Over the last 20 years it seems there’s been one mis-selling scandal after the other when it comes to financial services products.
Between the late 80s and early 90s there was the mis-selling of personal pensions by banks and financial advisers, which affected more than a million people. It was major news back then with firms involved having to conduct subsequent reviews that went on for years. Through regulation of the review by the Personal Investment Authority and its successor the Financial Services Authority, redress totalling £11.8bn was paid out.
Then came investigations into people sold interest-only mortgages (instead of the more traditional ‘repayment’ loan) with advisers taking commission payments through the sale of endowment policies.
More recently you will have seen endless adverts and reports regarding mis-sold Payment Protection Insurance (PPI) with loans and credit cards. Total compensation from that currently stands at around £20bn. And for investors there is an ongoing issue with mis-selling of Unregulated Collective Investment Schemes (UCIS) which has seen the industry regulator hitting certain advisers with six-figure fines.
Next up? It seems that ‘packaged’ bank accounts are now under the microscope.
In short, a packaged, or ‘with-benefits’, bank account is where a bank charges a fee (usually monthly) when providing a current account. With this account there are certain ‘benefits’ typically added on, in return for that monthly fee. More often than not these are insurance policies; travel insurance, mobile phone insurance, breakdown cover etc.
Of course, the add-ons with these accounts will be very handy for many people as they’re common things to insure against; most of us holiday in the UK or abroad, the vast majority of us have a mobile phone, and plenty of people drive. But depending on which organisation you bank with, you could be paying up to £200 a year for these benefits, so are they really a ‘benefit’ in the true sense of the word, bearing in mind you’re actually paying for them?
Added to the cost, it should be noted that often the level of cover provided by these insurance policies is basic.
It may be worth reviewing your own situation
If you’ve got a packaged bank account it’s probably worthwhile checking the cover you get with the insurance policies provided, as there’s a good chance you’ll be able to find more comprehensive cover elsewhere at a lower cost.
Yes it’s hassle if you want to change to a free account and get your own insurance cover for holidays, and of course many would just go for convenience rather than have to check each element and weigh up the total cost of the bank account versus what it would cost to buy their own cover. However, you could be throwing money away by taking the easy option.
Were you mis-sold?
The Financial Conduct Authority has rules in place over the sale of packaged bank accounts, which the banks have to adhere to. If you feel you may have been mis-sold one of these accounts, there is a process to complain to your bank, and you may be entitled to compensation.
The general points to consider are:
- Were you signed up to a packaged account without your bank telling you?
- Did the bank tell you that you could have had a free bank account instead?
- Did the bank over-egg the added benefits to you e.g. tell you they were “unbeatable” etc?
- Did your bank tell you that you had to have one of these accounts in order to get other products from them, such as a mortgage?
- Were you told you could only get an overdraft by having a packaged account?
- Did your bank sign you up for a packaged account knowing you wouldn’t be able to claim from one or more of the products, for instance a travel insurance policy which would have excluded you due to your age?
If you feel any of the points above are relevant in terms of a packaged bank account you’ve been sold, write to or phone your bank and let them know you wish to complain about the sale of your account. The bank must then follow procedures to investigate the sale of your account and if it is found that they were in breach of the rules, you could be entitled to a refund of the fees you’ve paid, plus interest. If your bank rejects your complaint and you’re still not happy, you can always contact the Financial Ombudsman; you can get more information from the Ombudsman by clicking here.