It’s official- loyal bank customers get a raw deal
Everyone knows that, to get the best deals, you need to shop around, and savings rates are no exception. Now, as part of its flurry of proactivity since being formed, the Financial Conduct Authority (FCA) have proved the fact as part of an investigation into the cash savings market- and they don’t like it.
The FCA have undertaken preliminary research which show that, owing to the fact that many consumers do not shop around, banks are able to pay lower interest rates to customers that have stayed with the same account for a number of years. They also found that the largest banks, with the greatest number of personal current account holders, are able to get a whole wedge of savings cash from their hapless current account holders despite offering lower interest rates, on average.
But so what? Most people are aware of the perils of doing nothing as a consumer, and if lazy account holders are effectively being penalised, that’s their problem surely? Caveat emptor and all that. Apparently not. The FCA have decided that this is Unfair and that they are going to Do Something About It.
Christopher Woolard, director of policy, risk and research at the FCA, said:
“Our preliminary view is that while some aspects of the cash savings market are working well competition does not appear to be working in the interest of many consumers. In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal. We want to look more closely at what is inhibiting the majority of consumers from getting better deals.”
The FCA have decided to investigate the whole savings market, to ensure competition is working correctly and that consumers are informed as to their options. The FCA has announced they will now undertake further research, before deciding whether to ‘intervene’ to ensure competition is working in the interests of consumers.
Some of the things the FCA will look at include:
what could be done to ensure that more consumers are aware of the rates they receive and the rates on offer on other accounts
what information customers are given when rates are changing
whether it is possible to give consumers greater insight into how their interest rate is likely to evolve over time, especially after any introductory offer ends, so that they can make an informed medium-term choice between providers when opening an account
what could be done to make it easier to move savings to a new provider
whether other interventions may be necessary to improve outcomes for customers overall
The final report into cash savings will be published in late 2014. We’re a little bit impressed.