Bank account holders who pay a monthly fee for a packaged account may be able to reclaim charges if it is deemed that the package included “useless” insurance products.
Under new rules, banks will now be required to carefully assess if the products in the bank account package can be used and provide any benefit to potential customers.
The Financial Services Authority (FSA) said that customers who have already been sold these types of bank accounts might be able to reclaim money if they were sold a packaged account that they did not need and that was not explained correctly by the provider.
The FSA has published proposed guidelines that aim to make sure that each provider offering a packaged account must check whether each individual customer is eligible to claim against the insurance policies contained, provide customers with an annual eligibility statement and establish whether each policy is suitable for the customer and alert them if some are not. Sheila Nicoll, FSA director of policy said: “We are concerned that it maybe too easy at the moment for firms to sell customers something they do not understand or need.”
One in fiveUKadults is estimated to hold a packaged bank account, the cost of which is often around £300 a year. Since the financial crisis and the PPI affair, banks have increased the amount of packaged bank accounts they offer as a way to increase profits and there are now more packaged accounts than free in-credit accounts available.
The FSA is concerned that insurance elements of the package are being sold in the same way as Payment Protection Insurance (PPI), the mis-selling of which caused a major scandal and legal case that was eventually settled in favour of the consumer, costing the banks around £7 billion.
Consumer groups have conducted research that shows just one in ten customers who pay for an insurance product through a packaged bank account actually use it to get the benefits. Which? executive director, Richard Lloyd, said: “A third of people don’t use any of the benefits offered with packaged current accounts. This means that they’re wasting between £240m and £320m in bank fees each year.”
Sarah Brooks, Director of Financial Services at Consumer Focus, said: “The last thing this market needs is another mis-selling scandal following on from PPI. Consumers need to able to trust banks to sell them products that are right for them.”
Sally Bowyer, Managing Director of financial claims specialist BrunelFranklin.com says that the public are slowly becoming wiser to the tactics of mis-selling, but that a lot of the damage is already done: “It is important to realise that we may all unwittingly have taken out PPI during the years when lenders were offering a seemingly endless line of credit in the form of loans and credit cards in particular. It costs nothing to check your paperwork for insurances that you may not even know you are paying for. PPI per se is not a bad product, however the onus is on the vendor to ensure the product is the best for your needs at the time of sale. If the best product for your needs was not offered, or if you were unaware of the true cost, for example, you may have grounds for a refund.”
Learn more about PPI refunds and find out if you could apply for a refund today! Visit the website www.brunelfranklin.com or call Brunel Franklin, free, on 0800 051 54 51.