Are you really going to get your bank account benefits?
The FSA seemed to grow a pair recently, having made a number of announcements aimed at changing scurrilous practices and improving customer experience. Whether or not they achieve their stated aim remains to be seen. However, the last pronouncement of the dying regulator was the new rules governing packaged bank accounts.
We told you recently about how some of the benefits available with packaged and paid-for bank accounts might actually mean that you end up better off despite your monthly fee, but the FSA spotted a potential flaw (for customers) in the blanket bestowing of benefits. From 31 March onwards, banks now have to write to such customers annually to advise them whether or not they actually qualify for the benefits they have signed up to.
Sound confusing? Well, consider the case of travel insurance, a staple of many paid-for account offerings. Like any insurance product, acceptance of cover is governed by strict criteria set by the insurance company. If you have ever had cancer, have been ill recently, are undertaking certain winter sports or have a pre-existing medical condition, it is likely that cover would be denied under the insurers standard terms. Of course, this doesn’t mean to say that you cannot get any travel insurance, and for health issues taking out a policy with exclusions is probably the way to go, but it does mean that the bog-standard policy bundled with your bank account is basically worthless. Makes the £6 a month you are paying seem a lot less of a bargain.
The new rules also mean that banks will have to screen all new applicants for these accounts to ensure they do qualify for the benefits offered at the time of application.
Michael Ossei, personal finance expert at uSwitch.com, said: “For too long customers have been paying over the odds for bank accounts that offer benefits that they may not even qualify for. The new rules will bring some much-needed clarity to the packaged account market and may even force a shake-up within the industry.”
“Banks will now have to go through a proper process to ensure customers meet the strict criteria for an insurance policy before they can sign up. The lengthy procedure may push some banks into deciding against offering these policies in the future - it may no longer be worth their while.”
Of course, this doesn’t mean that the bundled bank account is on its way out, rather than banks might have to think a bit harder about which benefits they offer as a sweetener to the deal. Barclays, for example, have developed a ‘features store’ which contains ‘packs’ of benefits that you can pick and mix to suit your own requirement. Current offerings include ‘home’ packs, offering extended warranties on domestic appliances or ‘tech’ packs to cover your smartphone and gadgets.
While the FSA is no more, having been disintegrated with effect from 1 April, perhaps this last swansong will have genuine effect for banking customers across the country. The FSA is replaced by the Prudential Regulation Authority and the Financial Conduct Authority. Why have just three letters of regulation when six will do.