FCA plans to clamp down on bank account switching obstacles

FCA plans to clamp down on bank account switching obstacles

It should be easier for consumers to compare cash savings accounts and then switch providers if they wish, the Financial Conduct Authority has stated.

A market study by the City watchdog found around £160bn of the funds held in easy access savings accounts earned an interest rate equal to or less than the Bank of England base rate of 0.5 per cent in 2013.

Consumers polled by the study found it difficult to know what rate they were on, or were put off switching by the expected inconvenience.

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Eight out of 10 easy access accounts have not been switched in the last three years, according to the research, but simple changes in the timing and content of communications to customers could significantly increase shopping around.

The FCA is now considering asking providers to be more transparent about how reductions in interest rates on variable rate savings accounts are applied the longer a consumer holds the account.

This includes displaying prominently the lowest rate of interest any of their customers receives.

The regulator is also looking at requiring consumers to be given clearer, more timely information to help them compare their savings account with alternative products and how to switch if they want to do so.

The FCA is not proposing to ban introductory bonus rates, because they can benefit some customers, but it does expect providers to improve the way they communicate interest rate changes and bonus rate expiry to consumers.

It is also planning to demand that banks make it easier to provide a way for consumers to view and manage accounts with different providers in one place.

The FCA is seeking views on these proposals by 18 February and will use this feedback to inform any future changes to savings rules.

Christopher Woolard, director of strategy and competition, said that in a good market firms should be competing to offer the best possible deal and consumers should have the information they need to help them shop around.

“More also needs to be done to reduce the hassle for consumers to switch their savings. The steps we have proposed today are designed to make the market more dynamic, working in everyone’s interest.”