Banks still failing packaged account customersAre new rules working for consumers?

20 October 2016

The FOS received thousands of complaints about packaged bank accounts last year

Banks are still treating customers unfairly when they sell packaged bank accounts and handle complaints about mis-selling, according to the Financial Conduct Authority (FCA). 

The regulator today published findings from its thematic review and concluded that more can be done to prevent these accounts being mis-sold.  

Know your rights: how to complain if you've been mis-sold a packaged bank account - see our consumer rights guide 

What are banks still getting wrong?

Following rules introduced on 31 March 2013, banks and building societies selling packaged bank accounts must:

  • check that you are eligible to claim under each policy offered as a benefit
  • establish whether each policy is suitable for you and let you know if some are not
  • provide an annual eligibility statement explaining how you can claim on each of the benefits, so you can easily see if the account still fits your needs.

While these rules have raised standards in the market, the FCA says firms have more to do to ensure customers are treated fairly, both when they take out a packaged bank account and when they complain.

Checking eligibility 

Mystery shopping showed that firms were not consistently checking eligibility for every type of insurance in the package. In particular, the FCA wants them to improve the way they check and record eligibility for insurances such as mobile phone/gadget insurance and motor breakdown cover.

Annual eligibility statements can also improve - to make them clearer and more engaging for customers, for example, avoiding jargon, using bold text for specific calls to action, and summarising key exclusions and limitations. 

Mishandling complaints about packaged accounts

The regulator looked at the way firms handle complaints about mis-selling and decided that too many customers failed to get the right outcome, identifying problems in 38% of mis-selling complaints.

This is supported by the number of complaints the Financial Ombudsman Service (FOS) upheld in that period (an upheld complaint is when the Ombudsman disagrees with a firm’s decision and finds in favour of the customer). 

When Which? investigated this earlier in the year, we submitted a Freedom of Information request to the FOS to find out which providers received the most complaints between April and November 2015. 

We revealed that NatWest generated 7,438 new FOS complaints about packaged accounts. Over the same period, there were 5,064 cases related to Barclays packaged accounts, and 5,041 about Lloyds.

Of the banks with the highest uphold rates, Ulster Bank (41%), NatWest (20%) and RBS (20%) were the worst performers, suggesting the FOS routinely found fault with the way these banks sold packaged accounts.

Next steps

All firms involved in the review have been asked to provide individual feedback. 

The FCA will also undertake a further review of more recent packaged bank account mis-selling complaints (received between March and May 2016) to test whether banks have improved the quality of their complaint handling. 

Are packaged accounts worth the money?

We’ve recently taken a look at the most common components of packaged accounts (travel insurance, car breakdown cover and mobile phone insurance) to give individual account ratings and show which providers offer the best - and worst - value.

Nationwide tops the table with a score of 83% and the joint-lowest fee of £10 a month. We gave its FlexPlus account full marks for both travel insurance and breakdown cover. It even offers a welcome 3% interest on credit balances of up to £2,500, worth an extra £75 per year.

Will you use the benefits?

Think carefully about whether it will really pay for itself. For example, if you don’t have a car and your mobile phone is covered by your home insurance, travel insurance alone won’t usually warrant paying a monthly fee.

Watch out for caveats and exclusions such as high excess levels on mobile phone insurance and age limits on travel insurance. Existing medical conditions won’t be covered automatically, so check this before signing up.

It’s also essential you keep on top of any changes to your account to ensure it continues to offer value for money. In a recent Which? survey, nearly one in five (16%) fee payers said perks had been removed since they opened their accounts and more than half (56%) said the monthly fee had increased.

Find out more: best and worst packaged accounts – we review the cost and quality 

Complaints about packaged accounts

If you think you’ve been mis-sold your packaged account, give your bank the chance to put things right first. 

You can complain by telephone or in person, but put it in writing too and keep a copy so that you have a record of your correspondence from the start. 

Claims management companies will do this for you but they could take much longer to reach a resolution – and charge a fee for the privilege.

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