The Financial Services Authority (FSA) is launching a consultation to introduce new rules on the sale by banks and building societies of packaged accounts.
The packaged accounts typically include a range of benefits, including travel insurance, breakdown cover and mobile phone insurance.
It is fair to say that packaged accounts are popular. The FSA estimates that one in five adults now has a premium bank account with these benefits. Whether or not each of these people truly benefits from having a packaged account is another story.
The proposed new rules will mean that banks will need to check for suitability before selling packaged accounts. This will mean checking that the customer is eligible to claim on any insurance policies included within the packaged accounts.
By placing a greater responsibility on the banks to confirm suitability, the sale of packaged accounts in the future should only take place to those who will benefit from the various policies included.
Regardless of these new rules, packaged accounts are a great example of why you should always read the small print before signing any contract. The banks have their own commercial interests at heart, rather than the best interests of their customers.
Packaged accounts, whilst representing good value for many customers, are simply another financial product the banks can sell to their customers. Banking has never been truly ‘free’, and packaged accounts are just another example of how the banks profit from their banking relationships with customers.
One potential unintended consequence of these new rules could be the introduction of more explicitly charged current accounts, with the end of apparently ‘free’ banking accelerated.
We hope that the FSA will extend the scope of their consultation in due course and look at what is possibly a more worrying sales tactic currently popular with some banks. The sale of combination savings accounts, where the customer qualifies for a competitive interest rate only if they invest money with the bank at the same time, poses greater risks in our view than the sale of packaged accounts.
Caveat emptor always applies when dealing with the banks. Perhaps one day the FSA will create a rule saying this should be clearly displayed above the entrance to every branch.
Photo credit: Flickr/kittybabylove
