FCA proposes changes to savings and ISAs
Regulator wants clearer interest rates and quicker account switching.
The Financial Conduct Authority (FCA) has proposed a series of new measures for banks and building societies offering savings accounts and ISAs, including clearer information on interest rates and reducing switching delays
In January 2015 the regulator published the final findings of its savings market study, in which it found that banks and building societies “need to improve the transparency of their practices, with little information currently being given to consumers about alternative products.”
It also observed that customers weren’t keen on switching as they expected it to be an arduous process that would result in minimal gains.
Christopher Woolard, Director of Strategy and Competition at the FCA, said that customers should be provided with clear information that is easy to understand, and should be allowed to move accounts “with the minimum of fuss”.
The proposals
The FCA proposals would mean that savings providers have to:
- Remove jargon from their communications and help customers to better understand their options;
- Supply easy-to-understand key information as an aid for comparing accounts;
- Provide clarity on interest rates customers will receive;
- Alert customers more actively to changes in rates and the end of bonus and fixed rate periods;
- Abide by a new rule ensuring quick and easy switching so that customers can switch to better accounts offered by the same firm.
The vast majority of firms would also have to offer seven-day switching of Cash ISAs from January 2017, though very small providers would be exempt from this. Currently, industry-led guidelines set out that this process should be completed within 15 working days.
The FCA also intends to become active in publishing information to highlight which providers are paying poor interest rates to longstanding customers, in the hope that it will encourage those people to shop around and get a better deal.
Communications from savings providers may in future have to include a ‘switching box’ providing key account information to prompt customers to see if they can get a better deal elsewhere.
Consumer groups and some providers are keen on this idea, though other providers were concerned that they might have to publish details of competitors’ products in these. The FCA said it remains committed to further developing this proposal.
The FCA is now seeking feedback on its proposals and expects to confirm finalised rules later this year. These will then come into force in 2016.
Do you think the savings market needs this overhaul? Let us know in the comments box below.
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