sort as it’s usually more effective to pay for each separtely when you need it, unless you really know you are going to take advantage of them. Or you pay for convenience.

    Of course, selling an insurance product that can’t be claimed against is wrong and should be stopped. But if bought, say, a power tool, I couldn’t use, or a telescope if I were blind, or a spare part for something I didn’t own…. should I be compensated?

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