The Financial Services Authority (FSA) is to launch a crackdown on banks that sell products to customers that they can’t even use. These accounts are normally sold as an upgrade, viewed as offering a whole ream of extras to those who opt into them. In exchange for all these benefits, the customer pays the bank a monthly fee.
One of the most popular inclusions is insurance of various types, whether it’s home, travel, pet or one of a host of others. This is the area being given particular attention by the FSA as it has emerged many of the account holders will not be able to claim against the insurance should the worst happen.
Although customers may feel like they are safe and covered due to the premium they are paying for these extras, they could get a nasty surprise when they try to claim and find out that limitations on the product, which were not explained to them when they took the account, mean they can’t use the insurance for what they intended to.
According to Sheila Nicoll, the director of policy at the FSA, “these products are often referred to as upgraded accounts but if you end up paying for an element you can’t claim on, it’s money down the drain. We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure customers know what they’re buying and that they can rely on the product or have the limitations explained before buying.”
These limitations will come into effect in March 2013, and could result in banks having to deal with another costly scandal if it’s revealed some of the services they offer are utterly useless. Whether this will result in another round of compensation payouts also remains to be seen.