FOS: sharp rise in packaged accounts complaints but just 13% upheld

There’s been a sharp rise in complaints about packaged accounts, according to the Ombudsman, but few are successful. Why are the complaints being rejected?

Complaints about packaged current accounts have jumped by more than 50% so far in 2015/2016, according to new figures from the Financial Ombudsman Service (FOS).

The independent body received 32,720 new cases regarding packaged accounts between April and December 2015 – more than the whole of 2014/15, when it got 21,348.

Packaged accounts are the subject of more complaints than any other financial product, bar payment protection insurance (PPI), which has brought in 141,366 new cases so far in 2015/16.

However, despite the rising number of complaints about packaged accounts there’s been a sharp fall in the number of cases being upheld by the adjudicators.

What’s wrong with packaged accounts?

Packaged current accounts charge a monthly fee typically between £10 and £25 in exchange for a range of additional benefits, such as travel insurance, breakdown cover and gadget insurance, as well as perks like better rates on loans and savings.

However, providers came under scrutiny from the regulators a few years ago following complaints of mis-selling, which led to new rules in 2013 to clean up the industry. Providers were criticised for using high-pressure sales tactics and for selling accounts to people that couldn’t ever actually use the benefits.

In one case a 73-year old woman signed up for a packaged account that came with travel insurance. While on a trip to Australia she got ill and had to stay in hospital, but the insurer refused to pay out on her cover as the policy had an age limit of 70. So she was forced to fund the treatment herself.

The Ombudsman ordered the bank to repay the costs she incurred plus interest and £200 compensation for the distress and inconvenience of the incident.

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Why packaged account complaints are failing

Despite the rising number of people coming forward to complain about packaged accounts, only a small proportion are being upheld.

Between April and December 2015 just 13% of complaints were found in favour of the customer, compared to 33% between April 2014 and March 2015.

This is largely down to claims management companies fishing for new customers following the publicity surrounding packaged bank accounts and encouraging people to make a case when they don’t necessarily have one.

According to the FOS claims managers account for around 80% of all packaged account cases and are the main reason behind the rising number of complaints.

The problem is that not all packaged accounts have been mis-sold. Just because someone hasn’t used all the features of the account, for example, doesn’t mean the bank was wrong to sell it to them.

A spokesperson for the Financial Ombudsman Service said: “Though undoubtedly some people were signed up who didn’t want, couldn’t use or didn’t need the accounts, for many people, the benefits packaged with the accounts were widely used."

How to complain

If you think you have been mis-sold a packaged bank account, you should first complain directly to your bank or building society. You should do this in writing and keep a copy for your records.

They have up to eight weeks to get back to you. If you are unhappy with the answer or they fail to respond in this time you can take your complaint directly to the Financial Ombudsman Service.

Remember there’s no need to use a claims management company, which will charge a fee for putting your complaint together, as you can do it yourself for free. You just need to fill in a complaint form that you can get from the FOS website detailing your grievance and attach any supporting documents that can help your case.

If the Ombudsman finds in your favour it can order the bank to refund fees you have paid for the account plus interest. It may also tell them to pay compensation for the trouble and upset caused.

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