THE City watchdog is clamping down on packaged bank accounts to ensure banks and building societies check customers are eligible to claim on insurance cover before selling them the product.
Packaged accounts are current accounts which are bundled together with a range of insurance policies and other products such as ticket discounts. Customers usually pay a set monthly fee for the account, and the Financial Services Authority estimates one in five of the UK adult population has one – about 10m accounts.
Sheila Nicoll, FSA director of policy, said: “For some people packaged accounts represent good value and convenience.
“But in other cases customers may find that the insurance cover they have paid for is useless.
“We are concerned that it may be too easy at the moment for firms to sell customers something they do not understand or need.
“We want to make sure packaged accounts are only being sold to customers who have actively decided it is the right product.”
The FSA has launched a consultation paper on the accounts, which proposes banks and building societies selling the product must first check whether the customer is eligible to claim under each policy and share that information with them. It also says lenders must provide customers with an annual eligibility statement, prompting them to check if circumstances have changed.
Consumer action body Which? said packaged accounts are rarely worth the cost.
Which? executive director Richard Lloyd said: “A third of people don’t use any of the benefits offered with packaged current accounts, meaning they’re wasting between £240m and £320m in bank fees each year.
“People should only have a packaged account if they’re absolutely certain that it will be cheaper for them and they’ll use all of the separate benefits offered.
“Banks should make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare.”