The FCA has revealed new measures which aim to boost competition in the cash savings market and help consumers get a better deal.
A new package of measures, announced by the FCA on the 8th of December, is designed to improve competition by encouraging easier and quicker switching of cash savings account and improving the information savers receive.
From December 2016 savings account providers will have to publish clear information about an account’s interest rate on all relevant customer communications. This means banks will now have to display interest rate information more clearly and alongside account balance information. The City watchdog also demands that providers remind customers about changes in any interest rates or the end of an introductory rate.
The new rules coming into effect on the 1st of December 2016 include:
- Requiring firms to provide key information in a product summary box at point of sale, replacing provisions about the summary box that currently sit in confirmed industry guidance.
- Being clear on what interest rate consumers are getting. Introducing a new rule requiring firms to display interest rate information prominently alongside account balance information in all relevant customer communications.
- Quicker and easier switching. the FCA is introducing a new rule which will require firms to provide a prompt and efficient service so that a customer can switch to a better account offered by the same firm.
The finalised measures are a response to the FCA’s market study into competition in the cash savings market. The study found that providers have significant amounts of customers’ balances in accounts opened long ago (e.g. more than 5 years ago ) yet these accounts paid lower interest rates than more recently opened accounts. It also found providers needed to improve the transparency of their practices.
Christopher Woolard, Director of Strategy and Competition at the FCA, said:
“With many savers never switching because they don’t think it will make a difference, our rules will help consumers get the information they need to shop around. In a good market, providers should be competing to offer the best possible deal and should a consumer wish to move accounts, they should be able to do so with the minimum of fuss.
“Our rules are about giving consumers the facts they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
Named and shamed
The FCA has also published the first set of data on the lowest interest rates offered by 32 providers of easy access cash savings accounts and easy access cash ISAs. Some of the named and shamed banks include:
- Ulster Bank, Danske bank and Progressive Building Society, only paying its customers 0.01% for interest on open- accounts
- Major banks with very low-paying open easy-access accounts include HSBC and First Direct, which both pay only 0.05%, and Santander and Yorkshire Bank, both paying 0.1%
The FCA will continue to publish information about poor-paying accounts every six months as part of an 18-month trial. The aim of this publication is to shine a light on those firms’ strategies to longstanding customers.
Which? executive director Richard Lloyd said: ‘This is a step forward for savers and the people who supported our Scrap the Savings Trap campaign.
‘These reforms, when they’re eventually in place, should inject some much needed competition into the market and help consumers move away from savings accounts with dismal rates.’